Week 2, Lesson 2
''Identical information can lead to opposite conclusions based on relative perceptions of its receivers."
― Naved Abdali
We are into the Week 2 of the Fifty Two Trades in Fifty Two Weeks. Thank you for reading on.
It’s going to be a year long journey. Tighten your seat belts and be ready to ride along. Let’s call it “The 52”.
For details on why I am doing this and who is this for, please read the About section on top, which I will update from time to time.
Each week, I am going to pick one area in detail so that we have more than 52 trading related topics covered before we pause for rest. Most trades that we take will be medium (min 1 month) to long term in nature. We might do some swing trading here and there if opportunity presents, but always with proper risk management. After all, our purpose is to make money, not lose sleep over it.
You can track our trades and progress live here at this Hashtalk Link
Over 10 years in banking and now 12+ years dealing with nuances of crypto, I have learned some very hard lessons. I intend to share them transparently as we go. More importantly, please keep the comments and feedback coming, so I know we are on the right track together.
Week 2, Trade 2: Long BLAST
Portfolio Update
First things first, let’s dive into last week’s trade. We’re currently sitting pretty with a $5,000 gain, thanks to SOL's price around $160. That was a good first call. We're on the verge of hitting our first take-profit (TP 1) target at $165. When we reach that milestone, we'll close 25% of the position, letting the rest ride the wave to our subsequent targets. To keep things safe, we'll also adjust our stop loss to $150, ensuring a minimum profit of $4,000 even if the market decides to take a little dip.
Update complete, moving on to this week’s trade.
Quick Market Update
Looking at the broader economic landscape, the economy continues to progress steadily, albeit at a slower pace, with anticipated interest rate adjustments likely coming in September.
In the political arena, Trump’s odds of winning the election have surged dramatically on Polymarket, reaching 70% over the past two days. This development could further stabilize and boost risky assets.
The week began on a positive note for the crypto market, with prices rising by 10%-20% over the weekend. The upcoming launch of the ETH ETF on July 23rd is expected to have a significant impact on ETH and related beta plays. But keep a close watch on the flows to determine how solid the ETH demand.
For more regular insights into macro and crypto, you can subscribe to our weekly newsletter - 5-min Macro and Crypto Weekly.
Overall Layer 2 Ecosystem?
Despite concerns about the fragmentation of liquidity across Ethereum’s expanding Layer 2 ecosystem, overall activity and TVL in L2 assets have continued to rise. This trend suggests that L2 solutions could potentially surpass Ethereum in revenue generation, especially considering the Ethereum blockchain's transaction limitations
ETH TVL in last 30 Days VS L2 TVL in last 30 days
As illustrated in the graph above, Ethereum’s TVL has been on a downward trend over the past 30 days falling from $63B to $59B. In contrast, L2’s TVL, though volatile, has shown an overall increase compared to Ethereum’s from $42.3B to $43.8B.
According to analysts at VanEck, curbing the growth of Layer 2 (L2) networks will be a formidable task, with projections suggesting that the market capitalization of such mechanisms on Ethereum could soar to $1 trillion by 2030.
Arbitrum, Blast, and Optimism have emerged as key players in the L2 arena. Their success can be attributed to the development of vibrant ecosystems and the strategic use of airdrops, which have garnered significant interest from the crypto community.
The graph above illustrates the TVL trends for Arbitrum, Blast, and Optimism. It highlights the rapid growth of Blast, which surpassed Optimism in less than 30 days after going live on the mainnet in March.
Optimism has a FDV of $7.8 B, while Blast's FDV is $1.6 B, despite Blast having twice the TVL of Optimism. This notable disparity highlights a strong fundamental basis for an increase in Blast’s token price, suggesting substantial upside potential.
What is Blast?
The Blast Blockchain is an optimistic rollup solution built on Ethereum, designed to enhance scalability and efficiency. Blast quickly gained traction due to its innovative approach to yield generation and asset staking.
Within six months, the platform achieved an active user base of over 1.5 million and attracted significant backing from prominent investors such as Paradigm and Standard Crypto.
