Author: YBB Capital Researcher Ac-Core
TL;DR
Unlike the previous bull market, which was driven by macroeconomic prosperity, this round of crypto market is mainly affected by macroeconomic uncertainty;
ETF is just an "ibuprofen sustained-release capsule", and the trend of crypto-US stocks has become a "curse" on the industry's growth potential;
The current bull market is almost limited to Bitcoin. The main reason for the sluggish performance of Altcoin is the lack of overall industry innovation, insufficient liquidity, and overvaluation of the primary market. The overall capital driving force is limited, and the market is difficult to increase in volume;
With industry innovation stagnating, the entry of traditional institutions such as BlackRock can provide a certain amount of incremental funds, but it cannot change the trend of market involution, and it is difficult to support sustained growth by playing the old tune ;
Can the cyclical rise of halving in four years be repeated?
1.1 The starting point of the bull market is completely different
Perhaps out of resistance to the over-issuance of national sovereign currencies and monetary policy intervention, Bitcoin was coincidentally born against the backdrop of the global economic crisis. From the development history, before Bitcoin was widely banned in China in 2021, China was the largest cryptocurrency in the crypto industry. The main driver is that domestic single mining once accounted for two-thirds of the global total. At the same time, China's overall economy has developed rapidly driven by the real estate and Internet booms, and the macro environment before 2021 is favorable. The central bank's monetary easing policy has stimulated the market's investment enthusiasm. However, as the real estate market cools down after 2020 and the overall economy declines, some market liquidity has gradually been withdrawn .
Looking at industry innovation from a rearview mirror perspective, DeFi Summer promoted Ethereum’s internal circulation economy and became the main driving force for its explosion. Subsequently, NFT, MEME, and GameFi continued to break through the circle, attracting massive traffic resources and triggering the explosion of digital collections. The rise in the industry's market value has driven the development of the entire industry. However, this round of innovation is mostly "old tunes" and has not brought substantial breakthroughs. Or perhaps the bull market has not really arrived yet, and the new narrative has not yet set off enough Big waves.
If we consider the beginning of 2019 to the beginning of 2021 as the starting point of the last bull market, Bitcoin was in the price range of 4K-10K USD, and Ethereum was in the range of 130U-330 USD. The entire crypto market was relatively small, and there was huge room for growth. According to data from CompaniesMarketCap, Bitcoin's market value is currently ranked 10th in the world, second only to Facebook, with about three times the growth space from Apple and about 15 times the growth space from gold. However, compared with the previous bull market, the overall expectation is The room for growth has shrunk significantly .
The rise driven by halving is the core narrative of the last bull market , and the cyclical growth of the crypto market is always closely related to the macro economy. Since the creation of the Bitcoin Genesis Block in 2009, its market value has exceeded $1 trillion, which is inseparable from Periodic monetary easing stimulus. However, the only constant in the financial market is "change". Even if you get a position, you can't know how deep you can dive.
Data source: CompaniesMarketCap
1.2 What is the positioning of Bitcoin and its future growth potential?
Is Bitcoin’s safe-haven property just a consensus within the industry?
To this day, the U.S. dollar still controls the global economy through its pricing power, while gold serves as a "safe haven" for hedging and preserving value. Its historical price highs are always accompanied by major crises. The first carnival began with the collapse of the Bretton Woods system after the end of World War II. , the dollar decoupled from gold, driven by geopolitics and inflation. The second carnival began in 2005, when a large amount of funds poured into the safe haven of gold after the subprime mortgage crisis. After the end of the Libyan war in 2011, geopolitics remained a key factor. After the three carnivals in 2018, the COVID-19 pandemic and local geopolitics pushed up the price of gold. Overall, gold has always been the first choice for hedging risks, and the Fed's quantitative easing to expand money supply and geopolitics are the reasons for its price increase. Main driving force.
