Hodl Ventures: Our Perspective Towards the Market Cycle


The past two years have been a hectic period for the digital assets industry. The market slowly emerged from the crypto-winter as macroeconomic conditions improved and interest among the public awakened. Then in 2023, we witnessed US institutional interest as various asset managers applied for Bitcoin spot ETFs, with their consequential approval in 2024. The effects of these ETFs are clear as Bitcoin climbed toward a new all-time high before retracing.

Currently, Bitcoin hovers around $69,000, approximately 6% from its all-time high. Conversely, although altcoins have experienced a strong upward trajectory, the majority of these assets are nowhere close to their previous all-time highs. So, what is the current state of the market, where in the cycle are we, and how do we at Hodl Ventures view these conditions?

Bitcoin is (currently) King

Throughout 2024, Bitcoin has remained the dominant narrative in the digital assets market. Strengthened by the approval of its spot ETF, billions of dollars flowed into Bitcoin, causing its price to surge. Moving towards April, the spotlight once again focused on Bitcoin as the fourth Bitcoin Halving closed in. This is also observed in Bitcoin’s Dominance, which has experienced an upward trend since December 2022.

Bitcoin Dominance shows signs of a reversal

As we enter summer, we anticipate that Bitcoin will slowly lose its dominant position. This is attributed to the fact that recently the Ether ETFs have been approved for listing, making it only a matter of time before they start trading. As a result, we observe the Ethereum narrative starting to take the lead and causing altcoins to catch up. However, we believe that a true bull market will start later as the Federal Reserve has delayed its interest cuts to September, with the possibility of further delay if economic data disappoints.

Until there is more certainty about this issue, we don’t expect investors to adopt a more risk-on approach and invest in altcoins. We anticipate that this looser monetary policy will occur at the end of 2024 or the beginning of 2025. As a result, with current conditions, we expect a relatively uneventful period ahead. However, trends will still occur but these will be relatively short-lived.

Moving towards the latter stage of the bull market

That Bitcoin is dominant in the early stages of the bull market is nothing extraordinary. Although history doesn’t repeat itself, the digital assets industry does have a cyclical nature which does show some similarities. And just as in previous cycles, Bitcoin is the first asset to start an upward trend, usually causing a surge in interest among investors. As more investors enter the industry and bring fresh liquidity, Bitcoin tends to accelerate in price, which we also witnessed with the introduction of the ETFs.

We anticipate that we are still in this markup phase; Bitcoin will continue to increase in price due to liquidity through the ETFs. However, with the recent approval of the Ether ETF, we may see a liquidity and attention shift to Ether, potentially leading to Ether surpassing Bitcoin in investor interest.

The different phases in a digital assets market cycle

This brings us to the altcoin market. Although they have experienced an upward trend, these assets haven’t performed as strongly as expected and failed to find significant footing in the market as macroeconomic conditions worsened in March and April. Nevertheless, as Bitcoin and Ether continue their upward momentum, the majority of these assets will follow suit. Only when the liquidity from Bitcoin to altcoins starts, usually observed when Bitcoin’s dominance begins to decrease, will we observe an "Altcoin season." However, this provides Hodl Ventures with unique opportunities.

Hodl Ventures is actively investing

As the broader altcoin market hasn't entered altcoin season yet and interest among retail investors hasn’t significantly surged, it allows us to actively invest in interesting projects that are aiming to go live in the upcoming year to a year and a half. This allows these projects to fully leverage the altcoin season to its full potential while also gaining retail investor attraction, as recently launched projects in this period tend to perform better than older projects.

Crypto VC Deal Count by Stage

Although VC funding tends to significantly increase as the cycle progresses, as observed in the illustration above, our thesis suggests that the upcoming period is the final opportunity to invest in early-stage projects. This is primarily because, after the altcoin season, the market tends to enter a prolonged period of downward movement, known as a bear market. Unfortunately, projects that launch in these periods have a lower rate of success as more users and capital leave the market. Therefore we aim to be fully invested by the end of 2024/ first half of 2025.

When the industry enters a bear market, our operations shift. We still focus on finding interesting projects and founders; however, this happens at a slower pace. This is an industry-wide phenomenon, as the number of deals decreases, and a more risk-averse approach is adopted. In this phase, we concentrate on creating new deal-flow channels, conducting research, and creating and improving relationships with new and existing partners. This is also the time to reflect and to find new methods of adding value to projects.

Hodl Venture’s takeaways

In our view, the market will slowly move out of the Bitcoin Dominance phase in the upcoming months as increasingly more focus is put on Ether and altcoins. However, until the Federal Reserve decides to start cutting interest rates, will we see a more risk-on approach among investors. This will favor altcoins more than Bitcoin, and we believe this will trigger the necessary liquidity shift to start the altcoin season.

As the altcoin season hasn’t started yet, it offers us an opportunity to position ourselves with interesting projects. According to our investment thesis, we strive to deploy by the end of this year/ first half of the next year as this provides the final opportunity to invest in early-stage tokens. These projects aim to launch within the current cycle, allowing them to leverage the market's upward momentum, optimistic investment behavior, and retail investor attention. This provides them with a unique set of circumstances for a successful launch and long-term growth. This must happen within this time frame, as after this period, the market cycle will end, leading to a prolonged period of downward movement.

We are looking forward to an exciting period in the digital assets industry, aiming to create a long-lasting impact and provide projects with a new dimension of value. To stay updated on our investments, we encourage you to follow our social channels on X and LinkedIn.