An outspoken crypto trader and economist explains why he invested 70% of his funds in leading altcoin Ethereum (ETH) and cashed out the rest while the painful bear market put on a good show.
Alex Kruger: Stocks drive the Bitcoin and altcoin market
Technical traders and analysts who spend hours perusing charts to find patterns and trends can only identify winning market opportunities. It may be enough for them to follow a few indicators. Crypto trader and economist Alex Kruger is familiar with price and volume charts as he uses them to gauge market sentiment.
Speaking on the May 31 episode of ‘The Pomp Podcast’, Kruger says these reliable tools are becoming less reliable in this harsh macro environment. “While I am strictly focused on crypto, macro data and stocks are driving crypto,” Kruger says on the podcast. In April 2020, Kruger entered the crypto trade. Kruger, who now has more than 130,000 followers on Twitter for his trade and market perspective, says:
I was happy that I could mostly ignore stocks because, to be honest, listening to Powell and the Fed. Having to and all this economic data at the level of detail I’m currently doing isn’t really fun. It’s just something the market forced me to do.
“The market will continue to decline unless the Fed changes its current stance”
Kriptokoin.com As we mentioned earlier this year, the Fed implemented an aggressive monetary policy plan to combat rising inflation, which included multiple rate hikes. This comes after years of low interest rates benefiting risk assets like stocks and crypto. As the Federal Reserve began to tighten, risk assets collapsed. The S&P 500 is down 15% from its 2021 peaks, while Bitcoin is down nearly 54% from its 2021 peaks.
Now Kruger is trying to ‘extract’ when the Fed will change its stance and when it will be time to start deploying substantial capital to risk assets. It monitors both inflation data and comments from the Federal Reserve. Kruger doesn’t think the pain will subside any time soon until the Federal Reserve steps in and explains:
It’s really about the Fed. Until the Fed does not return, it is very likely that prices will continue to fall unless they change their current stance.
“Leading altcoin will outperform Bitcoin”
Kruger tries to determine the point at which he can redistribute all his capital to the market in the long run Meanwhile, he is making a big bet on the leading altcoin Ethereum, allocating 70% of his portfolio and holding the rest in cash. The reason for this, Kruger puts it this way:
I think there is a very high probability that Ethereum will fundamentally outperform Bitcoin due to the ‘consolidation’ in the coming months.
Matt Hougan also believes ETH is worth betting on
This is similar to Matt Hougan, chief investment officer of $1.2 billion crypto asset manager Bitwise a view. Also, Hougan believes that the current crypto market is driven by the macro environment and volatility will continue into the summer:
In my view, we will continue to see volatility over the next few months. I think the Fed is in an absolutist effort to crush inflation at all costs.
Despite this, Hougan still believes Ethereum is an asset to bet on as the market bottoms out and crypto fundamentals begin to gain prominence again.
What will the leading altcoin project gain by switching to PoS in PoW? According to
Mat Hougan, the transition to a Proof-of-Stake (PoS) consensus mechanism will bring benefits such as reducing Ethereum’s carbon footprint, reducing new issuances and offering attractive returns through staking. “The merger is underrated and as a result I find it very attractive at these prices,” Hougan says.
Alex Kruger considers the probability of the merger happening this year extremely high. However, it still has two concerns. First, if crypto completely collapses, similar to the 2018 cycle, then the Ethereum merger will become completely irrelevant.
Second, if crypto continues to remain in the bear market and activity in Ethereum drops, it will reduce the yield that can be obtained from staking. Hougan’s firm estimates that Ethereum will offer a stock return of 8% to 12%. Alex Kruger says:
I think ETH offers a great way to risk trade right now. Why 70%? Because I’m basically trading for a reversal I have Stoppers so if things go bad I will unfortunately lose some of the position.
On the other hand, Kruger is staying away from altcoin projects completely as many market participants are trying to exit this area of the market. “The more liquid it is, the more likely we are to buy something we can’t really resist, really trade,” Kruger says.
