Some of the rallies over the past month have been admittedly eye-popping, in percentage terms. But, just like you probably didn't buy Amazon at the September 2001 low, you probably didn't buy altcoins at the June 2022 low — the lows are only ever obvious in hindsight. There were signs, though.
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"90% of everything is crap."
— Sturgeon's Law, Theodore Sturgeon
The Great Altcoin Rally of 2022
Stocks always have their biggest rallies in bear markets: In its 100-year history, the S&P 500 has recorded six up-days of greater than 10%, all in the wake of the 1929 or 2008 crashes.
The biggest fortunes are made in bear markets, too: Buying Amazon at its 1999 high would have netted you a respectable 2,400% return. Buying Amazon at the 2001 low would have made you a life-changing 45,900%.
Altcoins are showing signs that the same may hold true for crypto.
If your sarcasm detector was triggered by “The Great Altcoin Rally” (trademark pending ™), your detector is functioning correctly: 2022 will not be remembered for altcoins going up.
Some of the rallies over the past month have been admittedly eye-popping, in percentage terms. But, just like you probably didn't buy Amazon at the September 2001 low, you probably didn't buy altcoins at the June 2022 low — the lows are only ever obvious in hindsight.
There were signs, though.
Stablecoin dominance (the percentage of cryptoassets hiding in stablecoins) had spiked dramatically at what turned out to be the market bottom.
It showed that people were selling their altcoins but staying within the crypto ecosystem, presumably with the intention of buying back into altcoins at some point.
It proved to be an excellent indicator that the sell-off had gotten short-term overdone. And that’s not just hindsight talking, it was flagged at the time:
If you missed that alpha from my Blockworks colleague, don’t feel bad, you’re still doing better than I am: I saw it and ignored it, which is far worse.
I ignored it because I didn’t think people would be so quick to come off the sidelines.
More surprising still: There's new money coming into crypto, too. Crypto investment products had $474 million of inflows in July.
If nothing else, it all shows, despite the crypto winter, animal spirits are alive and well. (Which maybe means it’s not actually winter?)
The renewed risk taking has been variously attributed to the Fed’s (sort of) pivot, the Nasdaq rally, and the upcoming Ethereum Merge.
But, to me, it’s mostly just because people are degenerate gamblers who can’t stay away from the casino for long.
And not just in crypto: Shares of AMDT Digital, a Hong Kong based financial firm, are up 10,600% since its July 15 NYSE listing. That’s gifted AMDT a $249 billion market cap, making it one of the 40 most valuable companies in the world. (One hopes not for long.)
That kind of silliness makes whatever’s happening in crypto look downright sensible.
What has been happening? Let’s look at some of the more sensible altcoin moves to get a feel for what’s going on.
If a stock went from $48 to $10 and then back to $16, no one would be crowing about it.
But ETH’s move from $1,000 to $1,600 over the past six weeks has been cause for celebration, which I think is understandable: It felt like crypto was dead and buried, and now it’s back up and walking around.
I’m not sure why it’s back up and moving around: The most-cited reason (the upcoming Merge) must surely be priced in at this point, as it’s been years in the making.
But crypto prices still move on narratives, and it doesn’t take much of one at the moment.
LDO is up 450% from the lows, also on the Merge narrative.
MATIC is up 250% since announcing a zkEVM scaling solution.
AAVE and CRV are both up about 70% on plans to release their own stablecoins.
SNX and SYN are each up about 150% following announcements that were flagged ahead of time by Blockworks Research here and here.
YFI is up 220% on…well, I don’t know what.
So, what’s it all mean?
It means, even in a crypto winter, altcoins can still go up purely on narratives. And sometimes on nothing at all.
That’s not really what I had expected. I thought we were in for an extended period of more skeptical markets and that cryptos would need to find some sort of more tangible value to rally substantially.
But even at the lows, I didn’t see anyone trying to argue altcoins were cheap on any metric other than “distance from the highs.”
But who needs valuation metrics when you’ve got narratives?
Could narratives be enough to make this the start of a new bull market? If so, it will have been a shockingly short bear market.
But, everything happens faster in crypto, so I guess it’s possible.
For now, though, here’s some Sturgeon's Law investment advice: 90% of everything is crap.