Original author: Kyle
Original compilation: Deep Chao TechFlow
As we head into 2024, my core portfolio is now fully allocated. This article is about my perspective on how I see 2024 unfolding. I will do my best to express my opinions on investing as much as possible in this article. But this is not financial advice, just an insight into how I see cryptocurrency developing in 2024.
If you don’t plan ahead, your investment will fail
Over the past few months we have seen Bitcoin finally break out of its nearly 500 day swing between 15k and 32k and now everyone is anticipating a bull run.
But as 0x_Kun, my favorite blogger on Twitter, said:
Make an investment plan and follow the investment plan. Because when things go bad, youll know what to do.
So the core of this post is an in-depth look at my 2024 plans. This article is divided into two main parts:
How I see things unfolding in 2024
Which narratives do I think will perform well?
Part One: The Great Bull Market Case of 2024
I always prefer a top-down approach when investing: macro first, then micro. So here are what I believe are the most important key narratives driving the bull market:
Bitcoin ETF
interest rates lowered
Bitcoin Halving
There are a lot of other smaller factors - like a presidential election year, Chinas stimulus policies, etc. But I believe the three factors mentioned above are the most important and have the greatest impact on my investment portfolio. If you have to worry about every little factor, youll never make a deal.
What I then like to do is list a series of possible events and make predictions about the probability of each event occurring. I think the smartest thing about investing is determining how the cycle will play out on a longer-term basis.
Scenario analysis
Before we dive into the scenario, let me explain some of my basic assumptions about the key narratives I’ve listed.
BTC halving is certain
In all of these scenarios, I believe that the Bitcoin halving does not necessarily mean an increase in price immediately.
As can be seen from the chart above, Bitcoin’s halving always precedes a bull market, but Bitcoin’s halving is never a direct catalyst for a bull market. There is always a delay between the halving and the increase in price.
Rate cuts are bearish
Lowering interest rates will drive the price of Bitcoin down.
Second, I believe a rate cut is bearish. Like halvings, they are events that precede bull markets, but when rate cuts occur, they are negative for the market.
Having said this, we can analyze the 5 scenarios I think.
Could this bull market be different from the past?
The market will move in 5 different ways. All trends behave differently in every event
Scenario 1 - Best case scenario, but least likely
Scenario 1 is a bull market from 2024 to 2025, with prices continuing to rise. There isnt much explanation needed for this situation.
Scenario 2 - Bitcoin ETF falls after passing, also unlikely
The Bitcoin ETF created a local top and then fell, only to rise at some point later. Now, if youve followed me before, youll know that Ive talked about the ETF passing causing prices to fall because BTC was rising in anticipation of that event. At that time, no one thought that the Bitcoin ETF was going to fall. Everyone was just trying to buy before the Bitcoin ETF was officially passed.
My stance has changed and now everyone is talking about ETFs that are going to cause a drop and I think its going to be a Bitcoin ETF thats going to cause huge price swings.
Scenario 3 - A rate cut is bearish and most likely
Cryptocurrencies haven’t really been around that long compared to traditional financial markets. When we see how Bitcoin performs under high interest rates, we only have one point in time to look at - 2019.
2019 was eerily similar to what we are facing now. I believe this is the most likely event: we see a local top sometime in 2024 due to interest rate cuts, followed by a few months of decline before entering the largest bull market we have ever seen.
ETFs, halvings, interest rate cuts mainly set the long-term stage for a larger bull market. 2024 is definitely not a simple rise.
Scenario 4 - Halving is bearish and unlikely
I dont need to say more - this is similar to Scenario 2, except that the halving will cause the top to occur earlier.
Scenario 5 - Prices only fall; also unlikely
If prices keep falling, this could catch the entire market off guard, which I dont think is going to happen.
