As markets become more volatile, cryptocurrencies can offer pockets of shelter.
There are four catalysts that can cause a crypto bull run, according to Haouk Lee, Founder and CIO of Trinity Digital Assets.
Before his foray in crypto, Lee invested in real estate in emerging markets. Starting in 2017, he started investing in Bitcoin (BTC) and Ethereum (ETH).
Lee was first drawn to crypto assets because they were “outperforming every other financial asset,” and because of their network effects.
“We… use a four-pronged strategy in terms of playing this market,” Lee told David Lin, producer and anchor for Kitco News.
“[We are] ‘hodling’ the BTC and ETH that we’ve accumulated, maintaining an active liquid open trading book, playing the DeFi yields market… and the last component is pro-bono counselling a lot of family offices and institutions on how they can play this space.”
The current economic environment looks unpromising for investors in risky assets. The Federal Reserve recently hiked its interest rate by 50 basis points. The Fed intends to continue with monetary tightening.
When asked if he’s worried about selloffs in risky assets like crypto, Lee responded, “It’s uncharted territory… we’re kind of looking at entering into a recession. But even in the crypto space, aside from your long-term holdings, you can be on the [safe] side in stable coins. And in these choppy markets, I think one of the things you can do is to try to get yield on your stable coins.”
“Another thing you can do… is to sell covered calls on your BTH or ETH, or even SOL, which has enough liquidity. Or, if you’re going to be a perpetual buyer of Bitcoin and ETH… [a strategy] is to sell put.”
Lee also sees four catalysts that can benefit the cryptocurrency market.
“The biggest catalyst for the whole ecosystem would be the ETH merge that’s slated to happen,” he says. “When Ethereum goes from a proof-of-work to a proof-of-stake protocol… it becomes a stock with a dividend yield.”
“ETH is about $2,830 as we speak. If you look at a DCF [discounted cash flow], we’re looking at basically $10,000 ETH – with no terminal value assigned. So that kind of tells you how undervalued this is.”
Lee’s second catalyst involves corporations getting into the crypto markets.
“Corporate treasuries of these major firms are starting to get yields on their short-term capital loans – using DeFi protocol… They’re aiming for the 8 to 12 percent yield.”
Lee’s third catalyst is the Spot Bitcoin ETF, which the SEC has yet to approve.
“You know, people are pessimistic that it’s going to happen under the Gensler administration,” said Lee. “If it does happen, it will be because of political pressure.”
Lee also sees a potential change in BTC’s liquidity as a final catalyst. “The last [catalyst] is basically the liquidity of Bitcoin… there’s currently only about 12 percent of circulating supply of Bitcoin on centralized exchanges. And when I talk to OTC desks, there’s just not enough liquidity.”
“So, what’s happening is a lot of institutions, they’re buying it, and then taking it off and putting it into cold storage. So, in terms of a supply shock, that could be coming towards the latter half of this year, he said.”
To find out how Lee thinks money can be made from ETH staking, as well as his predictions for the BTC price, watch the video above.
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