Bitcoin Social Risk: Why Retail Never Returned

Summary

In this video, the speaker explores the concept of social risk in crypto, focusing on Bitcoin and altcoin market trends. They highlight how retail interest has not returned to the levels seen in 2021, despite Bitcoin's rise. The analysis shows how social risk tracks altcoin interest, which continues to bleed into Bitcoin due to a lack of an 'alt season.' The speaker attributes this to monetary policy, noting that changes in market dynamics require shifts in policy. With ongoing market pain, the speaker believes that only after enough pain will monetary policy change and bring new interest to altcoins.

Takeaways

• 😀 Retail interest in crypto has not returned to the same level as it did in the 2021 cycle, despite occasional spikes in activity.
• 📉 The social risk metric tracks social interest in crypto, and it has remained low during this cycle compared to previous years, signaling reduced retail participation.
• 📊 Social risk is derived from five metrics: YouTube channel subscribers, views, Twitter followers of analysts, exchanges, and layer 1's.
• 📉 Despite Bitcoin's price increase, altcoins have been losing value relative to Bitcoin since November 2021, contributing to the decline in social risk.
• 📉 The Advanced Decline Index (ADI) of the top 100 cryptocurrencies has not entered a durable uptrend, indicating that altcoins are not gaining traction.
• 📅 Monetary policy is a key factor in social interest: the current cycle's rate cuts and quantitative tightening have not matched the 2020-2021 conditions that led to high retail interest.
• 💡 The social risk metric tracks altcoin market behavior more accurately than Bitcoin's price movements, highlighting the focus on altcoins for social interest.
• 📉 Despite periodic spikes in views and subscribers for crypto YouTube channels, sustained interest has been absent, reflecting the ongoing lack of altcoin market activity.
• 🔁 While social media activity on platforms like Twitter remains steady, it hasn't translated into sustained retail interest, with altcoins continuing to bleed into Bitcoin.
• 💥 The only way for the social risk to increase significantly is for a change in monetary policy, which may come after prolonged market pain, as seen in previous cycles.

Q & A

What does the social risk metric measure in crypto?

The social risk metric is used to measure social interest in crypto. It is based on five risk indicators: subscribers to crypto YouTube channels, views on those channels, followers of crypto analysts on X (formerly Twitter), followers of exchanges on X, and new followers of layer 1 projects on X.

Why did retail investor interest seem to return in 2021 but not in subsequent years?

Retail investor interest in 2021 was driven by easy monetary policy, with stimulus and low-interest rates. However, after tightening monetary policy, including interest rate hikes and quantitative tightening, social interest in crypto, particularly altcoins, has remained lower than it was during the 2021 peak.

How does the advanced decline index (ADI) reflect market sentiment?

The ADI of the top 100 cryptocurrencies tracks the performance of altcoins relative to Bitcoin. It shows that altcoins have been underperforming and losing ground to Bitcoin since November 2021, reflecting a lack of retail interest in altcoins, which has prevented a durable upward trend in the altcoin market.

What role does monetary policy play in shaping social interest in crypto?

Monetary policy significantly impacts social interest in crypto. When monetary policy is tight (as it has been recently), social interest, particularly in altcoins, is lower. In contrast, when monetary policy is loose, as in 2020 and 2021, it encourages more interest in altcoins and broader crypto markets, fueling retail investor participation.

Why does Bitcoin dominance continue to rise despite low social interest?

Bitcoin dominance rises because retail interest remains focused on Bitcoin while altcoins continue to underperform. This trend is due to a lack of major movements in altcoins, resulting in their gradual decline against Bitcoin, which holds or increases in value.

How does the social risk metric track the altcoin market?

The social risk metric correlates more closely with the altcoin market than with Bitcoin. As altcoins have failed to perform well and attract retail interest, the social risk has remained low, even as Bitcoin prices have increased.

What was the relationship between social risk and Bitcoin's price movements in the past?

In the past, when social risk was high, it was typically associated with Bitcoin's price rises. However, despite Bitcoin's price increases in recent cycles, social risk has not returned to the levels seen in 2021, indicating that retail interest is not as strong in this cycle.

What is the significance of the 2021 crypto market compared to the current cycle?

In 2021, retail interest in crypto was significantly higher, as seen through spikes in views, subscribers, and followers across social media platforms like YouTube and Twitter. In contrast, current interest metrics have remained subdued, with lower engagement across these platforms, despite Bitcoin's price growth.

Why does the social risk metric not fully capture all forms of crypto interest, like those on TikTok or Instagram?

The social risk metric is designed to track key indicators of interest in the crypto space, primarily through YouTube and Twitter/X. While TikTok and Instagram may be significant, the presenter argues that these platforms do not fully reflect the broader trends in retail interest, as evidenced by altcoin performance, which still centers on Bitcoin.

What needs to happen for social risk to increase significantly again?

For social risk to increase again, there needs to be a shift in monetary policy, particularly through looser monetary conditions, such as rate cuts or quantitative easing. This change could encourage more retail investment in altcoins, leading to a resurgence in broader crypto market interest.