Scenario 6 - Local top but then bounces back
I didnt describe this in the chart above because it would be too complicated, but scenario 6 is basically any one of my previous 5 scenarios happening, but we dont get to the price high I was expecting, but after Fall quickly. This means shorts and stranded capital will be caught off guard as people wait for “better entry opportunities.”
So the conclusion is: I believe we will see something similar to 2019, when people were expecting new all-time highs, we will see a dip at some point. This tweet pretty much sums up what I think is going to happen:
So what would I do?
The biggest risk Ive learned in 2023 is taking a position too low knowing that at some point in the future the price will increase again.
As a retail investor, I am not tied to an LP (limited partner) and do not have to constantly adjust to optimize returns. I can manage my assets however I want.
So my strategy would be to be very left side investing, where I would de-risk my portfolio by a certain percentage before a rate cut and then buy back at a lower price while keeping the rest of the position the same.
This is a simple strategy and I prefer optimizing investment for simplicity rather than return. I believe that a more complex investment approach equals a greater opportunity for errors/mistakes. This strategy will not yield the greatest returns, but it is extremely manageable.
Additionally, I think I would either hedge by going short on the major cryptocurrencies, or reduce the size of my longs. Other approaches might be to diversify into more defensive assets, or buy forward out-of-the-money options.
Like I said, retail investors just keep it simple.
To summarize, I foresee prices falling after rate cuts and then rising.
Part 2: Narratives to Watch
Which narratives will gain the most attention in 2024?
Again, we need to think from the top down. One question to answer is: Who is buying?
I believe 2024 will be largely dominated by institutions, which is evident with the launch of Bitcoin ETFs and increased focus on cryptocurrencies. The narrative is really just hype, everyone is getting on and trying to get off before everyone else.
So the narratives that perform the best are going to be the ones that have the most buyers, and I think those buyers are primarily institutions, and I think the narratives that perform the best are going to meet certain criteria, which are:
regulated
Products that have demonstrated product-market suitability
This is not to say that all narratives must meet these criteria. In the past month, we have seen a lot of crypto narratives, such as RWA, DeSci, etc. These will obviously continue to crop up in bull markets, but for simplicitys sake I prefer to focus on narratives that I think will consistently perform well.
1.ETF beneficiaries
The ETFs inflows into Bitcoin mean its gains could see excellent performance in the short term. We have seen this happen with STX, ORDI, TRAC and other investment targets.
After the adoption of the Bitcoin ETF, a large number of traditional financial institutions may continue to buy.
Best Investment Options: COIN (Stocks) / BTC / ETH
Considering Coinbase has been picked up by 9 out of 12 ETF issuers, I think Coinbase will be a huge beneficiary of the ETF narrative. Coinbase is the recipient of liquidity going directly into the crypto ecosystem simply because prices rise as people chase performance.
Picture this: Big players like BlackRock, Franklin Templeton, etc. come up to you and say they want to use your platform to secure their products. It looks like it will drive up the stock price.
Naturally, we may also see an Ethereum ETF, so you can expect ETH to rise when this happens.
Derived Narrative: BRC-20/LSTs
Correspondingly, as derivative assets of BTC and ETH, BRC-20 and LST will also rise.
2. Lindy Effect
(Deep Chao Note: The so-called Lindy effect is the belief that for something that will not die naturally, such as a technology or an idea, their expected lifespan is directly proportional to the time they have existed. Here the author uses it to illustrate a certain The antifragility of some cryptoassets increases over time.)
In the field of encryption, anti-fragility is very important. We have seen VanEcks paper on Solana. Although traditional finance wants higher excess returns, it does not want air coins, which is the perfect market segment to be allocated to.
Best choice: SOL
I wrote a full report explaining why I think SOL will surge around $20; you can read it here . I believe that once FTX estate fully liquidates their remaining uncollateralized SOL, the foundation will begin to accumulate it as a high-quality asset. Solana could be the next Ethereum.
Derived narrative: TIA/Aptos/L2
TIA is definitely not a representative of the Lindy Effect. When investors ask: What is SOL beta?, Tia is the first ecosystem that comes to mind.
