Transcription
The crypto market hasn't been too bullish recently, and Soy did not benefit from that environment. Of course, the issue is that soy underperformed even the average altcoin here. The question is, why is this potentially a buying opportunity? Let's have a look at the data most people are not considering. In the end, crypto is all about buying low and selling high, and soy obviously currently is not very high.
What we see here, that's the soy dominance. How is soy performing relative to the entire crypto market? We've seen the peak at the beginning of last year. So, over the last 12 months, soy underperformed the rest of crypto by 60%, and it seems like we are in a somewhat constant downward trend.
Now, there are plenty of ways to look at those relative valuations. The dominance chart, so comparing market caps, is just one of those measures. We can also look at Soy relative to all other altcoins. We can have a look at soy relative to Bitcoin. And interestingly enough, the results we get are slightly different.
So again, this is soy dominance. This here is soy relative to all the smaller altcoins. So, "others" is the market cap of the altcoins that are not in the top 10. It seems like over the years, we are in a somewhat constant trading range. This vertical line here, that shows the beginning of the dominance chart. So, dominance has been measured a bit later. The price relative to the others market cap started slightly earlier. The dotted line here, that's the average ratio of the soy price to the altcoin market cap. So, it seems like we are somewhat balanced historically speaking, and we don't necessarily always move from one extreme to the next. We have seen turnarounds at the equilibrium price before. So, that's over here.
So, really, I interpret this data as neither bullish nor bearish. The dominance chart does not look great, but the comparison of Soy to all other altcoins doesn't look that bad.
Now, Bitcoin was able to outperform most other altcoins in the last years, and that's because of all the inflows into Bitcoin through the treasury companies and through the ETFs. Soy is no exception here. This is soy relative to Bitcoin. Since May of 2023, it underperformed by 65%. And I will tell you why I think it's very likely that in the short term, soy will continue to underperform, to then potentially bounce in May of this year.
Have a look at the tokconomics here. This is the number of circulating SUI tokens over time. The token inflation. So, the growth of the SUI supply will slow down in May of this year. That's when the Series B investors have finished their vesting unlocks. There will be no more early investors cashing out at that point. Then, it's only stake subsidies, early contributors, etc., that still get additional SUI tokens. But it's not anymore the early investors. So, a strong source of potential sell pressure ceases to exist in May. And if we just continue with our current negative momentum, then we might be at historically low relative prices at around May of this year. And sometimes assets bounce when they see their historically low price levels. We've seen this with Ethereum, for example. Here, have a look at ETH relative to Bitcoin once we came close to the historical low. That's when Ethereum was able to outperform BTC by more than 100%. Maybe we will see something similar play out with Soy once the Series B investors have no more token unlocks. And again, that's in May of this year.
Let's have a look at a few on-chain metrics for Soy. Over here, we've got the decentralized exchange trading volume over time. How much trading is happening on the SUI chain. Unfortunately, this is not growing that much in the last weeks, which of course supports the current underperformance, right?
This is again, soy dominance. Here is the total value locked measured in SUI. This long-term tends to go up, but measured in US dollars, it came down massively again, probably because of token unlocks, probably because of cash outs by the team, by the investors, by the insiders. I think there is a good chance that if soy continues to fall a bit further from here, that at some point there will be some leverage that enters the asset again, because the soy price action is very much determined by how much speculation there is on the price.
What we see here, that's the open interest on soy. So, how many bets are being made on the soy price via the perpetual futures. There is correlation between the soy price and the open interest. When there's more bets, the price tends to be high. When there's less bets, the price tends to go down. Now, currently, the open interest is not at historical lows, but it is declining to a level where it might pick up and turn things around again. We're currently at 635 million, and this can drop to 200 million and below.
Here's why this matters so much. Soy is the ninth largest asset in terms of open interest. Even at those lower levels, it's the ninth most speculated with asset. And compare that with the market cap, right? It's at number 19 in terms of market cap. In other words, there's a lot of bets on soy relative to its size. That's why the open interest matters so much. The trading volume on the perpetual futures and the price are of course also correlated, and that also tends to trend down, but is not yet at historically low levels.
So, I do think there's a very good case to be made that soy in the near term might struggle, but at some point, after we have fallen maybe 25 or up to 40% versus Bitcoin, at those levels, it very much makes sense to pick up the pieces.
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