Blast defied the usual trend of VC-backed coins launching with high FDV, leaving little upside for retail investors. While the market anticipated an FDV of $6B to $8B at launch, Blast debuted at a more modest FDV of $1.6B. This lower valuation offers substantial upside potential for investors.
Blast has been underperforming compared to other L2 and Ethereum token. This underperformance is largely due to the recent token launch, which has faced selling pressure from community members who received airdrops.
Why Blast is going to succeed?
Blast is going to be a medium to long term hold for me, because it is live on mainnet and there a lot more new developments to come in months ahead:
Backed by Big Investors: Blast boasts strong backing from prominent investors including Paradigm, Standard Crypto, eGirl Capital, and Pacman.
Native Yield Offering: Unlike traditional staking mechanisms requiring asset lock-ins within specific protocols, Blast stands out as the only Layer 2 (L2) solution offering native yield. This provides passive income directly to holders of ETH and stablecoins.
Rapid Increase in TVL: As of June 2024, Blast has surged past $2.2 billion in Total Value Locked (TVL), positioning it as the sixth largest blockchain by this metric. This impressive growth was primarily fueled by users locking their assets in anticipation of future rewards and airdrops, distributed in June. Even post-airdrop, the TVL remains robust at $1.3 billion.
Aggressive Marketing and User Acquisition: Blast’s aggressive marketing strategy incentivised early users with rewards based on the number of invites generated. This approach led to rapid user adoption and a significant increase in TVL.
Ecosystem Development and Future Plans: Blast aims to broaden its ecosystem by supporting a diverse range of DApps and services. Interest is already growing from various teams, including those developing DeFi, gambling, and NFT trading DApps.
Exchange Listing: Within one month of launch, Blast secured listings on all major exchanges, except Binance. A Binance listing is anticipated in the coming weeks, which could further drive the price upward.
Technical Analysis
Since BLAST is a new coin with limited historical data, our technical analysis has been conducted purely based on price movement strategy.
BLAST reached its all-time high (ATH) of $0.03 on the day of its launch, which seems to be the second resistance, breaking this resistance might result in uncertain upside which can’t be determined right now.
On the daily chart, BLAST is gradually moving in an uptrend, and it is anticipated that a significant price movement, either upward or downward, is imminent. Based on our analysis, we predict an upward movement, given the current uptrend trajectory of the coin
Hashtalk Crypto Trading Framework
Here is the link to Crypto Trading Framework and its template that you can follow live
Trade & Positioning
The stop loss is $0.01275, that is the lowest the coin has fallen to since the launch. Post which Blast has giving higher highs and lower lows, indicating a change in trend and imminent breakout.
My TP1 is at $0.022 because that was the first resistance level of the token of the token since it launch on 26th June.
“The 52” starting capital is $100,000 and we are risking $2,500 or 2.5% of the starting capital for the first trade and I calculate my position size accordingly.
For our first trade Long BLAST, the risk percentage is determined as follows:
Risk % = (Entry Price - Stop Loss) / Entry Price
= (0.0167 - 0.01272) / 0.0167
= 23.83%
Using this risk percentage, the position size is calculated:
Position Size = Capital at Risk / Risk %
= 2,500 / 8.75%
= 10,000 USDT (rounded from $9,929)
Therefore, we will buy $10,000 worth of BLAST. If the price hits our stop loss, we incur a max $2,500 loss. If it reaches our level 1 of take profit at $0.0226, we achieve a 33% gain, or $3,294, under the base case scenario. This gives us a base risk/reward ratio of about 1.31:1, with potential for higher overall profit. If the market is very buoyant at that time, we might adjust our SL and TP targets.
Conclusion
The second trade of “The 52” is opening a long position on BLAST at $0.0169, with a stop loss set at $0.012120 and a first take profit targets at:
Take Profit 1 $0.0226
Take Profit 2 $0.0318
Take Profit 3 $0.05
The trade size would be of $10,000 with a maximum loss of $2,500. You can track all our trades here.
Thank you and have a fantastic trading day ahead.