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Based on several conversations with the following liquid funds, Crypto is part of a multi-part series on the position of liquid markets.
It is an open mystery that most crypto liquid funds are underporing.
Liquid funds work similar to traditional hedge funds: choose a market direction, deploy capital and improve a benchmark.
Unlike hedge funds, however, the Yardstick S&P to beat is not an overall benchmark like S&P 500. Crypto liquid funds are in the game to defeat bitcoin.
For example, Bitcoin appreciated ~ 110% in 2024. Any liquid fund performing under that benchmark is considered underperforming, or best.
Unfortunately, the rise of orange coin means that liquid funds have a very difficult task.
Bitcoin is usually kept stable on a year-on-year basis, while Altcoin is forgotten in the rest of the market.
Consider bitcoin dominance (BTC.D), which has climbed 63% in the last one year to 63% of the $ 3.3 trillion’s total crypto market cap today.
In contrast that in November 2021, for the market cap peak of the previous bicycle, when BTC.D hoved in the 40-45% range.
VCs like DBA’s John Charbonue also question BTC as a benchmark. The appropriate benchmark Eth, SOL and BNB can have a weighted-average basket, Charbonue said 0xresearch on podcast.
This possibility the Crypto Twitter Eco -Chamber significantly explains the vibes of recession in the Crypto Twitter Eco Chamber, despite being close to all time in the Crypto Twitter Eco Chamber. Many high -risk -seeking investors are deployed on the thesis that altcoins will grow harder than bitcoin, and therefore “bypasses” from BTC rally.
Panera’s Cosmo Jiang told me: “It is not great right now. Most directional liquid funds are probably negative against BTC. For market-plate liquid funds, industry is average irrelevant. Yet they are also a bad year, but it means that they are usually flats on performance, not positive.”
Practically every liquid fund that I have spoken agreed that Bitcoin has located itself as an institutional/macro property, or as “digital gold”.
“We are at an interesting point in the S-cycle of the adoption of bitcoin, where you see rapidly growing due to the strategic reserve of the ETF and the US government. The bitcoin flow last year is more than the cucuyucue flow of Nasdaq, which is crazy,” Jiang said. “Most players still do not appreciate the nuances that BTC performance is quite different from the rest of the Crypto market.”
It is not only about orange coins, which is by chance by 11% a week.
The staggering performance of most liquid funds is affected by a dark, emerging clouds on the Altcoin market. L1/L2, Defi, Depin, AI and Memcoin’s glute which are already present and soon to unlock a foggy outlook, Arthur Chong of Defense Capital told me.
“Except for the unlock schedule for all ALT, it is estimated to be $ 1 billion every month for the next two years. There is not so much demand for altcoins. All Crypto liquid funds have a total capital of ~ $ 10-15 billion,” Cheong said.
These structural mobility also affects special liquid funds in market-plate strategies.
“When the projects try to sell their locked tokens at the counter (OTC) at a discount at 30–40%, it is difficult to find a buyer. A widespread expectation by the markets is that Altcoins will be dipped,” said Presto Research Analyst Min Jung.
The top 10 largest tokens launched in 2024 (STRK, ENA, Jup, Ondo, etc.) will require $ 60 billion to maintain pressure to maintain prices. wrote Last year.
This mismatch in demand and supply means that the liquid fund should work hard to take the “right” winners.
“Rising Tide (BTC) lifts all boats”. The occurrence of previous cycles is not much.
In the second part of this series, we will see:
- How to adapt to liquid funds on fundamental?
- What liquid funds are the Crypto sector watching?
- Is the four -year cycle dead?
- Is L1 Valuation Premium dead?
At the end of this week, peel your eyes for part two in 0xresearch newslator.
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