Aptos has a lot of potential because they are doing something. While MATIC may be considered the chain with the best BD team, it’s impressive how Aptos has forged partnerships with Windows, Alibaba, and more this year.
In the end, L2 is a nice product with great use cases, but with 10 different second tiers coming out in the past month, from Blast to... an L2 for board games? Im a bit bearish on this one as its more of a random experiment than a technological innovation.
Community is very important in building a strong coin, and Solana has a very resilient community; and those that rely more on breadth than depth tend to perform worse.
3. Regulation and product market fit
I believe 2024 will also be the year of regulation. I think that when the regulation of DeFi is not clear, no fund is willing to invest in DeFi. Instead, I think people will gravitate toward products that have passed the test and have shown clear product-market fit.
There’s really only one vertical that fits both categories: exchanges.
Best investment option: MMX/dYdX
Exchanges are one of the few products in crypto that solve core problems. I believe that Perp DEXes exchanges will see a resurgence, especially considering that the SEC is now regulating all central exchanges: first Binance and now ByBit.
I think MMX and dYdX are two options that will benefit, as in the past, any negative news for CEX has almost always meant a rally for dYdX (CEX vs DEX narrative). dYdX has shown continuous technological innovation: now that v4 has arrived, investment funds may view it as a more income-generating gameplay.
MMX is also a bet on Saudi money, and the recent Pheonix Group IPO (a BTC mining company) was subscribed 33 times, which makes me think they are eager to invest in cryptocurrencies.
You may be thinking - why is DeFi not on my list? Well, like I said, DeFi is in unclear territory right now. I tend to believe that there may be some kind of regulation for DeFi in the near future.
Derived Narratives: Other Perp DEXes
GMX, Hyperliquid, Level Finance, Synthetix and many more.
4. Decentralized artificial intelligence
Here, I wrote a long article explaining why you should be optimistic about DecAI. This is probably my main narrative for 2024, you have a product that is revolutionizing the 21st century and the average investor actually agrees with decentralization.
The Sam Altman saga has left a bitter taste in people’s minds as they realize the dangers of centralization, leading to more and more people saying we need “open source” artificial intelligence.
Preferred: TAO/OLAS
Edge narrative: TAO subnet token/RNDR/AKASH/other AI tokens
I dont think RNDR will perform that well because the coin has a large number of large holders from past cycles, who may control the market and sell heavily after taking profits.
5.GameFi
We were very interested in GameFi last cycle, and this cycle, we will see the release of these games. Many crypto OGs hate Gamefi - play 2 earn, play-and-earn... but who cares? They are all high FDV tokens and should be thrown in the trash.
Many funds have a shadow about investing in Gamefi at a high FDV, which is why I think GameFi will be hated. But this cycle, the Web3 games that actually build something amazing will do best.
Best investment options: Overworld/Treeverse/Prime/L3 E 7
Derivative narrative: NFTs → BLUR
The bottom for NFTs may have been reached, and I believe we will see a renewed focus on gaming NFTs.
6. Other potential narratives
In addition to the five narratives above, I will also list the narratives that I think have shown good potential in the past few months:
dePIN / RWAs
deSci
Memes (BONK / DOGE / PEPE / HPOS 10 INU)
RUNE / CACAO
GambleFi
Airdrop (LayerZero/Starknet/ZKSync)
Conclusion
Congratulations if you’ve read this far! This article summarizes my views on the cryptocurrency market in 2024.
One thing I havent talked about yet is how I think this cycle will end, and lately Ive been thinking more and more about GCRs view: The top of the bull market is when funds join, the next top of bull market is when countries start buying .”
This sounded ridiculous at the time, but after learning that countries with high inflation are considering incorporating Bitcoin into their portfolios (such as Argentina), I think it is increasingly possible.
But that’s for another article. I wish you all a Happy New Year in advance!
