So, with the crypto markets down this week, the basic argument for Bitcoin goes something like this: Bitcoin is the largest, safest, most reliable crypto investment. Also, we don’t know which altcoins will survive long term nor which narratives will have a long shelf life.
But you may already be familiar with these arguments for Bitcoin, as most people are by now.
However, there are two additional reasons for considering rotating your crypto investment portfolio into Bitcoin at this point in the cycle, which I think are worth discussing. I’ll save the most interesting point for last.
So let’s dive in.
Altcoin Capital Flow Cycle
First, let’s talk about the altcoin capital flow cycle. This is the idea that when the market begins to recover, money will FIRST flow into Bitcoin, then ETH and other large-cap alts, and finally, smaller altcoins. This cycle can repeat as frequently as every few weeks but also shows itself in larger market movements such as when the entire crypto market wakes up after a bear market.
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So, why not get the benefit from this basic flow pattern? In other words; first invest in Bitcoin, then rotate to large-cap altcoins, and finally, if you have the appetite for it, rotate into the smaller more risky altcoins. This way, you get to “ride” each one of these waves. You can think of it like a surfer thinks of waves at the beach: waves often come in a set of 4, and in crypto you can ride all 4 waves if you time it correctly.
Bitcoin ETFs
Ok, let’s move to reason number two, which is brand new for this cycle and quite fascinating if you ask me. In other words, there’s a whole new reason why Bitcoin can probably outperform the rest of the crypto market, in addition to many existing reasons from prior cycles. This reason pushes us over the edge toward Bitcoin having a STRONG profile for any crypto investor.
And that reason is institutional investors and the new Bitcoin ETFs. See, in the past, any money that flowed into Bitcoin could rotate out of Bitcoin toward altcoins, like what we just discussed.
However, most institutional money is NOT able to do this. Institutional money is only allowed – by law – to invest in regulated ETFs, they can’t use DEX’s (decentralized exchanges) or even most of the CEX’s (centralized exchanges) because they are highly regulated entities.
Therefore, in the current crypto bull run, money will tend to STAY in Bitcoin rather than rotating downward through the “waves” toward larger and finally smaller altcoins. It’s simply the case that much of the new money in this cycle is institutional and will be restricted to institutional crypto products.
This is why I think that now, more than ever, Bitcoin will remain King of the Crypto Markets.
But what about the new Ethereum ETF, and how does that play into the picture? Let’s discuss in my next article.
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