Is Altcoin Season Coming?

Joining us for some more insight into the crypto markets is coin based Institutional head of research, David Wang. Welcome back, David. Thanks, thanks Lawrence. Thank you for being here again. So alt coins, you know, we're seeing, we're seeing a another kind of uh I guess we can call it an alt coin rally 5 to 10% increase on Monday. Uh On some of these guys uh while Bitcoin is sort of flat here, 35 rangers. So um what do you make of this? Is it a switch to all coins? What's happening here? You know, I really thought that the cycles where you see Bitcoin rally then moving on to E and then into the alt coins would actually take a little bit longer because we're operating under a very interesting story for Bitcoin in particular ie what's going on, not just with the ETF but also with Safe Haven bid. We're getting due to geopolitical tensions, right? Um However, I think that there has been kind of some overlap, I don't think that this alt coin rally seeing has just materialized out of thin air. It's actually been ongoing now for a few weeks. Uh I think players have been very selective about what they're, they're trying to buy here. Uh They are looking for not just good stories but things that they believe are, are clearly underpriced. So we are seeing that people are picking up things like Solana chain link near right now, for example. Um and all of these things I think do bear their own stories. So what, what's the bet here? What, what's the narrative? Because of course, we're seeing the fed has isn't exactly lowering rates any time soon. And as you mentioned before, there are geopolitical tensions going on right now, you would expect people to jump into a safe haven. Why are they taking? I I would guess riskier bets on these all coins. What's the narrative that's being spread right now in the markets? Number one, the opportunity cost is a lot higher now. So you do need something that gives you a valuable return. And I think that people are looking into the alt coins because you're seeing that from the all time highs, a lot of these things have been depressed levels for some time counterintuitive. Right? Sure. I don't think anyone, by the way is expecting that they're going to get back to those all time highs in the immediate term. For example, like no one like is playing for a near term move of like, you know, 200 X or something. I think that it's more likely that a lot at least from the institutional clients I talked to, they're looking at this and saying actually, if the all time high was here, even if it goes two X three x five X from where it is today, that's a meaningful return. So that's something I want to take advantage of the concern I do have though, is that a lot of these projects now seem like like some of the good news has been priced in which isn't to say that there is an opportunity to short them. I don't think it is necessarily because there's still potential upside in the long term. It's really more of, well, could they could price action actually be stagnant here. And I think that's something that uh players need to think about David. I got to ask this question for the XRP army XRP, of course, spiked 10%. I believe it was at the end of last week. Was there any catalyst for this? From your perspective? What was driving that? I think this has to do more with views on the regulatory side more than anything else. And we are seeing that uh you know, progress, of course, on this front has been slow. We all talk about it. We're all kind of fixated on what's happening here. Uh But I think because of the positive developments, we've been seeing accruing to this space uh in recent history. And like, again, it's not unidirectional by any means, but this kind of puts into people's heads. Hey, maybe this is an opportunity that really hasn't been mindful yet. And some new surprising to me, at least data from Coiner said that investment vehicles holding crypto saw $261 million of net inflows last week and this is recording for the sixth consecutive week because that's surprising information for you to hear. Not necessarily. Um I mean, now that figure is like surpasses the flow that we got in 2022. So I think it's a big positive uh if anything, I've been wondering why it hasn't happened sooner. So I think this is a obviously great development for this space. It's interesting though when you break that number down like where that money is going. So of course, a big chunk of it still going to Bitcoin E is now net inflow for the first time or probably not the first time this year, but certainly like a big inflow that we've seen in a while. Um So on is kind of getting a piece of that. So it's, it's interesting to see that players are in fact migrating away from Bitcoin as we kind of mentioned. Part of that also feeds into this thesis that, um you know, we've previously kind of dispensed with the L one or L to L one kind of thesis for a little while. Now, that's kind of coming back and people are thinking again about, hey, uh, you know what are the platforms which we could run special sectors like gaming. For example, what what could accommodate that? Uh Do we need to start thinking about interoperability again? Ie like uh you know what's going to happen with the modularity thesis and data build. All these kinds of things I think are kind of feeding back into the mindset of what we need in this space to kind of make it work. So we had the rally in recent weeks over the, the idea that there might be a spotted, a Bitcoin ETF and a whole bunch of them might come to the market uh soon, sooner rather than later, I guess is, is, is how a lot of traders are looking at this. Um How plausible is that number one, number two is what if this thing is a bust? I think the chances are still pretty good that we'll see a one or more ETF approvals probably within fourth quarter, 2023. Now, I think part of that is fueled by the changes in the prospectuses that we've seen. Like, I think the guys at Bloomberg Intelligence have actually commented on this before, which is to say that uh you know, in other asset classes, it is very common to see that the there's dialogue between the SEC and these teams. Uh but this is a first in crypto. And so the fact that you're seeing like five pages of amendments come into these prospectuses, not just on one ETF application but several EPF applications. I think it's a good sign that something is going to materialize here. The only obstacle I see though is what's going to happen with a potential US government shutdown on November 17th. I see. I don't think the odds of that are fairly high, that would, of course put the SEC into a furlough and I think that would interrupt the timeline on that. David, you just brought up gaming. We had another guest on the show yesterday, bring up gaming during a stablecoin conversation. It seems to be coming up more and more, but during the last full cycle, it kind of fell flat. There wasn't any um any real web free game that was able to make it and show value to the mainstream audience. Why do you think gaming keeps coming up in conversation? How do you think we'll see it contribute to the narrative during the next full cycle? What's interesting about gaming is that it's also geographic too, like I feel like people talk about it more in Asia where a lot of these major game developers are located as well. Um And people are definitely focused on a use case for crypto gaming being one of the big ones. It's not the only one people are also thinking about social phi or decentralized identity. But I think gaming strikes the right tone because people have seen kind of a template for this exist in the past. They don't want necessarily, they fall back to the same, you know, play to earn kind of platform. But I think the idea that gaming could actually be a lightning rod for user participation in here, particularly when we start to see really low cost chains become available, the bandwidth kind of available for people. Um I think that's a big deal. The issue though is seeing whether A AAA game is going to happen. And I think that's a tougher bet because no one can really predict like what is going to capture people's imaginations, capture people's attention, capture people's desire to kind of play. So I think uh looking at the gaming sector, it's still kind of easier right now to do platform plays rather than trying to, you know, pick and choose what's gonna be the top game that's gonna um necessarily materialize. And I also think we should kind of broaden our horizons a little bit because maybe it won't be a AAA game that's gonna, you know, be the the winner here. Maybe it's going to be a game that will see people just kind of play in the morning. It's gonna run in the background, things like that. It might be an opportunity for the web three side David. Thanks so much for joining us this morning. Always a pleasure having you on that head of research.