This page is for information purposes only. Certain services and features may not be available in your jurisdiction.

What We See in the Markets: BTC and ETH Resilience Amid Altcoin Struggles and Strategic Shifts

Cumberland

Keep up with the latest in crypto research as we share the insights from leading institutional research players.

In this edition, we share what Cumberland sees in the markets amidst the recent crypto pullback and broader strategic shifts with the ETF benchmarks.

June has been a challenging month for crypto markets; BTC and ETH are both down around 8%, as a bit of pre-Summer ennui has crept into what has otherwise been a phenomenal year for both assets; even after June, both assets are up about 50% on the year. A drawdown after a sharp rally should always be expected, and with stocks pushing to new highs, a rate ease later in the year seeming likely, and an ETH ETF on the way, BTC and ETH holders seem, for the most part, fairly unstressed.

The stress, however, is in the alts market. The first issue is that while BTC and ETH have lost 8% in June, alts are down significantly more on the month, typically between 20 and 30%. This feels like Beta-- more volatile assets tend to do worse in downtrending markets—but it’s not. If it were just Beta to blame, we would’ve seen outperformance in these assets earlier in the year, on the way up, but we didn’t see this. Alts underperformed BTC and ETH on the rally, and also underperformed on the selloff; a really ugly state within a correlated asset class. At the beginning of June, with BTC and ETH both +60% and near their local highs, assets like OP, ARB, MATIC, ATOM, AVAX, and APT were all down between 10% and 40% on the year, and June has brought all of them lower.

A few weeks ago, we highlighted a problem with L2 tokens; there are too many of them. Not from a governance standpoint, but from a market cap standpoint. The capital pool being distributed to these L2 tokens is not growing, but the number of tokens available has been. Looking at the performance of all alts this month, one has to wonder if the same can be said of L1 tokens, or even alts writ large. Even in the midst of crypto becoming more mainstream investible (which is certainly happening), it is unclear if more capital is being unlocked for assets outside of BTC and ETH. I’m not being cute here: it’s really unclear.

  • There is absolutely more capital being unlocked for crypto. But it is mostly the “can only invest in regulated products” crowd, and all of that is flowing into BTC, and is expected to flow into ETH once the ETF launches

  • We might expect some wealth effect as a result of BTC and ETH rallies. Crypto investors are richer, and we would normally expect them to rotate some of their gains further down the risk curve: into NFTs and into ALTs. We haven’t seen much evidence of this.

  • BTC and ETH are special here because they’re on the right side of a meaningful moat. The question, the, becomes “Who else can cross the moat?” There are certainly some candidates-- SOL, DOGE, even BCH or LTC—but none of it feels like a this-year thing.

This puts crypto funds managers in a challenging spot. It’s extremely hard to outperform the benchmark (BTC) right now, and thanks to ETFs, the benchmark is now widely available for about 25 bps. We’ve seen many traders shift strategies to options, where they can stay in BTC and ETH markets but trade with leverage, and in particular there has been significant volume going through in calls, even in the midst of this month’s downtick.

Disclaimer

The information (“Information”) provided by Cumberland DRW LLC and its affiliated or related companies (collectively, “Cumberland”), either in this document or otherwise, is for informational purposes only and is provided without charge. Cumberland is a principal trading firm; it is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances, or requirements of any person, and it should not be the basis for making any investment or transaction decision. THE INFORMATION IS NOT A RECOMMENDATION TO ENGAGE IN ANY TRANSACTION.

If any person elects to enter into transactions with Cumberland, whether as a result of the Information or otherwise, Cumberland will enter into such transactions as principal only and will act solely in its own best interests, which may be adverse to the interests of such person. Before entering into any such transaction, you should conduct your own research and obtain your own advice as to whether the transaction is appropriate for your specific circumstances. In addition, any person wishing to enter into transactions with Cumberland must satisfy Cumberland’s eligibility requirements. Cumberland may be subject to certain conflicts of interest in connection with the provision of the Information. For example, Cumberland may, but does not necessarily, hold or control positions in the cryptoasset(s) discussed in the Information, and transactions entered into by Cumberland could affect the relevant markets in ways that are adverse to a counterparty of Cumberland. Cumberland may engage in transactions in a manner inconsistent with the views expressed in the Information.

