Welcome to this week’s analysis on which altcoins are performing well and which ones are not. You can view the list here:
Macro Update
As a follow-up from last week’s newsletter, I wanted to get deeper into a chart that suggests US PMI is going higher and that this is very bullish for altcoins. Let’s look at US PMI vs Global M2 YoY % Change and Altcoin Market Cap (TOTAL2):
I know there’s a lot going on this chart so let me try and break down each component. The dark blue line is the US Manufacturing PMI. This measures manufacturing sentiment in the US based on surveying several manufacturers. When the PMI is below 50, the economy is in contraction and small caps like altcoins tend to underperform against Bitcoin (with some exceptions). When PMI is above 50, the economy is in expansion and small caps tend to outperform. The last two times this occurred in 2016-2017 and 2020-2021, the altcoin market cap surged 200,000% and 1,100% respectively. The Global M2 YoY % Change (yellow line) measures the rate of change of Global M2 year over year. The higher the rate of change, the better PMI gets. This is because manufacturing PMI responds quickly to liquidity conditions. The more rapid the growth in liquidity, the more easing in credit conditions leading to expansion of manufacturing and capital investment. You might be asking: how did you come up with 5 months as the lead time? I tested a few timeframes and offsets to find the optimal one. I first looked at the entire history of Global M2 and it found the optimal offset as 3 months with a correlation of 0.58 (the closer to 1, the stronger the correlation):
But then I looked at the more recent timeframes and realized that 3 months seemed too short so I next looked at the correlation and offset combinations since 2015 since this is when altcoins started being introduced. The data suggests that the optimal offset is now 6 months with a correlation of 0.78:
This looked a lot better when you apply it on this chart but it still seemed slightly off so then I checked the correlation and offset combinations since 2020 and it found that 5 months was the highest correlation at 0.93 so that’s what I ended up using. After all, we want what the strongest data trend is telling us.
Bitcoin Update
Bitcoin had a slight pullback but I don’t think this is a cause for concern and in fact is quite normal. We had breakout of this inverse head & shoulders pattern and most of the time, there is a retest of the breakout level before going higher. This is what I think happened when Bitcoin touched 112,000 and then bounced:
Solana Update
Since Bitcoin had this retest $112,000, most altcoins went a bit lower too. Solana is retesting MA200 and I still expect this to go higher as long as Bitcoin keeps going higher.
Solana vs. Bitcoin rejected at MA200 and is still going sideways. I am still expecting it to break above and this will confirm a new uptrend.
Dogecoin Update
Dogecoin also did a retest of the bull flag that it broke out of so still expecting higher. Last chance to buy at these levels I believe.
Sui Update
Sui got close to MA200 as a retest so another chance to buy if you haven’t already.
Large Caps
For large caps, here’s the ones that stand out on a long term timeframe:
- Sui
- Hyperliquid
- XRP
- Stellar
Pepe is also retesting MA200. Fairly consistent pattern here… Last chance to buy in my opinion.
Model Portfolio Update
The open positions is showing a positive return of roughly 18%:
The overall portfolio performance considering closed positions is roughly a 5% positive return:
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