In this month's update, we'll explore the latest economic indicators, significant crypto news, and exciting updates within the Diamond Pigs ecosystem.
Key Highlights:
- Market Analysis: Understanding the Current Crypto Downtrend
- The Impact of Macro-Economic Conditions on Cryptocurrencies
- Mt. Gox Repayments: Anticipating Market Reactions
- Germany's BTC Sell-Off: What It Means for the Market
- Diamond Pigs Strategies: Performance Updates
- Bot Adjustments: Enhancing Protection and Performance
Market Conditions & Sentiment:
The cryptocurrency market has been experiencing significant declines over the past few weeks. Since BTC reached its all-time high of $74,000 in March, a downward trend has accelerated, particularly in the last weeks. Below are the main reasons for the price decline in BTC and the additional pressures on the altcoin market.
1. Macro-Economic Factors: Investor uncertainty surrounding U.S. inflation and interest rates continues to weigh on crypto prices. Federal Reserve Chair Jerome Powell recently noted that more work is needed to tame inflation, despite acknowledging progress. The Fed's indication of only one interest rate cut this year has contributed to a risk-averse sentiment among investors.
2. Mt. Gox Repayments: The defunct bitcoin exchange Mt. Gox is set to begin distributing around $9 billion worth of bitcoin and bitcoin cash repayments from July. The imminent payout to creditors, expected to receive approximately 142,000 BTC, could add substantial selling pressure to the market.
3. Germany's BTC Sell-Off: In recent weeks, the German government has been moving about 5,000 BTC to various exchanges, signaling their intention to sell the assets. The German government still holds a total of 40,359 bitcoins, worth about $2.32 billion.
4. Bitcoin Miners' Capitulation: Bitcoin miners are showing signs of capitulation, likely turning off underperforming hardware and selling coins following April’s halving event.
Altcoin Market Struggles:
- Despite the recent BTC sell-off, Bitcoin dominance remains high, ranging from 54% to 56%. The market cap of altcoins compared to Bitcoin is at lower levels today than during the bear market lows in November 2022 and the start of the latest bull run in October 2023.
- Meme coins have absorbed much of the retail liquidity, leaving smaller investors to chase gains in highly speculative assets.
- In May alone, more tokens were created than in the entire history of crypto from 2012 to April 2024. This influx of new altcoins competes for the same liquidity, exacerbating the market's challenges.
Our Strategies:
Amidst the market correction, some strategies focusing on larger coins have performed better than those concentrated on altcoins and meme coins experiencing high volatility. The Hereford Bitcoin Protect strategy has managed to perform 11% better than BTC in the last month. Meanwhile, Gascon, which recently held a significant position in SOL, has shown similar results. Conversely, strategies like Berkshire (top 10 index, 100% long), Duroc, and Bisaro, which hold small positions in various coins, have faced bigger declines.
Bot Adjustments for Hereford and Gascon:
The team has recently modified the bots' composiotion in some strategies under the current market conditions, increasing the allocation of bots that focus on protection rather than quick wins. These bots have successfully anticipated price bottoms in the past and aim to protect against significant declines while growing when prices move upwards.
Here is an example of the BTC bot and its actual performance over the last 1.5 years.
In this example, you can see that this bot often identifies when the price is bottoming out in each period and take a Long (L) position. Once a significant profit is achieved, the trade is closed (C). It's important to mention that these bots are not always in position, even when the price may be trending up.
And What's Next?
The sentiment in the crypto community is currently bearish. The German government continues to sell BTC at a high pace, adding to the anticipation that some Mt. Gox creditors will increase BTC supply by selling at least a portion of their holdings, further increasing sell pressure. Despite this, the official approval of the ETH ETF is expected in July, and a possible reversal in US interest rate policy, if supported by recent inflation data, could signal the bottom for this cycle and initiate a healthy run.
We have witnessed 70%- 80% corrections in altcoins many times, often occurring multiple times per cycle. As long as you feel comfortable with your long-term strategy and understand the associated risk and volatility profile, try to zoom out and wait for greener days to come.
As always, you can reach us via Piggy, our AI-chat support bot, by opening a ticket or sending an email to support@diamondpigs.com.
