Planting Coins: 12/24

Management Summary

• November marked the start of the Altcoin Rally with Bitcoin dominance dropping below 56%.
• The Fear and Greed Index reached Extreme Greed levels without overheating.
• Bitcoin’s sustained demand by institutional players suggests long-term support, while rising Ether outflows signal potential ETF-driven capital rotation into Ethereum.

What is the crypto investing series? 

This blog post is the twelfth 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! 

Start of the Altcoin Season

As mentioned in several blog posts in the past, the Kaleido Digital Asset strategy seeks to generate returns over an entire crypto cycle by providing an equally weighted exposure to the technology. Obviously, such a strategy tends to underperform in times when Bitcoin is strong and conversely outperforms in times when the broad market is rising. This has now also been demonstrated in November. While Bitcoin gained an impressive 37% in November, Cardano was the clear outperformer in the portfolio with +216%. The strategy gained more than 77%.

Strong strategy gains thanks to broad-based altcoin rally

As always, we take a look at Bitcoin dominance, the market share of Bitcoin in the overall crypto market. Here we observed the first signs of a market shift in November, with Bitcoin dominance falling from over 61% to below 56%. It is important to note that Bitcoin's absolute market capitalization increased significantly, but the outperformance of altcoins in the market was much more significant. As long as Bitcoin does not lose significantly in market capitalization and Bitcoin's dominance continues to decline, the strategy will tend to perform strongly. In addition, it is currently important to keep an eye on Bitcoin's struggle with the psychological threshold of USD 100,000, which could lead to a market consolidation in the meantime.

Bitcoin Dominance drops below 56%

The fact that the start of the altcoin rally has also woken up the market can also be seen in the Fear and Greed Index, which is currently at the lower end of the Extreme Greed Level at around 80 points. However, the fact that there is no clear overheating at the moment can be seen from the phase at the beginning of the year in which the Fear and Greed Index was above 90 points for a few days. In retrospect, the consolidation over the summer months was therefore good for further sustained price rises, as sentiment was able to cool down.

Fear & Greed Index entering again the Extreme Greed zone

Due to the constant spot buying of Bitcoins - not only, but also by MicroStrategy - more Bitcoins flowed off the exchanges in November, as can be seen from cryptoquant.com's Exchange Reserve Tracker. These strong spot purchases, including by ETFs, made the upward trend more stable and therefore more sustainable. The volatility of the Bitcoin price was also limited, with the exception of a few liquidations of leveraged positions.

Heavy outflows of Bitcoin

While Ether outflows from crypto exchanges stagnated in the first half of the month, outflows began to pick up in the second half of the month. It will be interesting to see how the flows to Ethereum ETFs will behave and whether they will be an equally exciting support for the price trend. We can also ask ourselves whether the rotation from Bitcoin into altcoins will now also take place in the institutional ETF world and whether capital will flow primarily into Ether due to the lack of alternatives from ETFs to other coins.

Outflows of Ether picking up again towards month' end

We do not yet see an end to the bull market, no, the altcoin rally is only just picking up speed. The Bitcoin price is also being supported or even driven by constant demand from the institutional sector, among others. Now that companies such as Microsoft and Amazon are also asking themselves the Bitcoin Treasury question, cryptocurrencies are definitely here to stay.

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