Every crypto bull run in the past has shown a clear rotation of capital across various crypto assets. Usually, money moves first from stablecoins to Bitcoin, then to Ethereum and other large layer1 protocols, and then into various mid and low market cap altcoins.
The start of this bull run has already seen new players with very huge pockets of liquidity pool coming to the market, these institutional investors think very differently from the regular retail trader/investor. So, the capital rotation in the crypto market will not follow the usual pattern of previous bull cycles.
Here is why???
Institutional investors have previously not participated in the crypto industry, however, with both Bitcoin and Ethereum ETFs, an entirely new crowd of players have flooded the market, and what was commonly accepted in regards to capital rotation will unlikely hold true.
As retail investors/traders eye a typical 10x – 100x return per their investments, institutional investors will even aim for more. This means at every layer of the capital rotation, the several billions of dollars of buying pressure can move bitcoin to grow 500% for example, but capital gains obtained from the growth of Bitcoin would then flow to ETH and SOL with 1000% rise in value. The capital gains on ETH and SOL growth would then get spread into mid-cap and low-cap crypto projects where insane returns would often occur due to their highly volatile nature and small pool of capital available on liquidity pools on decentralized exchanges. It is very common to see 10,000% growth in new low cap crypto-assets.
Capital rotation occurs for two primary reasons:
1) Bitcoin investors chose to cash in some of their profits and re-invest in lower size projects that are yet to grow significantly,
2) investors have come to realize that they won’t get rich fast enough with bitcoin, and they chose to seek alternative highly risky investments, typically mid – low cap crypto projects.
In summary, here are 3 “DON’T” to watch out for:
Don’t be worry about the massive pump BTC and other crypto projects are experiencing.
Don’t check out from the coins in your portfolio to FOMO into coins that are experiencing PUMPS. You may miss out on potentials PUMPS due to impatience. When you check out from a coin, then it PUMPS and when you enter a coin, it DUMPS.
Don’t forget to take profit along the way. You’re only profitable if you take profits. Greed could cause you to see loss of all your gains because you refused to press the sell button.
Note: This is not financial advice, Don’t forget to do your own research.
$SOL
$WIF
