My Crypto Q4 — Q1 Theses

Major moves and rebalances, a look at major ecosystem trends, and ETHBTC.

My Goal: Outperform ETH short term until ETHBTC breaks out, then be long ETHBTC through Q1.

My thesis is the Q4-Q1 transition in crypto will be about:

• Multi-chain dex’s, dapps
• L1/ETH rotation plays — this has been a feasible way to outperform ETH lately while still not taking on excessive risk of micro caps, because they are midcaps yet when running can still perform a 2–5x or even more with DeFi plays measured in performance against their ecosystem token. Examples: ADAETH earlier in year, SOLETH was an almost 5x from the summer 2021 lows, now focusing on LUNAETH, AVAXETH
• AVAX ecosystem — strong upward pressure right now (see AVAX/ETH pair especially).
• LUNA ecosystem — upward price action on a pause at the moment
• DOT ecosystem and parachain auctions, KSM
• Gaming and metaverse coins — prominent narrative already and continued volume rotating
• BTC.D or 100-BTC.D (Bitcoin vs altcoin dominance)
• ETHBTC on watch later in Q1 due to seasonality
• L2 ETH scaling solutions and their respective chance to outperform ETH, e.g. MATIC/ETH

Let’s quickly look at seasonality of ETHBTC for Q4 and Q1.

Historically, ETH tends to outperform BTC going into Q1.

Where is ETHBTC now as of 1 Dec 2021?

Pictured: ETHBTC D3 chart. ETHBTC forming a macro symmetrical triangle.

I believe it is likely ETHBTC will continue to consolidate within this triangle through the end of Q4 and then breakout into Q1.

I am targeting 0.1 ETHBTC or a second target of 0.12 (54% measured move from today) which for target 1 at a price of 58k BTC would make 1 ETH = 5.8k USD for target 1 and 6.96k USD for target 2, sometime in Jan-March 2022.

Historically, ETHBTC tends to not make any major moves during Q3-Q4 and this has played out again this year.

Hence, I want to be long ETHBTC in Q1 Jan. Aka stay net long ETH overall.

ETH strength means strengths in altcoins. I think altcoins will do well in Q1 but for the rest of Q4, not sure what happens — in previous Q4-Q1 transitions we have seen sudden downward pressure in ETHBTC that in turn brings capitulation and risk-off on altcoins, and note that altcoins have been bullish since 20th July so some caution may be warranted — manage risk.

We could keep seeing fragmentation in that certain leaders keep leading (rotate AVAX SOL LUNA) vs other altcoins do mostly nothing — see DeFi 1.0 such as SNX, AAVE, COMP have done mostly nothing this year since runups in January.

As of right now, for the last 6 weeks or so of the year, ETH will likely not do much price action wise and I believe the protocols noted above will continue to steal the show.

The best way to take advantage of this is in the AVAX/ETH and LUNA/ETH charts (and SOL/ETH).

The ETH pairs for these three protocols are relevant since they are in many ways, competitors to Ethereum, and the ETH pairs may make it easier to see inflection points or shifts in the flow of capital.

The ADA/ETH pair proved useful for this earlier in the year.

Of course, this is just talking about pure price action and not fundamentals. I will cover the fundamental theses I have regarding AVAX and LUNA in future publications.

AVAX/ETH pictured. Especially watching this pair due to the all time high from earlier in the year at 0.04564 ETH for 1 AVAX. As of today, that would make 1 AVAX = 199 USD.

Could it go higher?

Perhaps but I will look to take significant profit on some AVAX spot positions there and see if strength in this pair continues beyond that or not.

LUNA/ETH pictured.

Note how easy it was to see the shift in strength of ADA vs ETH in Feb 2021 using the ADAETH pair.

Come the start of Q1, it is possible based on historical trends that this same liquidity currently in Layer 1’s goes back to ETH and ETH steals the show at least for a handful of weeks.

