The Market
There is a lot of hype in the market during the second week after the election. The Kaito market sentiment indicator, calibrated from news and social media data, has surpassed its high point in Q1 2024.
Retail interested started kicking in as we observed crypto trading app rankings climbing up from below 200 to number 11 on November 13. During the height of the last cycle, the Coinbase app was ranked as number 1.
The market cap of spot BTC ETFs has increased by almost $25B since the election, driven by a combination of inflows and BTC price appreciation.
Meanwhile, as BTC becomes a household name, memecoin search has reached unprecedented highs in this cycle.
We are also seeing an acceleration of stablecoin inflows into exchanges, with USDT supply increasing by $7B, or 30%. We are now $5B away from the previous cycle peak in total stablecoin supply. USDC supply still has about $5B to catch up, which isn’t hard to achieve given that it was reached before in Q1.
In terms of price action, BTC broke the $90K level on Nov 13. Since dealers are mostly long Gamma in the $90K - $100K price range, we expect some resistance for BTC to break the $100K price level. The funding rate spiked when BTC first broke the previous ATH but is still well below the March market high level, indicating the price action is driven more by spot rather than leverage.
Memecoin staged a big rally since the election, with the top 6 memes captured by the MarketVector Meme Index doubling since November 6. The speed of the rally is comparable in scale to Q1, when the meme index tripled in the two weeks in March.
We view memecoin price action as a good leading indicator of risk capital rotation. In the last bull cycle, Dogecoin, one of the earliest and largest memecoins, delivered a 9X return from Jan 25, 2021 to Feb 11, 2021, as BTC retook its previous ATH. It returned another 10X as altcoins began outperforming BTC.
Despite the recent rally, with BTC establishing new ATHs, the altcoin market cap has not recovered to its previous peak. It will take another 30% rally for the total market excluding BTC and ETH (Total3) to return to its 2021 peak level, and 60% rally for the total market cap excluding top 10 (Others).
There is a honeymoon period between now and January 20 as the market looks forward to Trump’s pro-crypto policies. However, one sign watch is global liquidity, which peaked in September and has since started a downtrend, diverging from the crypto market.
We expect this to be temporary as the Move index declines, boosting the collateral value of bonds. There could also be temporary liquidity relief as the Treasury draws down the General Account to pay debt before revisiting the debt ceiling again in January. Additionally, Trump’s policy on reducing financial regulations could stimulate bank lending activities as the new year approaches. Nevertheless, inflation remains a risk factor that could impact the Fed’s monetary policy and soak up liquidity.
DeFi Update
SUI has risen to the top performer among the top 50 coins in the past 90-day period. Many investors have likened SUI to SOL from the last cycle, as SOL became this cycle’s ETH.
Developed by the team behindFacebook’s Libra blockchain project, SUI is a high-performance Layer 1 blockchain designed for scalability, low latency, and instant finality. It uses the Move language with an object oriented Architecture which is very developer-friendly. Through account abstraction, any user can create a SUI wallet using a Google account, eliminating friction for getting on-chain. Through wallets like Stash, users can manage and send/receive assets as easily as any Web2 P2P payment app. SUI’s TVL has grown 8X YTD. Transaction volume and stablecoin supply on SUI have also seen healthy growth this year.
Alt L1s peaked at around 30-40% of ETH’s market cap in the last cycle. SUI is currently 10% of SOL’s market cap, indicating further room of growth.
Top 100 MCAP Winners
Peanut the Squirrel (+1745.79%)
Stellar (+130.18%)
XRP (+105.88%)
Bonk (+97.73%)
Pepe (+95.70%)
Top 100 MCAP Losers
Aave (-12.83%)
Raydium (-11.55%)
Helium (-11.33%)
Neiro (-10.26%)
Aerodrome (-8.76%)
About Decentral Park
Decentral Park is a founder-led cryptoasset investment firm comprised of team members who’ve honed their skills as technology entrepreneurs, operators, venture capitalists, researchers, and advisors.
Decentral Park applies a principled digital asset investment strategy and partners with founders to enable their token-based decentralized networks to scale globally.
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.
About the Author
Kelly is Portfolio Manager and Head of Research at Decentral Park Capital. Investing across sectors with a thesis driven, deep research approach.
Prior to this, Kelly has led research and product efforts at CoinDesk Indices and Fidelity Digital Asset Management. Kelly has been a TradFi investor for 15 years before joining the crypto space.
You can follow Kelly on Twitter and LinkedIn for more frequent analysis and updates.