Crypto analyst Jamie Coutts says that the current correction in digital assets is likely a mid-cycle dip that could be taken advantage of.
Coutts says on the social media platform X that Bitcoin (BTC) and Ethereum (ETH) have held up much stronger than other crypto assets, implying that a potential mean reversion is on the table for smaller projects.
“Smaller cap crypto assets have been taking it on the chin since March high of this year. The past three months have seen the Top 200 equal weight index fall 33% vs. the Market Cap index, which is down around 12%.
This is the breakdown of the three-month sector returns from my crypto classification framework:
Smart Contract Platform -31.58%
Infrastructure -43.28%
Digital World -44.13%
Digital Currency -31.59%
DeFi -31.15%
Applications -38.33%
BTC and ETH have held up -11% and 5%, respectively.
If this is a regular mid-cycle correction we are experiencing, which I believe is likely, then expect some opportunities to be had in the mid and small caps once the market settles.”
When the rebound happens, Coutts says decentralized artificial intelligence (AI) is another sector that has “genuine opportunity,” but the analyst doesn’t mention any specific coin or project.
Coutts also shares a chart comparing a declining price index of layer-1 smart contract platforms to an increasing number of their daily active users (DAUs). The analyst suggests that the divergence is one of the best signals of health in the crypto ecosystem.
“Web3 users seem less price-sensitive than in the previous cycle.
The number of daily active addresses (DAUs) on SCP (smart contract platform) blockchains is up 30% since March, while the SCP sector index is down approx 30%.
In a sign of how wild the last cycle was, prices are 37% below the all-time high, yet DAUs are 2.6x higher (4.2 million to 11.2 million).
One doesn’t equal the other but if you are looking for a signal on the health of the crypto ecosystem, this is one of the best.”
Generated Image: Midjourney