Planning for the Next Alt Season

In this analysis I am gonna touch on several topics starting from how I’d construct my portfolio the closer we get to alt season, and then move into how I see the current landscape and how we get from here to the promise land of AltSZN!

  1. ETH, LTC, BCH, XRP – Most accessible and liquid. Most newbie friendly. I like the narrative behind them and that crypto people hate them. I want to buy capitulation after ~3 years of bear. 30% allocation.
  1. YFI, SNX, AAVE, RUNE, RSR, UNI, CRV – Most established DeFi projects, decent products, have shown lots of strength vs BTC. 30%.
  1. DOT, WAVES, BNB, THETA. FIL, VIDT, IDEX, OCEAN + a few more. In this category I might put some older coins that have a decent product or a decent chart. For example, WAVES is one I mentioned a few times in the past and I like it because its chart is quite special. Maybe add in here coins that could be listed by Coinbase and/or newer protocols like ROSE, NEAR, AVAX. 20%.
  1. Newer small caps. Coins that have been going down essentially since the day they launched and they have some interest/listings behind them. Only new stuff and mainly ERC20s. 20%.

That’s how I’d structure the main portfolio in which I’d put 20% of all my BTC (essentially 20% of everything I have at the moment).  I’d also keep an extra 5% which I’d deploy on small caps once I see large caps start popping and small caps to at least go sideways. For this extra 5% I’d probably be waiting for brand new coins to come out and put it in there. As you have probably already noticed, the percentages at the end is what I’d put in each category, but of course it can vary, especially as things start going up hard.

How Alt Season Will Unfold

My view is that the main show will start from larger coins that are easily accessible to all newcomers. I can’t see how a total newbie will buy ETH or any stablecoin first, and then go on Uniswap to start picking any of the small caps first. Of course several small caps will pump and they will pump hard… but a) they don’t have the same risk profile with old, well established coins which someone can even buy on PayPal.

Right now there are like 200k people that use / have used Uniswap, whereas there are more than 400M people that have access to centralized exchanges, PayPal, Grayscale and so on. Most of these coins are listed on most of these exchanges and have the potential to be the first ones that rally hard once they bottom.

Overall I don’t really like many coins that were launched before 2020, however some projects that are being used, are promising, or have really great charts have my attention. As my focus is on macro narratives and cycles, and not picking coins purely based on fundamentals, I try to see the best narratives and trends and capture as much upside as possible with the minimum amount of risk. This means that I want to be properly diversified and ready to rebalance when something gets too hot and something else is lagging. Essentially I don’t want to be left stuck in something I don’t understand when things are changing so rapidly.

Doing DeFi Right

Of course ignoring major DeFi coins would be insane given how well they are currently doing even as Bitcoin is going up. Altcoins are slowly moving away from empty promises and/or garbage code/products or awful tokenomics into something way more useful, mature and reasonable. However this doesn’t mean I want to be all in DeFi due to all the risks these projects have. From regulatory issues, hacks or just in terms of price appreciation, given the fact that DeFi was in a bubble that ended at the beginning of September. Finally many people ignore the potential issues Ethereum might have as everything moons and the space as a whole isn’t ready for what is coming.

Right now Bitcoin seems to want to go higher, but a short term top at 20-22k seems reasonable as the price is already quite overbought and diverging. Many tools I use are confirming that and point to a potential top in that area, but of course this is Bitcoin. As big players are getting in and everyone has started talking about Bitcoin again… It could explode much much higher before we see inflows into alts. When it crosses the ATH we might not see any meaningful selling, but the opposite.

So what could that do to alts? What is the current picture looking like for them? My current view is that alts don’t look that great and the altcoin dominance chart looks like it has a lot more downside. If alts have fallen 50% as a whole since Sep 1st then they have a minimum of another 30% before they bottom. This could either come with a big BTC correction down to 12-14k and then pump to 22k or by Bitcoin exploding straight to 30k where alts fully capitulate and then start rallying. Several major alts are looking decent and many smaller seem to be in a bottoming process, but to me it seems risky to move in now without getting some extra clarity.

Time Your Entry

In terms of timing this, I think December is the month alts bottom. My key dates are the 7th, the 17th and the 31st. Essentially 3-4 months of downside for alts is enough for an alt season to begin after the previous one ended. It probably isn’t a bad idea to start accumulating alts or set bids on the way down to buy stuff you planned to buy. It is better to have everything predetermined and once you buy them, set your sell orders, set your alerts and only use your profits to buy other coins instead of micromanaging everything. My expectation of this alt season is that it will last for 3-4 months as well and will be more like Q1-Q2 2017 and not Q4-Q1 2017-2018. Of course things could be different if BTC explodes much higher because the players that are in right now mainly have access to BTC and not alts.

My final thoughts are that of course your main objective is to make more Bitcoin. Everything else is noise and dangerous. This market has certain characteristics that remain unchanged and will be very hard to change, despite a lot of its dynamics being very different. Of course the fundamentals of alts have improved dramatically, but at the end of the day liquidity trumps everything. Alts have a lot more to prove, as Bitcoin has already proved itself in many ways and the reasons for BTC being King are countless. So deploy your BTC carefully and forget the fiat value of your portfolio until BTC gets above 100k. All the dates and potential moves I mentioned are only useful as guide and not as the final solution, as until I see a massive red or green candle on alts I won’t fall in the trap of thinking an alt season would begin so quietly. Usually, when alt season is here you either get a clear sign it has arrived or a clear sign that there has been so much pain that it is almost there.