BitMEX founder Arthur Hayes is laying out his methodology for selecting which altcoins may pop the most in the next crypto cycle.
In a new interview with Real Vision, Hayes says he scours the market for projects that appear to have enough adoption and credibility to survive in the long run.
“I guess you use survivorship bias. If I’m looking at a top 20 market cap asset and it’s down 95%, will it survive to the next cycle? Will it survive the next two years? How much money did they raise? If the answer is yes, buy it.
Worst case, it goes down to zero. Best case, goes up with 10x or 20x. If it went from 100 to one and it goes from one to 10, it’s a 10x. Still isn’t anywhere near where it was, but I’m just playing the rebound.
So you know that on the rebound of crypto, when the next cycle begins, everything that fell the most is going to rise the most just by the path dependency of how returns work. And so, I guess this doesn’t change in most of these things. Most of them will fail, you don’t really care. It’s really just a numbers game.”
As for whether the current market has dropped as low as it will go, Hayes says it’s impossible to know for sure.
But he believes the market is near a bottom and the primary question now is how long prices will linger at the lows.
“I think we’re chopping around the bottom. Do we hold $17,000 or $18,000 on Bitcoin? Maybe, maybe not. Do we think it goes much lower than that if it does break? Probably not.
My whole thinking is – who’s selling physical? We had a classic credit crunch, just like every other asset class. It could be an Asia 1998. It could have been a Mexico in 1994. It could have been an Argentina. It’s all the same. Similar behavior, tide went out, everybody went bankrupt, and you have force selling…
And then you think about who’s gone bankrupt? The largest, most revered hedge funds, startups personalities have all come up and say they had some financial difficulties. So the only people left who I think could sell in size are the miners. And then you have to wonder – when they have had to sell in size in mid-June, when the price are even lower than they are today, when people were pulling credit, and nobody could get credit. Now, things have stabilized a bit, who’s fucked and who’s not?
So my view is that I’m trying to think of a cohort that didn’t have to sell a month and a half ago, two months ago, who now needs to sell today because we’re back at the same level. And I just don’t see that intensity, which leads me to believe that we’re just chopping around the bottom. We might not be here for a while, we might be here for a while. That doesn’t mean that we’re going up anytime soon.”
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