Whether you were celebrating or grieving this week, there are now undeniable tailwinds for Bitcoin and the broader crypto market.

Bitcoin’s price broke out of a 10 month range and climbed to a new all-time high -- a level it may never revisit (BTC has never returned to a prior election week price).

Time will tell if Trump delivers on his crypto friendly campaign promises. But any combination of these will be a major catalyst for future growth:

• replace Gary Gensler as head of the SEC

• end Operation Chokepoint 2.0 (debanking crypto companies)

• provide regulatory clarity and pass sensible stablecoin legislation

• establish a strategic national Bitcoin reserve

Which are of course in addition to:

1/ a ripening four year cycle

2/ strong institutional demand for crypto ETFs

• Blackrock Bitcoin ETF bigger than its gold ETF

• Sovereign wealth funds, Pension funds, and University Endowments

3/ central banks around the world cutting rates

4/ rising global liquidity

The rest of this piece describes how Bitcoin’s trajectory and dominance (relative size) of Bitcoin, Alt, and Stablecoin segments of the Total Crypto Market Cap might affect how you allocate to each segment throughout the cycle.

Bitcoin is a $1.5 trillion dollar asset today and its 10 year logarithmic trend line puts it somewhere in the $3 to 10+ trillion dollar range in 2 years.

$10 trillion sounds like a lot. Can Bitcoin be as big as Gold?

The more optimistic you are about Bitcoin’s trajectory, the more Bitcoin you might hold in the crypto allocation of your portfolio.

Van Eck makes the case for a modest (up to 6%) crypto allocation in a portfolio otherwise allocated 60% to equities and 40% to bonds — but it doesn’t provide any guidance for how the market cycle might affect your allocation strategy. So market cap dominance is a good place to go from here.

Market Cap Dominance is an asset’s percentage of the total crypto market cap. Over time, it’s a way to assess relative performance within the crypto economy.

At any point in time, the crypto allocation of your portfolio is comprised of some combination of BTC, Alts, and Stablecoins.

When you expect Bitcoin dominance to increase, Bitcoin is going to rise faster than the overall market. So you might allocate more to it until you expect Bitcoin dominance to decrease.

Tokens other than Bitcoin are often referred to as Alts (or shitcoins). So Alt dominance rising means many token prices are rising faster than Bitcoin.

For example, in the third row of the next chart you’ll see Bitcoin dominance increased in the early innings (Oct to Dec20) of last cycle’s euphoric phase, then fell as the Alts segment of the market outperformed (Jan to Nov21).

As investor risk appetite increases, capital flows from on ramps (fiat) and stablecoins to Bitcoin and then Alts. At the end of a cycle as risk appetite decreases, capital flows back from Alts to Bitcoin and Stablecoins.

In the expanded version of the previous chart, BTC dominance rose in two scenarios:

1/ during early innings of the risk-on transition (Oct20 to Jan21) “Crypto is heating up again, I should buy some Bitcoin”

and

2/ during risk-off transitions (Jan to June22) “Crypto is cooling, but I’m not sure if the cycle is over yet. Time to sell off my Alts but hold onto some Bitcoin just in case it starts going up again”

On the other hand, Bitcoin dominance decreased in two scenarios:

1/ during the euphoric phase of the market cycle as capital flowed farther out on the risk curve, from BTC to Alts, pushing Alt Dominance higher (Jan21 to Jan22)“I can make a 2-3x on my Bitcoin but maybe I can get a 10-100x on the small cap token of a new blockchain that’s faster and cheaper than the Bitcoin network”

2/ when there’s a flight to safety as investors cut risk, evidenced by rising Stablecoin dominance and falling BTC and Alt dominance (Jun22 to Dec22)“The cycle is over. Market sell everything and yield farm stablecoins until the next cycle starts.”

Assuming this cycle continues to rhyme with prior cycles, we are heading towards a euphoric phase defined by a steep ascent in total crypto market cap, $100k+ BTC, and rising Alt dominance.

People who made money on Bitcoin during early innings of the cycle (BTC is up 4.5x from Nov22 lows) will rotate profits to Alts and new money will chase their returns as Coinbase rises in the app store rankings. Michael Saylor and a new crop of crypto millionaires will be all over mainstream media and the regulatory posture in DC pivots to embrace magic internet money as Warren and her ‘anti-crypto army’ cower in defeat.

If the optimal crypto allocation since Nov22 was overweight Bitcoin and underweight Alts in a rising BTC dominance and falling Alt dominance regime, the playbook for euphoria defined by falling BTC dominance and rising Alt dominance is underweight BTC and overweight Alts.

If the Alts:BTC ratio returns to Jan22 level and BTC price climbs to $120k+, then the implied Alt market cap will be 5.6x its current level and blue chip Alts will outperform the overall Alt market. Allocate accordingly. NFA.

