Why This Trader Is Betting Big on $ETH Despite the Bear Market

  • Crypto trader Alex Kruger is making a major bet on ether, allocating 70% of his money.
  • On a podcast he breaks down why he’s making the bet while trying to fish out the Fed’s next move.
  • And Kruger shares the reason why he’s avoiding alt-coins at all costs right now.

Technical traders and analysts who spend hours studying charts to find patterns and trends may need only watch a few indicators to identify winning market opportunities.

Crypto trader and economist Alex Kruger is intimately familiar with the price and volume charts as he leverages them to gauge market sentiment.

Speaking on the May 31 episode of “The Pomp Podcast”, Kruger explains that those trusty tools have become less reliable in this challenging macro environment.

“Even though I’m focused strictly on crypto, the macro is driving crypto and equities are driving crypto,” said Kruger on the podcast.

In April 2020, Kruger went all in on crypto trading. He currently has over 130,000 followers on Twitter who follow his outlook on trading and markets.

“I was happy to be able to ignore mostly stocks, because honestly having to listen to Powell and to the Fed, and to all this economic data with the level of detail I’m doing right now is not really enjoyable. It’s just something the market is forcing me to do,” Kruger said.

At the start of this year, the


Federal Reserve

implemented an aggressive monetary policy plan to combat surging inflation, which involved multiple interest rate hikes. This comes after years of low interest rates which have benefitted risk assets like stocks and crypto.

When the Federal Reserve started to tighten, risk assets crashed. The S&P 500 is down 15% from its 2021 highs, while bitcoin’s fallen around 54% from its 2021 highs.

Now Kruger’s trying to “fish out” when the Fed is going to change its stance and when it’s time to start deploying significant capital to risk assets. He’s monitoring both inflation data and commentary coming from the Federal Reserve.

“It’s hard to explain this, it’s painful. It’s quite a spectacle,” said Kruger describing the difference between this market crash and previous ones. “This is like a drip,” he added. “It’s like acid in your face if you’re long.”

Kruger doesn’t see the pain subsiding any time soon until the Federal Reserve steps in.

“It’s really about the Fed,” Kruger said. “And until the Fed doesn’t pivot, until they don’t change their current stance, there is a very high likelihood that prices keep on going down.”

As Kruger tries to identify the point where he can deploy all his capital in the market again for the long-term, in the meantime he’s making a major bet on ether with a 70% allocation of his portfolio to the asset while keeping the rest of his funds in cash.

“I think ether has basically a very high likelihood to outperform bitcoin because of ‘the merge’ in the coming months,” Kruger said. “Like say from here until the end of the year.”

This is a similar outlook to Matt Hougan, the chief investment officer of the $1.2  billion crypto asset manager Bitwise. He also believes that the current crypto market is being driven by the macro environment and that the


volatility

will continue throughout the summer months.

“My own view is that we’ll continue to see volatility for the next few months,” Hougan said. “I think the Fed is on an absolutist push to squash inflation at any cost.”

Despite this, Hougan believes ether is an asset to bet on as the market bottoms out and crypto fundamentals start to matter again. 

The merge, which is the shift from


proof-of-work

to


proof-of-stake

consensus mechanism, will bring benefits such as lowering the carbon footprint of ethereum, reducing new issuance and offer attractive yields through staking, according to Hougan.

“The merge is undercounted and as a result I find it very attractive at these prices,” Hougan said.

Kruger sets the likelihood of the merge happening this year as extremely high. However, he still has two concerns.

First, if crypto completely collapses similar to the 2018 cycle then ethereum’s merge will become completely irrelevant.

Second, if crypto continues to stay in a


bear market

and activity on ethereum lowers then it will reduce the yield that can be achieved from staking. Hougan’s firm is predicting ethereum will offer an 8% to 12% staking yield.

“I think ether offers a great, great way to trade risk at the moment,” Kruger said. “Why 70%? Because basically I’m trading for a reversal.”

“I have stops, so if things go bad, unfortunately, I’ll be getting out of part of the position at a loss,” he added.

On the flipside, Kruger is staying completely clear of alt-coins as a lot of market participants are trying to exit that area of the market.

“The more illiquid, the higher the probability that we suffer something that we can’t really hedge against, we can’t really trade,” Kruger said. “It is just people with more information than us that can destroy our thesis completely. So I’m quite concerned about being in alts at present.”