The popular analyst puts the bullish case for Terra, which has become the second largest DeFi blockchain after Ethereum, and discusses whether the popular altcoin Solana can make a comeback. Michael Safai, co-founder of crypto market Dexterity Capital, explains how investors can buy and sell altcoins in volatile markets. And he shares his views on two of crypto’s most popular altcoin projects, Solana (SOL) and Terra (LUNA). Details are on Kriptokoin.com.
2 altcoin projects stand out
In January, altcoins were hit even harder as Bitcoin (BTC) dropped 19%. Popular tokens like Solana (SOL) and AVAX fell 44% and 39%, respectively, according to the January market report from crypto trading company Genesis. Now over the past five days, sentiment has changed and AVAX is up 11% while Bitcoin is up 6%. Dexterity Capital is one of the oldest institutions in the crypto scene. “We’ve seen the winters, we’ve seen the cycles, we’ve done this for four years, we want to be ready for anything,” said Michael Safai, co-founder of Dexterity Capital. According to Safai, last year the firm processed over $1.2 trillion in cryptocurrencies. The Financial Times reported that Dexterity trades between $2 billion and $4 billion a day in cryptocurrencies.
As Safai’s firm does not take directional risks, they are focusing on how the liquidations and volatility in altcoins will affect their profits and losses. The tricks of trading some smaller tokens to manage their volatility are having good pricing models and historical data to manage and prepare for extremes. Safai says:
When there is too much activity, we may withdraw our offers. So in normal times you might be bidding 50 [basis points] on either side of the midpoint price. When things get really hectic, we can pull back to 100 [base points]. We call this type of operation dynamic pullback, so that’s how we deal with it.
According to the analyst, most altcoins such as Solana and those in the DeFi space are associated with “blue chips” such as Bitcoin and Ether. So when these blue-chip cryptos go down, altcoins go down too. However, the altcoin trading ledger is not as deep and liquid as Ether and Bitcoin, which can cause greater price fluctuations and larger losses. Safai said, “When the stock market liquidates my position, there will be more slippage and it will force Solana price down further. And this cycle repeats as some sort of gradual further liquidation occurs.” Famous analyst Safai said that liquidations are not a reason to avoid altcoins altogether. He stresses that investors need to be smart about this because so many projects are doing really great work. “It is really good to be in altcoins in the long run but you have to be prepared for bumps… If you are a short-term trader, you just need to be smart about how to hedge and make sure you are well diversified,” Safai says.
well on Terra (LUNA)
One of the most popular altcoins among traders and investors is Terra (LUNA), a layer one blockchain protocol focused on algorithmic stablecoins. Last week, Terra-backed assets recorded their first significant inflow of $1.4 million. Leading market tech JC Parets named Terra (LUNA) one of his top picks at the start of the year and has echoed that view in recent days as Bitcoin surpassed $41,000. A number of investors also highlighted Terra as one of the toughest contenders for higher performance in 2022 than Bitcoin. But can it really compete with the likes of the already dominant Ethereum? “I think Terra has been very aggressive in attracting a user base and community,” Safai says. However, investors should be aware that Terra provides generous returns to investors who issue USD shares for the Terra stablecoin, possibly using the anchor protocol that played a role in its adoption.
Can Solana (LEFT) make a comeback?
Safai maintains a wide variety of tokens in his personal account that can be held for the long term. “Ethereum has been great… But some of these will offer some interesting features that Ethereum has yet to offer, and some will just be huge,” Safai says. A blockchain that many investors claimed could compete with Ethereum was Solana. However, it has grappled with various technical issues affecting the price in recent weeks. “While they certainly took away some of the brilliance in the public eye, I don’t think it changed the quality of what they were building,” Safai said. I think Solana has a lot of great supporters,” she says.
The expert highlights similar issues that occurred with Ethereum a few years ago. “So, if you go back even further, Ethereum had to roll back transactions, of course there was the Ethereum classic split, these are teething issues and it’s really hard to avoid them,” Safai said. At least for now, that doesn’t impress major Bitcoin bull and hedge fund head Mark Yusko, who says he’s optimistic about Solana despite the technical challenges. Yusko said in a recent interview, “There is probably some potential fluctuation in the price ahead. But in the long run, I think it’s a great protocol,” he says.
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