Specialising in Bitcoin, Gold and Digital Assets

ByteTree Asset Management

Investment Manager specialising in bitcoin, gold and digital assets

CEO, ByteTree Asset Management

Crypto

<p>The big story in crypto is the upcoming Ethereum merge which, following months of testing, has been confirmed to take place on 6 September. Assuming this complex technical feat goes smoothly, which we believe it will, it will be a non-event to the outside world. But it is important because ETH moves from proof of work to proof of stake, which from the institutional investors’ perspective means it moves from being an energy-hungry blockchain to something no worse than a typical internet stock.</p>
<p>My simple analogy is that ETH is the crypto post office. You use it to send tokens such as stablecoins (which amount to $155 billion of issuance), gold tokens (which recently passed $1 billion), NFTs, smart contracts, and so on. In that sense, ETH is the shovel provider to the crypto industry and is valued at a cool $200 billion. Is that too high or too low? It is hard to tell, but the underlying system may have a bright future. Charlie Erith wrote this excellent piece.</p>
<p>In ATOMIC, we downgraded bitcoin from bull to neutral, reflecting a more challenging environment. The ETFs are seeing modest outflows, but the macro headwinds and the slowing on-chain activity cannot be ignored. One chart to keep an eye on is the Institutional Dominance Ratio (IDR) which broadly measures institutional liquidity. It has softened and is below 99%.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/294/414/original/image_21891793521661540540299.png?1661540543" class="editor-image img-responsive" data-smartkarma-image-id="294414"></figure>
<div class="content-caption">Source:&nbsp;<a href="https://bytetree.us3.list-manage.com/track/click?u=a4a4461fba9ee073aaefd6019&amp;id=78a8017097&amp;e=7c019babf2" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://bytetree.us3.list-manage.com/track/click?u%3Da4a4461fba9ee073aaefd6019%26id%3D78a8017097%26e%3D7c019babf2&amp;source=gmail&amp;ust=1661626754726000&amp;usg=AOvVaw35G77jBL0Ze62iPEDqQdiZ" rel="noopener">ByteTree Terminal</a></div>
<p>Specifically, it looks inside each bitcoin block and measures the largest quintile of translations by size compared to all transactions. When above 99.2%, that’s generally a good sign, demonstrating a liquid market. Below 99% shows that liquidity is drying up.<br>&nbsp;<br>Our crypto model portfolio, ByteFolio, made a couple of changes and is performing well in the shakeup. In Token Takeaway, Seran covered Trust Wallet (TWT). Despite having 21 million monthly users, he liked the project but gave the investment case the thumbs down. How do you value a governance token? We’d love to know.<br>ByteTrend ETFs<br>ByteTrend ETFs is developing nicely, and we have more work to do in cleaning up the data to make it simpler to use and more digestible. It’s happening.<br>&nbsp;<br>The current stockmarket leadership is dominated by the US, Saudi Arabia, Brazil, Turkey, and India (surprising given the last two import energy) along with agribusiness, energy, rare earths, and solar. Value stocks also improved along with Chinese internet stocks.&nbsp;</p>
<h3>Chinese internet stocks at 2014 prices</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/294/415/original/image_58438266131661540575916.png?1661540576" class="editor-image img-responsive" data-smartkarma-image-id="294415"></figure>
<div class="content-caption">Source: Bloomberg</div>
<p>They’ll certainly be a buy at some point, but other China-related ETFs continue to lag, so it’s probably a bit early to get excited about this.<br>&nbsp;<br>Also weakening are interest rate-sensitive sectors such as utilities, consumer staples and quality stocks, along with momentum. It’s a tough market out there as the normal safe havens and reliable long-term strategies are lagging the market.&nbsp;</p>
<p>And then there’s this. Global mid-caps compared to large caps. It is telling us that small isn’t beautiful and market breadth is weak. Flip it around, and it’s telling us that safety lies in the big stocks - that is, provided they aren’t rate sensitive.</p>
<h3>Small isn’t beautiful right now</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/294/416/original/image_99440399641661540619634.png?1661540621" class="editor-image img-responsive" data-smartkarma-image-id="294416"></figure>
<div class="content-caption">Source: Bloomberg</div>
<p>These are tough times, but there’s always something to do. Right now, stay cautious and be patient.</p>

The big story in crypto is the upcoming Ethereum merge which, following months of testing, has been confirmed to take place on 6 September. Assuming this complex technical feat goes smoothly, which we believe it will, it will be a non-event to the outside world. But it is important because ETH moves from proof of work to proof of stake, which from the institutional investors’ perspective means it moves from being an energy-hungry blockchain to something no worse than a typical internet stock.
My simple analogy is that ETH is the crypto post office. You use it to send tokens such as stablecoins (which amount to $155 billion of issuance), gold tokens (which recently passed $1 billion), NFTs, smart contracts, and so on. In that sense, ETH is the shovel provider to the crypto industry and is valued at a cool $200 billion. Is that too high or too low? It is hard to tell, but the underlying system may have a bright future. Charlie Erith wrote this excellent piece.
In ATOMIC, we downgraded bitcoin from bull to neutral, reflecting a more challenging environment. The ETFs are seeing modest outflows, but the macro headwinds and the slowing on-chain activity cannot be ignored. One chart to keep an eye on is the Institutional Dominance Ratio (IDR) which broadly measures institutional liquidity. It has softened and is below 99%.

Source:&nbsp;ByteTree Terminal
Specifically, it looks inside each bitcoin block and measures the largest quintile of translations by size compared to all transactions. When above 99.2%, that’s generally a good sign, demonstrating a liquid market. Below 99% shows that liquidity is drying up. &nbsp; Our crypto model portfolio, ByteFolio, made a couple of changes and is performing well in the shakeup. In Token Takeaway, Seran covered Trust Wallet (TWT). Despite having 21 million monthly users, he liked the project but gave the investment case the thumbs down. How do you value a governance token? We’d love to know. ByteTrend ETFs ByteTrend ETFs is developing nicely, and we have more work to do in cleaning up the data to make it simpler to use and more digestible. It’s happening. &nbsp; The current stockmarket leadership is dominated by the US, Saudi Arabia, Brazil, Turkey, and India (surprising given the last two import energy) along with agribusiness, energy, rare earths, and solar. Value stocks also improved along with Chinese internet stocks.&nbsp;
Chinese internet stocks at 2014 prices

Source: Bloomberg
They’ll certainly be a buy at some point, but other China-related ETFs continue to lag, so it’s probably a bit early to get excited about this. &nbsp; Also weakening are interest rate-sensitive sectors such as utilities, consumer staples and quality stocks, along with momentum. It’s a tough market out there as the normal safe havens and reliable long-term strategies are lagging the market.&nbsp;
And then there’s this. Global mid-caps compared to large caps. It is telling us that small isn’t beautiful and market breadth is weak. Flip it around, and it’s telling us that safety lies in the big stocks - that is, provided they aren’t rate sensitive.
Small isn’t beautiful right now

Source: Bloomberg
These are tough times, but there’s always something to do. Right now, stay cautious and be patient.

Ethereum

Be Cautious and Stay Patient