Kvarn X Pro weekly report:Week 51
The last week on the crypto market has seen a strong upward trend. The price of bitcoin, the largest cryptocurrency, rose by about 10%, the price of ether, the second-largest cryptocurrency, by about 9%, and the total value of the broader crypto market (excluding major stablecoins) by about 10%.
As the market moved upward in relative lockstep, there were no significant changes in bitcoin dominance or the ETH/BTC ratio.
Among the tokens traded on the Kvarn X platform, the top weekly gainers were AAVE (+46%), SUI (+27%), and ENS (+25%). Among the few losers during the bullish week were QNT (-5%), FET (-2%), and PEPE (-1%).
Next leg up?
The largest cryptocurrency, bitcoin, has reached new all-time highs in recent days. On Monday evening, bitcoin's price rose to nearly $108,000.
Breaking above the $105,000 level provides room for interpretation that the three-week consolidation phase following the sharp rally after the U.S. presidential elections may have ended, potentially marking the beginning of a new upward movement.
Similar to previous rallies, the altcoin market has been relatively stagnant in recent days as bitcoin took the lead in the upward movement. This suggests that once bitcoin’s rise stabilizes, we could see capital rotation into altcoins, driving strong price increases there.
To prepare for the possibility that this interpretation were to be correct and the altcoin market showed a clear upward movement within 1–2 weeks, we want to highlight two altcoin categories that currently appear to have somewhat attractive valuations.
AI and Memes Underperforming
We highlight two altcoin categories that have underperformed the altcoin market average in recent weeks but in our view still show potential. We thinnk their recent weaker performance makes their relative valuations potentially attractive.
The first category includes AI-related tokens such as RENDER, AKT, and FET. They, especially RENDER and AKT, performed strongly immediately after the U.S. presidential elections, which was reflected in a spike in their performance relative to the broader altcoin market outside the top 10 (OTHERS).
However, during December, as capital rotated into other sectors of the altcoin market, these AI-related tokens have underperformed. Therefore, we view their relative valuations as relatively low and encourage monitoring them. If a new rally occurs within the altcoin market, the internal order of performance could mirror the previous rally, with AI-themed tokens among the first to rise.
Using the same logic, we highlight meme coins as another category worth watching. Meme coins experienced explosive growth immediately after the presidential elections but have since underperformed compared to the broader altcoin market.
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Among the larger coins, PEPE has stood out with slightly stronger performance, likely benefiting from ether’s strong relative development. Conversely, BONK has performed notably poorly due to Solana's weakness, with its post-election surge relative to the rest of the altcoin market almost entirely erased.
We consider it likely that the altcoin market’s attention will eventually turn back to memes. This could coincide, for example, with a resurgence in Solana’s strength, given its association with meme coins (more on this below). In case this shift occurs in the next upward movement within the altcoin market, we recommend monitoring meme coins and their relative strength.
Finally, we want to emphasize that there is no certainty about the "comeback" of AI tokens or meme coins. Significant allocations to them are not advisable until there are signs of the end of their relative weakening. We see clear upside potential in both categories, which is why we want to bring them to our readers’ attention before a potential turn begins.
SOL – Reversal already?
In last week’s Kvarn X Pro Weekly Report, we discussed the recent relative weakness of Solana’s SOL token. We noted the possibility of a "mean reversion," which could soon be reflected in SOL’s outperformance. At the time, we wrote:
“... Such a steep decline in the SOL/ETH ratio creates an obvious opportunity for ‘mean reversion,’ where SOL could outperform ether and the broader crypto market. We see a good chance that the SOL/ETH ratio will find support around 0.050–0.055 and potentially bounce back toward previous highs or beyond.”
Our hypothesis is now being tested, as today (Tuesday, December 17, 2024), we’ve seen the SOL/ETH ratio bounce strongly from the 0.053 level. This would be a natural area to find support, as it is also close to the 200-day moving average for the SOL/ETH ratio. We will monitor whether this could mark a turning point for the SOL/ETH ratio.
Supporting this hypothesis is the observation that ether, relative to bitcoin, appears to have been rejected at the same 0.41 levels as during the previous attempt.
Relative to bitcoin, SOL is at the lower end of its 2024 trading range, which could act as a natural turning point.
We are closely watching SOL’s situation with interest. A reversal from these levels could mean a 25–50% strengthening against bitcoin and ether. On the other hand, a breakdown of the SOL/ETH 0.05 and SOL/BTC 0.002 levels could indicate deeper issues for SOL. For now, however, we see a good opportunity for a mean reversion, potentially reflected in strong price performance for the SOL token.
With these thoughts, we leave our readers to observe the intriguing situation in the crypto market, as bitcoin has just reached a new all-time high!
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