The cyclical challenge of Crypto Assets: how much further can the "bull" go?

To cut to the chase, the rise driven by Halving may be the last chapter of this story. The cyclical rise of the cryptocurrency market has always been closely related to macroeconomics.

Since the emergence of BTC in 2009, it would not have been possible to achieve a market capitalization of over 1 trillion dollars without regular injections of liquidity to stimulate the economy.

The only constant in the financial market is change. Even if you manage to hold onto your position, you never know how deep the recession will be.

To this day, the US dollar still dominates the world with its pricing power, while gold is seen as a 'safe haven' for hedging and preserving value, often reaching new highs during major crises in history.

The first gold pump began after the collapse of the Bretton Woods System after World War II, when the US dollar depegged from gold. The driving factors include geopolitical tensions and inflation. The second pump began in 2005, with the price of gold soaring, especially after the subprime crisis, as a large amount of investment capital poured into gold as a safe haven. It eventually ended after the 2011 Libya war, with geopolitics once again becoming a major factor. The turning point for the third pump occurred in 2019, with the global COVID-19 pandemic and Central Bank liquidity injections as the main driving factors, along with localized geopolitical conflicts. Gold has always been the preferred safe haven, and the Federal Reserve's quantitative easing and geopolitical factors are the main forces driving the pump in gold price.

The globalization of the economy itself contains contradictions that are difficult to resolve between the dominant position of global currencies and national interests. For example, El Salvador has adopted a "dual currency" policy to promote the use of BTC nationwide and weaken the influence of the US dollar; Damao will allow residents to trade cryptocurrency and use it for trade settlement starting from September 2024 to evade sanctions.

The dilemma of BTC may lie in its value derived from hedging against the trust risk of Fiat Currency, but its pump power still relies heavily on the adoption of strong national policies, monopolistic capital, and macroeconomic conditions.

Once the belief was to resist authority, now it has become a hope for authority. It seems that in our encryption utopia, we only care about profit, not direction. But the two are inseparable entanglements, there is only traffic with direction, and only profit with heat.

The direct impact of the post-ETF era is that prices will be more correlated with the TradFi market. Only those who hold the most Tokens have the greatest influence, and the United States is gradually gaining ideological control over the encryption industry. According to QCP Capital's report on September 10, 2024, macroeconomic uncertainty continues to dominate the crypto market, with a 30-day correlation between BTC and the MSCI World Stock Index reaching 0.6, the highest level in nearly two years.

There is no doubt that the encryption industry originated from XMC, but now more professional players are on the road. In the future, not only brand IP selection and industry focus will be needed, but also strong trading and execution capabilities. The Matthew effect will penetrate every corner of the industry, and the encryption world is steadily evolving towards the "Wall Street-level" trading complexity.

Looking back at the California Gold Rush over a hundred years ago, hundreds of thousands of people flocked to California from around the world in pursuit of the dream of getting rich overnight. However, most people returned empty-handed, and some even lost their lives. Levi Strauss, on the other hand, took a different approach. He sold the canvas he had hoarded during the gold rush to make durable pants for gold miners. These pants became popular due to their practicality. Later, he improved these pants and became the founder of blue jeans, establishing the globally renowned Levi's brand.

The fast-paced, non-stop trading and volatile market with intense fluctuations are both tempting traps and endless trading opportunities, which is the charm of Crypto Assets. The combination of strong financial attributes and low barriers to entry makes Crypto Assets a natural high-quality gold mine. We used to cheer for ETFs and hope they can bring in more external capital, but the reality is that ETFs are opening the door for more 'Levis'-like figures.

Obviously, the capital-driven momentum is currently ineffective. In addition to the above factors, there are other objective factors that have led to the situation of low Liquidity and high FDV.
The market is fragmented, with too many competitors. In the last cycle, domestic and foreign capital jointly speculated on Decentralized Finance and L1 chains. However, in this cycle, funds and participants are too dispersed across multiple narratives, and Western and Eastern capital often do not take over each other's projects. This leads to a situation where the number of buyers is insufficient to meet the number of sellers.

Without AltCoinBull Market, speculation is lacking. The EVM-based chain infrastructure has matured, and funds and projects are competing in the same direction. So far, no 'Ethereum killer' has come up with anything new. In addition, in a market without AltCoinBull Market, when a project succeeds in a specific area, imitations spring up like mushrooms after rain, becoming the next underestimated opportunity.

To complicate simple things, to turn complicated things into stories: Pseudo-innovation that complicates simple things is everywhere. The repackaging of old concepts is often just to sell bigger dreams to the market.

The Matthew effect is ubiquitous: the encryption industry has developed for more than 16 years, and the basic solidification of the monopoly interests at the top has made the strong stronger and the weak weaker in terms of technology, projects, and capital. Those who survive have strengthened their control over the narrative.

The challenge of sustainable rise. The lack of innovation and Liquidity are the most urgent challenges facing the market at present.

Long time no talk about it from a macro perspective, a bit of a mess, but the main point to summarize, unlike the Bull Market driven by macroeconomic prosperity in the last round, this round of the crypto market is mainly affected by macroeconomic uncertainty. In addition, the approval of ETFs is just like 'ibuprofen sustained-release capsules' in my opinion, which can relieve pain but not cure the disease. The trend of Cryptocurrency imitating the US stock market has become a constraint factor for the rise potential of the industry.

Furthermore, the current consensus in the market is that it is only a BTC bull run, and altcoins have not yet shown any signs of improvement. This is mainly due to insufficient industry innovation, lack of liquidity, unreasonable valuation in the primary market, resulting in insufficient capital momentum and difficulty in achieving volume-driven growth. Repeating old narratives cannot sustain market value, and with traditional institutions like BlackRock entering the field and the lack of innovation in the industry, internal competition seems inevitable.

Last year I kept saying that the cold winter had passed, and soon we would see the warm spring and blooming flowers, are you still there?

#Crypto #BitcoinETFs #BTC