Maybe we are not in a "bear market for altcoins", but rather the market is returning to quality assets.
By Regan Bozman
We just launched the top spot ETF of all time, Bitcoin is halving, Trump is going completely crazy, and you’re still bearish? Investors are just expressing their pain instead of objective analysis. Let’s look back at how far we’ve come and look forward to how far we still have to go.
Every bull market has months of volatility, and this one is no exception.
There are two views on the current situation:
(A) Return to high-quality assets
(B) All infrastructure venture tokens are screwed
A I think it is correct.
Let’s analyze the current situation. Why do people think we are in a bear market? Why are they wrong? Why do we have so much room to run?
People say this cycle is over because the things they expected to rise didn’t:
meme
BTC
90% of VCs are underallocated to these assets and most new VC tokens will underperform in 2024.
Obviously, capital flows are a big part of this story, but many venture token launches have been accompanied by huge oversupply.
But money flow isn’t the only part of the story, the way tokens are currently issued in the market is also pretty stupid.
If you issue at $1 billion and it reaches $5 billion six months later, you’ll be ecstatic;
But if you issue it at $10 billion and six months later it's only $5 billion, you're going to be frustrated.
I’m not going to write another 47 tweets about how stupid the point, short, high FDV/low float issuance is. But this issuance strategy is as much the cause of the current bear market as macro flows. It’s really bad!
It is we ourselves who set the trend of this "bear market"!
We need truly amazing retail flows to offset dozens of super-large FDV (Fully Diluted Valuation) issuances. But now retail investors are taking free money from "Eigen Daddy", so there are no buyers. "Only down but not up" charts like $DYM are everywhere.
Even VC “blue chip” stocks like $ARB have been underperforming, trading near their 2023 bear market lows. The call for months – the biggest risk to any token is that VC selling pressure far outweighs retail investment inflows, which is clearly happening.
The “bluest” blue chip – ETF.
Most VCs (including us) were overweight ETH and it clearly underperformed this cycle. So VCs are unhappy! It looks like a big funeral from a timeline perspective.
But I think it would be a mistake to call this cycle finished!
Previous cycles have had months of volatility or corrections, which is nothing new. If you want to get more than 100 times the return in an industry, you have to accept violent market fluctuations.
Let’s look specifically at altcoin performance, the Total3 index tracks the top 150 tokens excluding Bitcoin (BTC) and Ethereum (ETH).
Yes, there has been an overall pullback since the local highs, but there have also been multiple pullbacks of equal or greater magnitude in the previous cycle.
Maybe we are not in a "bear market for altcoins", but the market is returning to quality assets. I mentioned Dymension earlier. As far as I know, they only have one customer and added less than 10,000 new users last week. Maybe such a project should not be worth a 10-digit valuation.
Teams that launched in a smarter way have fared better. For example, $SAFE launched in a volatile market, but it has 42% of circulating supply, a more stable price chart, and seems to have real price discovery around $1.7B FDV.
Teams that built cool stuff are doing well. For example, Ethena is so new that it’s doing better than most other projects. So maybe not all VC tokens are dead, just the iterative zk modular da solutions.
The tide is turning away from redundant infrastructure and toward consumer applications, which is very healthy, and I think public market valuations will reflect that in this cycle.
Leading user-facing applications will be the defining factor in this cycle as they vertically integrate and capture more value.
Layer3 announced their token this morning. They are already the second largest application on Base behind Uniswap. The winners of this cycle will be those with unique allocations, and @layer3xyz is definitely in that category.
Hats off to Fantasy.top and Pump.fun who have been helping lead the charge, they haven’t even issued a token yet, that’s when the real fun begins.
We still have a ways to go. Financial advisors can take more than 90 days to add new stocks to their approved allocation lists, and ETFs were only approved 120 days ago.
Institutional time-weighted average price (TWAP) investing is just beginning.
Bitcoin ETFs are still not included in most macro strategies. Considering the market cap of crypto, the amount of money in these ETFs is staggering.
Cryptocurrency becoming an issue in the U.S. election is bullish for the market, at least until November.
More attention will bring more market participants.
Sure, some of the attention might be negative, and a lot of people hate crypto, but in that case, you probably don’t have any selling points :)
Sorry to disappoint the haters, but we remain bullish.
