Crypto Bull Market Is On
Cryptocurrencies have entered a 18-24 month bull cycle in late 2023. Otorongo is positioned.
In financial markets, the most successful traders and investors tend to be those who are excellent at balancing the art of being aggressive and defensive simultaneously.
If an investor is always defensive and cautious, it’s difficult to make career-making and life-changing returns. On the other hand, a very aggressive investor will always be taken out by the brutal ebb and flow of market cycles.
Knowing when to be cautious and defensive, and when to switch to being aggressive isn’t something that can be learned or taught - we have to learn from experience and consciously get better at it. This key trait is what distinguishes the ones that will truly be successful in markets.
This is also somewhat implied by the nonagenarian billionaire Warren Buffett when he said:
"Be fearful when others are greedy and be greedy only when others are fearful"
Doing this well in markets requires excellent situational awareness, skillful sizing of risk and reward, and superior understanding of the positioning and emotional state of others (market participants). Only after doing these right can we decide whether we should be defensive or aggressive.
Sizing up the current state of the cryptocurrency universe, we’re reminded of a time back in the past, a time of gunpowder and revolution, a time of Beethoven and Goethe, a time of industrialisation and empire…
The British general, Sir Arthur Wellesley, more famously known as the Duke of Wellington, exemplified this key trait in his military campaigns when he fought against the French in the Napoleonic Wars. While famous for taking on Napoleon at Waterloo, he was already a very accomplished leader and commander in his own right prior to that battle.
During the Peninsular War, Wellington led his troops in a long, bloody and arduous war against Napoleon’s French forces to support Portugal and Spain in their war of independence. Well-known for carefully playing defense when his army was outnumbered on various occasions, he bid his time well to wear the enemy out before making key strategic moves across Iberia.
But what’s lesser known were his legendary offences when he saw the opportunity to crush the French.
Near the beautiful town of Salamanca in July 1812, Wellington was seeking an opportunity to engage the French after advancing into Spain from Portugal earlier. The two armies conducted a series of manoeuvres across the countryside hoping to gain an advantage over the other side. After days of jockeying, the French made a momentous mistake in deploying to engage the British after inaccurately reading their positions.
Our friend Wellington spotted his opening and knew it was an opportunity too good to miss. It was said that he was dining on a chicken leg while watching the French raggedly deploy their formations, and cried out: “by God that will do!” in excitement.
He galloped hard for 3 miles across country on his stallion Copenhagen to give crucial orders in person to his divisions, and supposedly, it was recorded that many of his young staff officers struggled to keep up.
The French army realised their mistake but morale collapsed and they were crushed in just after an hour when Wellington went on the offensive. Their casualties was more than twice of Wellington’s forces.
According to the National Army Museum in London, the crushing victory at Salamanca:
“was one of Wellington's finest and proved that he was more than just a good defensive general after he had quickly seized on an opportunity to attack…”
By seizing a relative momentary advantage, Wellington turned it into remarkable triumph that had a lasting, strategic impact on the Allied war effort against Napoleon.
Cryptocurrency Bull Market Confirmed
Turning back to our topic-du-jour, the time to be defensive is over.
Cryptocurrencies have awoken late last year after a spectacular collapse in 2022. Multiple rounds of high-profile litigations, collapses and deleveraging in the crypto-world have weighed on the minds of participants and observers. Few have expected (yet alone positioned for) the price gains seen in cryptos over the past few months, other than those who were speculating on the SEC’s approval of BTC ETFs.
Bitcoin (BTC) has now rallied more than 78% (USD terms) since October 2023, and it’s hovering around 48,000 handle at the time of writing. We like the fact that BTC has languished for a few weeks post-ETF approvals, disappointing bulls and encouraging bears. That alone has caused a reset in overall market sentiment in the crypto market, setting the stage for the current bull market.
Recent rallies since 7 February have crushed bears and sceptics, with huge amounts of short liquidations in BTC positions at 44,000 and 46600 levels.
Stepping back and taking a look at the bigger picture, BTC is behaving similarly to historical moves prior to its halving:
A mixed macro backdrop with attractive yields in global credit markets and attractive carry in FX markets has also led to less interest in cryptocurrencies as a whole. This is perfect for the current bull cycle. Observations over the past few weeks and the sizing up of the overall market situation is enough to make us exclaim: “by God that will do!”
Current Positioning
Otorongo is now fully positioned after staying cautious in January. We have rotated half of the portfolio out of BTC and USDC into smaller-cap tokens and projects.
Layer 2s (L2s) have displayed great relative strength, and we’ve accumulated positions in tokens such as IMX and OP after getting long signals on them.
ImmutableX (IMX)
Optimism (OP)
Our proprietary index measure of GameFi tokens have also entered a bullish market regime, and we went long ICP after receiving a long signal.
Internet Computer (ICP)
Larger-cap tokens such as Chainlink (LINK) and Solana (SOL) are also enjoying great relative strength in recent weeks.
We retain a large overweight in BTC but remain flexible in reducing BTC allocations to rotate into other tokens when the opportunity arises. Occasional pullbacks and possible short-term sell-offs are possible as the bullish market regime plays out. Should they occur, we stand ready take advantage of those moves.
The time to be aggressive is now. Thanks for reading.