Specialising in Bitcoin, Gold and Digital Assets

ByteTree Asset Management

Investment Manager specialising in bitcoin, gold and digital assets

CEO, ByteTree Asset Management

Crypto

The structure of the crypto market is changing. As you can see from the chart below, Bitcoin dominance (which measures its contribution to the total crypto market cap) hasn’t recovered in this cycle, even as we go through this “crypto winter”. This is a healthy development and one that supports a bullish, albeit selective, long-term view of the sector.
This could be for a couple of reasons:
a)&nbsp;&nbsp;&nbsp;&nbsp;Bitcoin is losing its appeal as an alternative store of value b)&nbsp;&nbsp;&nbsp;&nbsp;More value is being created elsewhere in the crypto ecosystem
Let’s take those in turn.
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First, is bitcoin losing its appeal? It’s certainly taken some knocks. Its identity as the currency of the internet has been diluted by the introduction of stablecoins (which have taken a share in this calculation). These enable investors to park cash in a far less volatile entity while remaining in the digital universe. Furthermore, in the short-term, bitcoin has also disappointed those who believed it would be a hedge against inflation and a store of value, although we argue that this can only be judged over a long period of time. Bitcoin is still in the very early stages of its existence – if it is to reach a goal of being multiple times more valuable, it must, by definition, be volatile. In addition, like any other asset, its role as an inflation hedge is contingent on what price it was bought at. Those who have accumulated at cycle lows rather than chased bubbles are generally very happy with the outcome. Have a look at&nbsp;ATOMIC&nbsp;this week for a chart showing how bitcoin moves with inflation.&nbsp; The other factor driving down bitcoin dominance is the emergence of other tokens and coins as the sector builds use cases and value. This is certainly happening. Over the course of the next 5-10 years, we expect to see changes to many industries, some of them fundamental. A reduction in bitcoin dominance tells us that the market agrees with this view. In&nbsp;ATOMIC&nbsp;this week,&nbsp;we look at&nbsp;the move in US 2-year real rates in the US. We’ve had a 4.6% bottom-to-top move – so far – which has presented a huge headwind for risk assets. And this before the Fed hiked again later in the week. Crypto is being heavily driven by macro forces. In that it’s not alone, of course. We’re now watching the British Pound come under substantial pressure, and as I write, it sits at less than 1.12 to the US dollar. Back in November 2007, it was over 2. It’s not just emerging markets that suffer massive debasement. That said, we are only days away now from “Uptober”, which we wrote about last week. If we’re getting to the point of maximum pain, maybe there’s light at the end of the tunnel. &nbsp;

The structure of the crypto market is changing. As you can see from the chart below, Bitcoin dominance (which measures its contribution to the total crypto market cap) hasn’t recovered in this cycle, even as we go through this “crypto winter”. This is a healthy development and one that supports a bullish, albeit selective, long-term view of the sector.
This could be for a couple of reasons:
a)&nbsp;&nbsp;&nbsp;&nbsp;Bitcoin is losing its appeal as an alternative store of value b)&nbsp;&nbsp;&nbsp;&nbsp;More value is being created elsewhere in the crypto ecosystem
Let’s take those in turn.

First, is bitcoin losing its appeal? It’s certainly taken some knocks. Its identity as the currency of the internet has been diluted by the introduction of stablecoins (which have taken a share in this calculation). These enable investors to park cash in a far less volatile entity while remaining in the digital universe.  Furthermore, in the short-term, bitcoin has also disappointed those who believed it would be a hedge against inflation and a store of value, although we argue that this can only be judged over a long period of time. Bitcoin is still in the very early stages of its existence – if it is to reach a goal of being multiple times more valuable, it must, by definition, be volatile. In addition, like any other asset, its role as an inflation hedge is contingent on what price it was bought at. Those who have accumulated at cycle lows rather than chased bubbles are generally very happy with the outcome. Have a look at&nbsp;ATOMIC&nbsp;this week for a chart showing how bitcoin moves with inflation.&nbsp;  The other factor driving down bitcoin dominance is the emergence of other tokens and coins as the sector builds use cases and value. This is certainly happening. Over the course of the next 5-10 years, we expect to see changes to many industries, some of them fundamental. A reduction in bitcoin dominance tells us that the market agrees with this view.  In&nbsp;ATOMIC&nbsp;this week,&nbsp;we look at&nbsp;the move in US 2-year real rates in the US. We’ve had a 4.6% bottom-to-top move – so far – which has presented a huge headwind for risk assets. And this before the Fed hiked again later in the week. Crypto is being heavily driven by macro forces. In that it’s not alone, of course. We’re now watching the British Pound come under substantial pressure, and as I write, it sits at less than 1.12 to the US dollar. Back in November 2007, it was over 2. It’s not just emerging markets that suffer massive debasement.  That said, we are only days away now from “Uptober”, which we wrote about last week. If we’re getting to the point of maximum pain, maybe there’s light at the end of the tunnel. &nbsp;

Bitcoin

This Time It's Different