Why ETH will reach $20,000 a coin, next cycle!
Market Report #43
Introduction
Hi everyone, welcome back to a new newsletter, thanks for all the recent signups, in this newsletter we usually cover more macro focused updates on the crypto markets, the wider macro and my take on crypto assets. The macro outlook is usually one of the most important pictures to paint for investing and always will be a key factor on the crypto markets as a whole, let us take a look at price action and some of the things that have been on my mind over the last week or two.
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Price Action Overview
BTC looking no different in a macro position than how it was looking the previous week, yes we saw maybe a higher climb in price, but generally speaking price is still hovering around this $28/30k region that is critical for us to break if we really want to see some bullish momentum. This is a really important region for BTC in April.
There are currently arguably two valid ways you could look at this current PA, the first one being a more bearish setup, that this is the range high and a regional resistance level that is not really worth longing until flipped back into support. This is probably the way I would personally trade this PA, I would likely hedge my longs, maybe play for downside and wait until we get a valid breakout. The slightly bullish argument I have been seeing people talk about is how PA consolidating under resistance is bullish and this will eventually lead to a breakout. Both are somewhat valid, but one seems to have a much large risk tolerance, I am currently hedging my longs and waiting to see if price can continue to sustain this massive upside momentum from Q1
ETH looks pretty similar, except a larger push to the upside getting to around $1950 at the local highs, but failing to wick into 2k which is a level we reached in the summer of 22, this level has significant important to PA, and until we really flip this level back into support, I see no real major break in macro bear market structure. We can already also see that price is already showing lower timeframe signs of weakness, pulling back from the highs and likely we will continue to range in this macro channel until this 2k level is broken at some point in the future, until then would rather buy the lows.
Im going to go into more detail next week on overall price action, just want to make sure that even in Newsletter where I am writing about specific topics, I am still giving a general opinion on both BTC & ETH from a higher timeframe for the coming week.
Why ETH is going to explode next cycle?
The good news is that while price action might head lower in the short-term, the most important take away from this is that we have longer and a better time to continue accumulation and look forward to what is coming in the future. ETH for me, is still likely going to be the best risk to rewards for the next cycle, already cementing itself as likely the future of Web3 but with so many more bullish events than previous cycles that can be used to build new narratives and push price to even further heights.
Firstly we have to mention that ETH now is a deflationary asset, an asset that naturally now decreases it’s supply every single year by around -0.33% which might not sound like a large % but that is roughly 32k ETH being taken out of the market, which will eventually will only increasing performance in price.
The tokenomics have gotten way more bullish when we are comparing ETH to previous cycles, this huge shift in supply with have very large ripple effect, especially when we take into account just how much the ETH chain could be burning during the heights of a bull market, when network activity is through the roof.
Also on top of this, staking also plays another major role in getting tokens off the market and putting even more pressure on the amount of tokens in circulation, currently around 15% of the entire ETH supply is being staked, with 31% being staked on Lido followed by Rocket Pool at around 2%.
Combining the two makes for a very change in the tokenomics, hard to be bearish on ETH longterm with now such a favourable token model, this all fueled with having by far the most dApps, most users and most network effect in the space. What we saw at the peak of the last run with NFT’s and DeFi was likely only the start of network adoption, and I think as we continue to see real world utility expand, things are only going to keep growing as more users gain access to the Ethereum ecosystem.
The amount of ETH locked in the DeFi space has not actually decreased that much since the highs of DeFi season and the peak euphoria around the topic, this is not a fad or a random narrative that was only used in the previous bull cycle, DeFi is a massive contributor to the ETH network and one revolutionary application for crypto that actually brings real world users and interesting concepts for those looking for financial service services without banks or institutions. DeFi is going to explode over the coming few years, and likely we will see hundreds of billions of dollars in TVL during the next cycle, and while other chains do compete, ETH will remain the dominate place for all new and old money, as it already has battle tested protocols that have now seen the full extend of a bear market, and has clear cut safe options.
Next week we will see the Shanghai Upgrade, which is a planned hard fork of the ETH protocol and while being a much smaller upgrade compared to what we have recently faced with ‘The Merge’, this upgrade will allow much more improved liquidity for stakers and validators.
While ETH stakers will now be able to withdraw their funds, which may sounds negative if you read or hear about it out of context actually this upgrade will likely boost liquidity to the pools, causing potentially much lower fees for those transacting on the network, this due to the 32 ETH requirements being removed, allowing anyone to begin staking and getting a secure yield on their cash. The new inflow of yield participants will also likely out way the amount of of withdrawals so overall this is a major upgrade and a very important feature that will be added.
Look, I have been a major ETH buyer since it was $70, and this is probably the most exciting time to be a bull on ETH in the longterm, back in 2018/2019 we had none of the major bullish tokenomics factors that contribute to deflationary measures, we also had no DeFi, no NFT’s and pretty low network usage compared to today. ETH at $900 was incredibly undervalued, ETH at $1500 is also likely pretty undervalued and I think this will be the best R:R for the coming cycle, the marketcap for ETH is going to explode over the next 5 years, let’s put it this way, Apple a singular entity company has a marketcap of 2.61 trillion dollars, Microsoft has marketcap of 2.17 trillion while ETH currently sits at $224 billion, don’t tell me you have no believe that ETH and BTC as a global network can at some point reach or surpass Apple in valuation, because I think everyone reading this newsletter has some hope it can happen, its not crazy and actually seems pretty realistic and logical on a long enough time horizon.
Will continue to keep personally adding allocation to ETH as an asset, think the risk to reward is way to favourable to traders who are buying in a bear market and holding or validating with no intent for a quick sale. I am bullish, very bullish longterm.
Position Changes
FLEX position reduced to 25%, sold 75%
Added further XRD
Hedged my spot long exposure from 28k BTC and 1.9k ETH
Sold my Bitcoin Miners, moved value into spot holdings
Radix
I also wanted to discuss a little bit on Radix Network, a position that I have been building up in my personal portfolio probably since late last year, for those who are not aware Radix is ran on the XRD token and growth has been outstanding the past few months, continuing to push the network further and expand the ecosystem.
The tough market conditions are are tricky time for most projects, radix has used this opportunity to really push expansion, “boasting a dynamic dev community of 8.5k+ members & a whopping $26 million in transaction volume across 92.2k active accounts”, all before smart contracts have even launched. The developer, account and transaction growth is pushing more than ever, all while funding and building a cohort of new excited projects that will all launch inside of the ecosystem very shortly.
As mentioned in the last newsletter, this is another big chain project that I am accumulating now for some time, think the network is getting a lot of adoption in this bear market and will continue to grow at an alarming rate. Radix is the only decentralized network where developers are able to build quickly without the constant threat of exploits and hacks, and actually scalable with built in solution.
Radix is a full stack ecosystem for DeFi and is a position I am accumulating.
Thank you for reading this Newsletter; if you did enjoy it and would like to stay up to date with any of my technical analysis moving forward, please do subscribe. I am currently trying to write something on the markets at least once a week.
Thanks for always taking the time to read, I appreciate the support, and writing this newsletter is always the highlight of my week.
Hello, since I am really not well versed on crypto, what time frame is considered "next cycle"?
Very insightful...