Welcome to this week’s analysis on which altcoins are performing well and which ones are not. You can view the list here:
Bitcoin Update
Bitcoin ended up going lower which I mentioned in the previous newsletter. Is it possible that we go even lower? Yes, however there are already some bottom indicators being triggered. Bitcoin recently lost its 200 day SMA of $82,400 which tends to be a bull market support level. I am not too concerned about this since in previous bull market corrections, it hovered below this in July 2023 and August 2024 and price still went higher.
One bottom indicator that just triggered measures the 3-day percent change of the US dollar index (i.e., DXY). When this crosses -3, it has marked a major bottom in the following occasions:
- August 2015
- March 2020
- November 2022
Credit to Jamie Coutts where I first saw this indicator.
Another indicator that has triggered a bottom is called DXY 1-Week % Change Z-Scores. This also looks at the US dollar index and measures the rate of change over 1 week and then calculates the number of standard deviations from the mean. This triggered in the previous occasions:
- March 2020
- November 2022
Credit to Julien Bittel where I first saw this indicator.
This next indicator has yet to signal a bottom so we have to wait another 10 days or so. This measures the Nasdaq index against its 200 day moving average. When it closes below, if the drawdown from that first close below is less than 3.5% in the next 2 weeks, it’s a bull market bounce and returns are higher a year later. If the drawdown is bigger than 3.5% then it results in a bear market. I developed an indicator that measures this historically and it has a pretty decent track record.
Credit to Jason Goepfert where I first saw this indicator.
Another chart I want to share is Bitcoin vs. Global M2 Money Supply. This tends to lead risk assets such as stocks and crypto by a few weeks. With a 78 day offset, this model suggests we bottom by end of March:
Solana Update
Solana went lower and it’s possible it could hit 120 or even 110. I would still consider this a buying opportunity.
Solana vs. Bitcoin is still holding up on a key support level:
Dogecoin Update
Price went lower but the bull flag is still intact and Dogecoin is looking great for more upside in the coming months.
Sui Update
Sui also went lower but still holding around this 2.30 level. If it breaks below this level, the next level is 1.80.
Sui has also decoupled from this Solana 2020-21 fractal. I also added Ethereum from the 2015-17 cycle and there’s some similarities there too. Let’s see if Sui can end up closing the gap to the upside.
Large Caps
For this week’s newsletter we will focus on a refresh of the sector outperformers that I first shared in the December 23, 2024 Pro newsletter as I think now presents a major buying opportunity. If you want to take a more cautious approach, you can wait toward the end of this month for a rebound or that the Nasdaq 200 DMA bear market indicator doesn’t trigger in the next 10 days. For the free newsletter, I will share a sample of the Large Cap Layer 1s and Memes:
I went through every Large Cap Layer 1 and did chart comparisons where you divide one coin’s price by the other and measure against 2023 to see if it outperformed or not. The way to read this is from left to right with the example highlighted is “Solana outperforms Ethereum”. After going through these iterations, you can eventually narrow down the outperformers within each sector and the ones that stand out are Solana, Sui and XRP. I have had Solana and Sui in the portfolio for a few months and I will continue to have it especially now that it’s still showing outperformance. I’m however less optimistic about XRP for a few reasons:
- Its market cap is already very large (over $100b) and the risk-to-reward is likely to not be as much compared to if you held Solana or Sui
- Coins that are younger like Sui or Solana (less than 4 years old tend) tend to outperform older coins like XRP which is almost 12 years old now
- For Layer 1s, crypto adoption is a matter of momentum and steady increase in adoption over time. XRP is nearly 12 years old and had excellent outperformance prior to 2018 but it has since lost momentum. It’s now been 7 years since it make a new all-time high and I think the chances are low that it goes much higher from here. Maybe it goes to $5-6 but I think the risk-to-reward is better off with Solana or Sui.
Next, we have Large and Mid Cap meme coins which now there is only Dogecoin and Pepe. Both of these are a part of the portfolio and Dogecoin has had the longest standing outperformance of any altcoin. It continues to make new all-time highs with every cycle and is one of the criteria we look for with outperformance especially multi-cycle coins. Pepe is newer this cycle and has outperformed Dogecoin so far since 2024.
Model Portfolio Update
The model portfolio service I use seems to be undergoing maintenance so I’m unable to provide a more detailed update but I imagine the portfolio is about break even. Most altcoins have revisited or are below August 2024 lows.
All altcoins are more or less in a good buy zone so review the sector outperformers if you are looking to allocate. Otherwise, we sit tight and let the cycle play out monitoring for the cycle top data to trigger.
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