MetalSwap Knowledge: Halving Altcoin Strategy

Metalswap Knowledge [BLOG]-Apr-09-2024-03-47-51-5805-PM

The long-awaited halving of Bitcoin is approaching and today we continue our mini-series on this topic by analyzing it from a different perspective, that of altcoins.

For those unaware, altcoins refer to all those coins and tokens that are not Bitcoin, including, for example: OP, XMT, or MATIC

Ethereum and its currency, ETH, are now in a kind of no-man's land. Some still consider it an altcoins, while others remove ETH from this categorization as it has now become a very important coin for this industry. 

The price of these alternative cryptocurrencies is generally influenced by BTC price movements and thus the halving event indirectly impacts these cryptos as well.

Today, using MetalSwap's dApp and its Hedging Contracts, we present strategies for both hedging and speculation in the altcoins sector during this halving period.

Altcoin and Altseason

As we understand, altcoins are all those cryptocurrencies that are not Bitcoin and this category somewhat unites them all, especially since, in certain phases of the crypto cycle, they exhibit very similar price movements.

Let's immediately look at a practical example to understand this general correlation among all altcoins:

In this chart, we've overlaid the price action of the major altcoins during the last bull market, in 2021.

As mentioned earlier, a generally similar trend can be observed among all these coins, despite the fact that the underlying projects are quite different.

This period, usually after halving, when all altcoins have incredible performance, is called the altseason.

Altcoin during the Halving

The most important metric that allows us to evaluate the general performance of altcoins is undoubtedly the BTC market dominance.

During an altseason, the prices of all these alternative coins generally rise and this cause a BTC's market dominance falls. 

We can clearly see this from the chart, with the blue lines representing the halving moments and the two red rectangles representing the last two altseasons, in 2017 and 2021.

So, what strategies can be implemented using MetalSwap's hedging contracts?

Altcoins Speculation with MetalSwap

Within MetalSwap's dApp, besides BTC and ETH, the first real altcoin available today is OP.

Given the data we've analyzed so far, it seems reasonable to set up a speculative strategy on this asset.

If we think another altseason could occur in the months following Bitcoin's halving, as in past years, then opening a long position on OP, which has been one of the most successful and high-performing altcoins to date, could be reasonable.

In the example now presented, we can analyze the opening of a "long" position with a 5x leverage. This position was created for a duration of 180 days, but this, like all other variables, can be entirely modified by the user.

If an altseason occurs and in 180 days the price of OP is higher than it is currently, then this position will be profitable. Conversely, if an altseason does not materialize and the price of OP is lower, the position will be at a loss and liquidated at a price of 1.79 OP.

It's important to note that there is no payment of any funding rate on positions in the MetalSwap dApp, making this product even more competitive compared to the perpetual derivatives.

What if the Altseason doesn’t occur?

Historical data and past cycles suggest that a further altseason may occur in the months following Bitcoin's halving.

However, this is not a certainty and there's a possibility that the altseason may not happen, and instead, the coming months could bring a depreciation of all circulating altcoins.

If this is your preferred thesis, you can capitalize on it by opening a short position, contrary to the one previously presented, to protect yourself from the downturn of the OP token.

In this scenario, the position will profit if the price of OP falls over the next 180 days, and it will incur a loss if the price of OP rises.

Here, we've also used a 5x leverage, meaning we'll face liquidation if the price reaches the target of $4.69 per single token.

As before, all the metrics such duration, target size and leverage could be modified by the user.

Volatility it’s coming

Obviously, we cannot know whether an altseason will occur, but what we are certain of is that significant volatility is coming to the crypto markets due to Bitcoin's halving.

This is a period where market hype increases, which always corresponds to a rise in volatility.

Thanks to MetalSwap, you can protect or speculate, both on the upside and the downside, without paying a funding rate and also receiving liquidity rewards if you operate on the Optimism layer 2.


-The DeFi Foundation


✎ What is MetalSwap?

MetalSwap is a decentralized platform that brings Hedging Contracts on financial markets with the aim of providing coverage to those who work with Digital Assets and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.

With MetalSwap we enable Hedging Contracts on the DeFi field, AMM style.