Against the Ropes
Coins Face Additional Turbulence
Last week, we seized the opportunity to "buy the fear" in response to the SEC lawsuits targeting major crypto platforms Coinbase and Binance. In our Core Strategy, we decreased our allocation to stablecoins to 10% and lowered our allocation to alts from 17.5% to 7.5%. This turned out to be fortunate timing on our part, as altcoins continued to face significant losses over the weekend. Moreover, we were wise to keep some funds available for potential further market downturns, which we indeed encountered.
As demonstrated by the asset performance table below, regulatory pressures had an outsized effect on the assets deemed securities by the SEC in their complaints.
The divergence between the majors and alts has been striking. While majors remain comfortably higher than where they were 1 year ago (+26%), altcoins have retraced all of their gains YTD and, in aggregate, are 11% lower over the last 12 months.
Another lens through which we can view the current market divergence is in the combination of ETH and BTC dominance, which is now as the highest level since April 2021, meaning that all of the liquidity in the crypto ecosystem is flowing into these two assets.
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