Whether you were celebrating or grieving this week, there are now undeniable tailwinds for Bitcoin and the broader crypto market.

Bitcoin’s price broke out of a 10 month range and climbed to a new all-time high -- a level it may never revisit (BTC has never returned to a prior election week price).

Time will tell if Trump delivers on his crypto friendly campaign promises. But any combination of these will be a major catalyst for future growth:

• replace Gary Gensler as head of the SEC

• end Operation Chokepoint 2.0 (debanking crypto companies)

• provide regulatory clarity and pass sensible stablecoin legislation

• establish a strategic national Bitcoin reserve

Which are of course in addition to:

1/ a ripening four year cycle

2/ strong institutional demand for crypto ETFs

• Blackrock Bitcoin ETF bigger than its gold ETF

• Sovereign wealth funds, Pension funds, and University Endowments

3/ central banks around the world cutting rates

4/ rising global liquidity

The rest of this piece describes how Bitcoin’s trajectory and dominance (relative size) of Bitcoin, Alt, and Stablecoin segments of the Total Crypto Market Cap might affect how you allocate to each segment throughout the cycle.

Bitcoin is a $1.5 trillion dollar asset today and its 10 year logarithmic trend line puts it somewhere in the $3 to 10+ trillion dollar range in 2 years.

$10 trillion sounds like a lot. Can Bitcoin be as big as Gold?

The more optimistic you are about Bitcoin’s trajectory, the more Bitcoin you might hold in the crypto allocation of your portfolio.

Van Eck makes the case for a modest (up to 6%) crypto allocation in a portfolio otherwise allocated 60% to equities and 40% to bonds — but it doesn’t provide any guidance for how the market cycle might affect your allocation strategy. So market cap dominance is a good place to go from here.

Market Cap Dominance is an asset’s percentage of the total crypto market cap. Over time, it’s a way to assess relative performance within the crypto economy.

At any point in time, the crypto allocation of your portfolio is comprised of some combination of BTC, Alts, and Stablecoins.

When you expect Bitcoin dominance to increase, Bitcoin is going to rise faster than the overall market. So you might allocate more to it until you expect Bitcoin dominance to decrease.

Tokens other than Bitcoin are often referred to as Alts (or shitcoins). So Alt dominance rising means many token prices are rising faster than Bitcoin.

For example, in the third row of the next chart you’ll see Bitcoin dominance increased in the early innings (Oct to Dec20) of last cycle’s euphoric phase, then fell as the Alts segment of the market outperformed (Jan to Nov21).

As investor risk appetite increases, capital flows from on ramps (fiat) and stablecoins to Bitcoin and then Alts. At the end of a cycle as risk appetite decreases, capital flows back from Alts to Bitcoin and Stablecoins.

In the expanded version of the previous chart, BTC dominance rose in two scenarios:

1/ during early innings of the risk-on transition (Oct20 to Jan21) “Crypto is heating up again, I should buy some Bitcoin”

and

2/ during risk-off transitions (Jan to June22) “Crypto is cooling, but I’m not sure if the cycle is over yet. Time to sell off my Alts but hold onto some Bitcoin just in case it starts going up again”

On the other hand, Bitcoin dominance decreased in two scenarios:

1/ during the euphoric phase of the market cycle as capital flowed farther out on the risk curve, from BTC to Alts, pushing Alt Dominance higher (Jan21 to Jan22)“I can make a 2-3x on my Bitcoin but maybe I can get a 10-100x on the small cap token of a new blockchain that’s faster and cheaper than the Bitcoin network”

2/ when there’s a flight to safety as investors cut risk, evidenced by rising Stablecoin dominance and falling BTC and Alt dominance (Jun22 to Dec22)“The cycle is over. Market sell everything and yield farm stablecoins until the next cycle starts.”

Assuming this cycle continues to rhyme with prior cycles, we are heading towards a euphoric phase defined by a steep ascent in total crypto market cap, $100k+ BTC, and rising Alt dominance.

People who made money on Bitcoin during early innings of the cycle (BTC is up 4.5x from Nov22 lows) will rotate profits to Alts and new money will chase their returns as Coinbase rises in the app store rankings. Michael Saylor and a new crop of crypto millionaires will be all over mainstream media and the regulatory posture in DC pivots to embrace magic internet money as Warren and her ‘anti-crypto army’ cower in defeat.

If the optimal crypto allocation since Nov22 was overweight Bitcoin and underweight Alts in a rising BTC dominance and falling Alt dominance regime, the playbook for euphoria defined by falling BTC dominance and rising Alt dominance is underweight BTC and overweight Alts.

If the Alts:BTC ratio returns to Jan22 level and BTC price climbs to $120k+, then the implied Alt market cap will be 5.6x its current level and blue chip Alts will outperform the overall Alt market. Allocate accordingly. NFA.