Layer 1 liquidity may flow back into ETH (AVAX, LUNA, SOL liquidity goes back into ETH).

If trading DeFi coins I suggest making your base currency by which to record your portfolio performance in ETH.

For intra-layer plays e.g. If you are across the Solana ecosystem, compare the performance of your portfolio to the base currency e.g. SRM/SOL, RAY/SOL, SPL/SOL, etc.

Therefore, ALT/ETH pairs are more important in instances over ALT/USD pairs or even ALT/BTC pairs.

We have seen in Q3-Q4 so far that other Layer 1 protocols have outperformed ETH by a large margin due to capital inflows.

e.g. AVAX/ETH, SOL/ETH, LUNA/ETH

AVAX, for reasons to be discussed in a future report, at the moment seems to be the strongest EVM competitor for ETH.

DeFi Theses and Ideas

• Can we observe an exodus from centralized exchanges to dex’s due to new regulatory pressure from China?
• In which dex’s are we likely to see this happen?
• Will DEX volume continue to be fragmented away from Uniswap both within other dex’s on ETH and across other chains in response to ETH gas fees? (e.g. JOE on AVAX)
• JOE is the best AMM on AVAX, watch for volume to increase and take market share from UNI and SUSHI.
• Can DeFi/Eth pairs see the end of their downtrends in price? Many near lows of 2021
• dYdX decentralized futures markets volume, Mango Markets on SOL
• Focusing on newer protocols, bridges and multi chain capabilities. These narratives may continue to run over the designated blue chips like Aave Comp etc.
• Watching JEWEL on Harmony One plus other contenders on ONE
• Expecting continued underperformance on Dino coins (LTC, ZEC, BCH) at least for rest of Q4, this may change later. Earlier this month we saw brief upward pressure for LTC and BCH after which the entire market sold off. This pattern seems to be occurring frequently over the last year, meaning whenever capital flows into LTC and BCH, the market seems to near a local top. At the least, such capital flow indicates a reason to be cautious and/or consider taking some risk off short term.
• AVAX rotation continues? AVAX continued strong price discovery, LUNA now lagging as of 20 Nov 2021
• Metaverse tokens continued watch — AXIE, SAND, ENJ, MANA, VRA, NTVRK, UFO, BLOK, ATLAS, ALICE. Kucoin has a metaverse category, also see category on Coingecko. These continue into their 3rd week of strength after Meta’s announcement.
• SOL consolidating for remainder of Q4 — I think AVAX, LUNA, Metaverse tokens will steal the show while SOL can see possibly no net change during the remainder of Q4.
• Watch for when ETH may be ready to outperform L1 again (Jan and later) as noted above- this can be rapid but first watch for retail ‘giving up’ on ETH as we saw in Jan-Feb 2021
• Capital from SHIB to flow into other L1 or back into BTC, ETH
• Will the rise of other L1’s take market share away from BNB’s market share earlier in March-May 2021? The primary reason BNB saw such surges was due to the low gas fees on Binance Smart chain which saw Pancakeswap dex increase significantly in volume and liquidity and several yield farming opportunities for retail participants who could not afford the gas fees of Ethereum. Today, there exists yield farming on FTM, ONE, Matic, AVAX, and SOL, all of which have negligible transaction fees.
• L2 scaling solutions continue to be a predominant narrative as of late and warrant their own post due to the necessity of ETH scaling solutions and what this means for the broader market however there are a few main plays in this category while saving the differences and details for a future post: MATIC, IMX, LRC
• Pic below: MATICUSD/ETHUSD — very bullish on Matic as of today 1 Dec 2021 and I think there is a good chance we see the old highs on this pair as in earlier in Jan.

• I refuse to be long DeFi 1.0 (seen here in FTX DEFIPERP index) until we can see major market structure as measured against ETH shift into bullish and put in a clear low on the D1 timeframe at least — so far we keep seeing new lows this entire year.