Cumberland makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness, or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. Cumberland undertakes no duty to amend, correct, update, or otherwise supplement the Information.

The virtual currency industry is subject to a range of risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or cryptoassets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products, or cryptoassets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. Investing in virtual currencies involves significant risks and is not appropriate for many investors, including those without significant investment experience and capacity to assume significant risks.

Cumberland SG Pte. Ltd. is exempted by the Monetary Authority of Singapore (“MAS”) from holding a license to provide digital payment token (“DPT”) services. Please note that you may not be able to recover all the money or DPTs you paid to a DPT service provider if the DPT service provider’s business fails. You should not transact in a DPT if you are not familiar with the DPT. This includes how the DPT is created, and how the DPT you intend to transact is transferred or held by your DPT service provider. You should be aware that the value of DPTs may fluctuate greatly. You should buy DPTs only if you are prepared to accept the risk of losing all of the money you put into such tokens. You should be aware that your DPT service provider, as part of its license to provide DPT services, may offer services related to DPTs which are promoted as having a stable value, commonly known as “stablecoins.”

The information provided in this document by Cumberland DRW LLC is for informational purposes only and does not necessarily represent the views of OKX. Any additional disclaimers issued by these third parties are also applicable and should be considered as part of this document.

This report is not intended as financial advice, investment recommendation, or an endorsement of specific trading strategies. The contents of this report, including but not limited to any graphs, charts, and numerical data, are provided “as is” without warranty of any kind, express or implied. The warranties disclaimed include but are not limited to performance, merchantability, fitness for a particular purpose, accuracy, omissions, completeness, currentness, and delays.

The cryptocurrency markets are highly volatile and unpredictable, subject to substantial market risks including significant price fluctuations. The strategies, opinions, and analyses included are based on information available at the time of writing and may change without notice. They are also based on certain assumptions and historical data that may not be accurate or applicable in the future. Therefore, reliance on this report for the purpose of making investment decisions is at your own risk.

Past performance is not indicative of future results. While we strive to provide accurate and timely information, we cannot guarantee the accuracy or completeness of any data or information contained in this report. We are not responsible for any losses or damages arising from the use of this report, including but not limited to, lost profits or investment losses.

Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. The inclusion of any specific cryptocurrencies or trading strategies does not constitute an endorsement or recommendation by OKX.

Disclaimer
This content is provided for informational purposes only and may cover products that are not available in your region. It is not intended to provide (i) investment advice or an investment recommendation; (ii) an offer or solicitation to buy, sell, or hold digital assets, or (iii) financial, accounting, legal, or tax advice. Digital asset holdings, including stablecoins and NFTs, involve a high degree of risk and can fluctuate greatly. You should carefully consider whether trading or holding digital assets is suitable for you in light of your financial condition. Please consult your legal/tax/investment professional for questions about your specific circumstances. Information (including market data and statistical information, if any) appearing in this post is for general information purposes only. While all reasonable care has been taken in preparing this data and graphs, no responsibility or liability is accepted for any errors of fact or omission expressed herein. Both OKX Web3 Wallet and OKX NFT Marketplace are subject to separate terms of service at www.okx.com.
© 2024 OKX. This article may be reproduced or distributed in its entirety, or excerpts of 100 words or less of this article may be used, provided such use is non-commercial. Any reproduction or distribution of the entire article must also prominently state: “This article is © 2024 OKX and is used with permission.” Permitted excerpts must cite to the name of the article and include attribution, for example “Article Name, [author name if applicable], © 2024 OKX.” No derivative works or other uses of this article are permitted.
Expand
Related articles
View more
View more
Explore our institutional solutions.