OPPORTUNITY

During the “mania” phase of a bubble, when fresh money enters the market chasing quickly rising prices, both fundamentals and technicals seem to play no role and market inefficiencies proliferate

• A crypto bubble typically follows a particular pattern: stealth phase, awareness phase, mania phase and blow-off phase

• In a bubble’s “mania” phase, fundamentals & technicals seem to play no role and market inefficiencies proliferate

• The market can be “overbought” for weeks/months from both a fundamental and technical perspective, extremely high volatility, market returns driven by a few exceptional leaders, continuous ‘sector rotation’, and market manipulation

• These inefficiencies are driven by the nascent and highly innovative nature of the industry, lack of objective valuation metrics, new retail traders entering the market, VCs launching sophisticated marketing programs and a lack of regulation

• Traders typically follow one of two fundamentally different strategies: Mean reversion or Momentum. Combining mean reversion and momentum strategies is a natural fit that significantly improves the risk adjusted returns

• Huge differences in returns between leaders and laggards means diversification is crucial