Data analysis: Can you make money using the dumbbell strategy in this bull market?

Author: Biteye core contributor Viee

Can you make money with the dumbbell strategy in this bull market?

Today I will share with you a strategy that can make a lot of money and avoid losing all your money: the dumbbell strategy.

The performance of the following crypto assets was analyzed by indicators:

• BTC is always the king: BTC.D Index

• ETH lags behind BTC in this stage: ETH/BTC exchange rate

• Altcoins are generally sluggish: (1) Altseason Index (2) Altcoin market capitalization

• Memecoins have high risk and high returns, outperforming BTC and ETH: Memecoin Index

What is the dumbbell strategy?

The dumbbell strategy is mentioned by Taleb in "Antifragile", which is to adopt a conservative strategy in one field and an open strategy in another field, giving up the middle road. Simply put, "mostly conservative, a small part radical".

Applied in the currency circle, most of the assets can be invested in assets with relatively good security such as BTC and ETH, a small part of the funds can be invested in high-risk assets such as Meme coins, and most of the altcoins in the middle should be participated as little as possible.

In this way, you can maintain stability in the high volatility of the currency circle, and at the same time have the opportunity to obtain high returns through high-risk assets (such as Meme coins).

Next, through some indicators, let's objectively look at how BTC, ETH, most altcoins, and Meme coins perform?

BTC is the eternal king: refer to the BTC.D index (Bitcoin Dominance)

The Bitcoin dominance index is used to reflect the market capitalization share of Bitcoin and is often used to determine whether the altcoin season has begun. From the figure, it can be seen that during the altcoin season in 2021 in the last bull market, the BTC.D index was falling significantly.

The logic that can be explained is: BTC.D index fell ➡️ BTC dominance declined ➡️ Risks increased ➡️ Altcoins regained their market position ➡️ Altcoins began to soar. (Vice versa)

We are still in Bitcoin season. The index has been rising since the beginning of this year. As of July 26, 56%, altcoins still perform worse than Bitcoin, so Bitcoin is dominant.

ETH lags behind BTC in this stage: refer to the ETH/BTC exchange rate

Generally, the larger the ETH/BTC exchange rate, the smaller the price gap between the two, and ETH performs strongly. On the contrary, the smaller the ratio, the larger the price gap, and ETH performs relatively weakly.

In addition, this indicator will also be used to judge the market's interest in altcoins. If the ratio starts to outperform BTC, it may be a sign that funds are flowing into altcoins.

Currently, the ETH/BTC exchange rate is still at a relatively low level, and ETH is performing relatively weakly. Even the approval of the ETF has not been able to reverse the trend of Ethereum. However, since it is at a low level, if you have enough confidence in ETH, you can also consider building positions in batches and wait for subsequent increases.

The overall decline of altcoins: Reference (1) Altseason Index

The Altseason Index tracks the sentiment of the altcoin market, and counts the proportion of the top 50 altcoins that outperformed Bitcoin over a period of time. The index shows that a value greater than 75 indicates an altcoin season, and a value less than 25 indicates a Bitcoin season.

It is obvious that we are in the Bitcoin season, with the index at 16, and the momentum of altcoins is relatively weak. This year, the index was only greater than 75 at the end of January, and it only lasted for half a month. Compared with the three months from the end of March to the end of June 2021 when the index exceeded 75, it cannot be regarded as a true altcoin season.

The overall decline of altcoins: Reference (2) Total market value of altcoins

The full name of this indicator is Crypto Total Market Cap Excluding BTC & ETH. In addition to BTC and ETH, the total market value of other tokens in the crypto market reflects the overall situation of capital flowing into the altcoin market.

After the total market value of the altcoin rose significantly at the beginning of the year, it did not continue to maintain the trend. It has fluctuated repeatedly in the past few months. There is no obvious breakthrough signal at present. The altcoin is still relatively weak as a whole.

Meme coins have high risks and high returns, outperforming BTC and ETH: refer to the Memecoin Index

The Meme Coin Index launched by MarketVector tracks the return performance of the 6 largest Meme tokens by market value.

The main components include $DOGE, $SHIB, $PEPE, $FLOKI, $WIF and $BONK, which best represent the overall performance of Meme coins.

Through the comparison, it can be seen that the performance of Meme coin from the beginning of the year to date is really eye-catching, with a 120% increase, exceeding BTC with a 52% increase and ETH with a 37% increase.

Summary & Risk Warning

Combined with the dumbbell strategy, it can be seen from the above indicators that BTC and ETH are indeed well-deserved safe assets under the current market conditions, with a high market share.

Especially BTC, which is even stronger than ETH. From the comparison of return rates, it can be seen that Meme coin is still a representative of high-risk and high-return assets. On the other hand, most altcoins are still relatively sluggish overall, without too many opportunities, and it doesn’t matter if you put less chips.

Here we should also remind you of the risks. Crypto asset allocation is a very difficult thing, and it is not a simple matter of using a few indicators.

But in any case, please remember that taking risks is meaningful only when most of the funds are very safe. People who have experienced multiple rounds of bull and bear markets must have a deep understanding of this! As the old saying goes, if you keep the green mountains, you will never be afraid of running out of firewood.