Management Summary
What is the crypto investing series?
This blog post is the tenth report in 2024 about the Kaleido Digital Asset Core (KDAC) Strategy. Read more about our crypto portfolio framework here. Don't forget to sign up to our newsletter to get the next reporting straight in your mailbox!
"Uptober" in Bitcoin Dominance
The month of October only lived up to its reputation as “Uptober” to a limited extent. As in previous months, the first few days were characterized by a drop in prices before prices stabilized. As the month progressed, prices rose again across the entire portfolio, albeit led by and in the wake of Bitcoin. Accordingly, the KDAC fund ended the month slightly down at -7.6%.
Slightly negative October due to outperforming Bitcoin
Bitcoin's dominance, i.e. its market share of the overall crypto market, continues to rise and closed above the 60% mark again for the first time at the end of the month. This behavior has been observed on various occasions in the past and is particularly typical for the phases before a bull run, as new (fiat) money flows into the crypto market and this typically flows into Bitcoin first. After the last halving in spring 2020, for example, we achieved Bitcoin dominance of over 73%, before the distribution of capital into altcoins really took off.
A survey of 70 participants conducted on LinkedIn over three days at the end of the month showed how the dominance of Bitcoin will be assessed in the coming weeks. When asked how high Bitcoin's dominance will be before the altcoin season starts, 37% of participants responded with a dominance of between 65 and 70%, which is significantly lower than in the last cycle and would suggest a broader market. While 26% of participants see Bitcoin dominance rising to less than 65%, 29% are in favor of a more repetitive pattern with over 70% market share for Bitcoin.
It will be interesting to observe this redistribution behavior in this cycle, as the inflows into Bitcoin ETFs take place virtually separately from the crypto market in the traditional world and therefore cannot be exchanged for altcoins on crypto exchanges, for example, without friction. Market observers are currently divided on the extent of this impact on an altcoin rally, with some even expecting Bitcoin to dominate at a generally higher level.
Bitcoin Dominance exceeds again 60%
Despite the sharp rise in the price of Bitcoin, the Fear and Greed Index only rose to 66% at the end of the month, which may be in the "greed" range but is still a long way from showing that the market is overheating. It will be interesting to see how a breakout to a new Bitcoin all-time high and a possible subsequent altcoin rally will play out and how long the index will remain in "extreme greed" territory.
Fear & Greed Index stabilizing and slightly increasing
The outflow trend remained unbroken in October, with exchange holdings falling from 2.68 million to 2.63 million Bitcoins, a decrease of -1.9%, according to CryptoQuant.
The Bitcoin outflow curve continues its trend
Ether also saw outflows again last month, with holdings on crypto exchanges falling by -3.6% from 19.61 million to 18.91 million.
Outflows of Ether pick up speed again
With the upcoming U.S. elections on November 5, 2024, there has been a tendency to de-risk in recent days. With the hope that it will soon be clear who will move into the White House in January 2025, the market will probably want to take on more risk again, which could lead to a year-end rally. We continue to focus on market developments, in particular on developing narratives that could trigger a potential altcoin season. Macro indicators remain bullish and a breakout of Bitcoin to a new all-time high would certainly be positive for the entire crypto market and then also for the broad-based KDAC strategy.
Disclaimer: This piece of information is for marketing and entertainment purposes only and should not be taken as an investment recommendation. Remember that all investments involve risk. Please read our full Marketing Disclaimer here.