The Great Decoupling

As pretty much every self-respected asset manager in the crypto industry, one of my first tasks of the year is to take the crystal ball out of the drawer and try to predict what is going to happen within the next 12 months.

My view is that it will be another Great Year. Yes, 2020 was the year of the Great Reset, 2021 was the Great Resignation and 2022 will be the year of the Great Decoupling.

What do I mean by that? Well, we know that up to very recent times [whether we like it or not], pretty much all crypto assets have been following the movements and behavior of bitcoin. That is, if bitcoin goes up by a certain percent, the rest of alt coins will move in the same direction and with a very similar proportion.

But in the second half of 2021, we saw very influential crypto assets having life on its on. This is something that we in Belobaba discussed in length and received with positive vibes.

If you are a seasonal individual investor that are only interested in a single objective, this situation might not be relevant whatsoever to you but if you are a Hedge Fund, managing a multimillion-dollar portfolio integrated 100% by crypto assets, the lack of correlation of high-quality assets against bitcoin is of great importance.

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We often talk about the golden triangle in Investments, the expected returns, the liquidity and the Risk. And is in the later exactly where having at our disposal projects such as Terra, Solana and Avalanche comes very handy in building a well-diversified portfolio capable of isolate negative movements in the bitcoin – Ethereum tandem.

So far in this article I have been only stating the facts. Now let’s venture into the speculations about the reasons for such divergence.

A couple of catalysts could be named.

The first is the high number of successful projects in the DeFi, Gaming and Metaverse space that are already built upon their solid infrastructure and not depending on the Ethereum network.

And the second is the difference in the consensus algorithm.

We strongly believe that in 2022 we are going to see a wide divergence in growth patterns between the protocols based on proof of work or PoW and those using proof of Stake.

Yours in Crypto

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