According to Beijing time on Thursday (September 12), spot gold closed up 1.84% at $2,558.07 per ounce, a record high; spot silver rose 4.19% to $29.8792 per ounce. COMEX gold futures rose 1.78% to 2587.6 USD/ounce, also breaking the historical closing record (data source: Qianzhan.com Research and Selection Express). The positioning of Bitcoin and gold as safe-haven assets seems to have been broken. Gold has skyrocketed, but Bitcoin has not kept up. Its price trend is closer to that of U.S. stocks.
Bitcoin’s greatest value: a tool to resist economic sanctions and lack of trust in fiat currencies
In the context of economic globalization, all countries hope to achieve international circulation, reserves and settlement of their own legal currencies. However, the trilemma between monetary sovereignty, free capital circulation and fixed exchange rates still exists. It is felt that paper money itself has no value. It only relies on the credit endorsement of the state. Those who control the right to issue currency can actually override the law. Even a hegemony as strong as the US dollar can hardly support such a large-scale credit endorsement for a long time. Behind the global economic globalization, the essence is the unsolvable contradiction between currency globalization and national interests. For example, El Salvador adopted "legal currency dualization" to promote the use of Bitcoin in the country to weaken the hegemony of the US dollar. Russia has been using Bitcoin since September 2024. Starting from this month, residents will be allowed to trade cryptocurrencies and use them for trade settlement to circumvent sanctions.
The embarrassment of Bitcoin is that its value comes from hedging the risk of trust in legal currency, but its rising momentum depends on the policies of powerful countries, the adoption of monopoly capital and the influence of the macro environment. This dual dependence makes Bitcoin challenge the traditional financial system while , still subject to its rules.
2. ETFs are only short-term pain relief, not a cure-all
2.1 The post-ETF era of crypto: failed confrontation with power
Image source: The Guardian-News
Bitcoin was coincidentally born against the backdrop of the global economic crisis. The unique properties of blockchain have the potential to resist the over-issuance of national sovereign currencies and monetary policy intervention. Anti-power, freedom and decentralization were once the industry's beliefs and slogans. However, most of the "players" in the industry have a speculative mentality. Getting rich overnight seems to have become the primary productive force driving the development of the industry. Although the launch of the Bitcoin ETF is a positive, it is ultimately just an unavoidable one-off event. Unable to sustain the market in the long term.
Once upon a time, most of us believed in resisting the powerful, but now we put our hopes on the power of the powerful. In utopia, we seem to care only about profits and not about the direction. The market is full of cheers for the good news of ETFs, and everyone is looking forward to more funds. However, we who once fought against the powerful are now gradually handing over our achievements to the powerful. This change reflects the profound contradiction between ideals and reality.
Giants like BlackRock, Vanguard, and State Street control the world, and now BlackRock is controlling Bitcoin.
The most influential companies in the world are not Apple, Tesla, Google, Amazon or Microsoft, but the world's largest asset management companies. BlackRock is one of them. From 2009 to 2023, it has been For 14 consecutive years, it has been the world's largest asset management company, managing trillions of dollars in assets. Compared with technology giants, these asset management companies have a more far-reaching economic influence through the global flow of capital.
The direct impact of the post-ETF era is that the price of crypto assets will be closer to the trend of traditional finance. Only by holding more chips can you have a greater voice in the industry. Today, the United States is gradually controlling the development of the crypto industry through ideology. According to QCP According to Capital on September 10, macroeconomic uncertainty has become the dominant factor in the crypto market, with the 30-day correlation between BTC and the MSCI World Stock Index reaching 0.6, close to a two-year high. This shows that Bitcoin's price trend is becoming more and more are more affected by the performance of global stock markets.
The crypto industry did germinate in China at first, but now the big players have changed and more professional competitors are emerging. In the future, in addition to screening brand IP and track sectors, it is also necessary to have strong trading and transaction capabilities. The Matthew effect It will penetrate into every corner of the industry, and the crypto world is gradually ushering in "Wall Street level" trading difficulty.
2.2 Metaphor of the Gold Rush
Looking back at the California Gold Rush more than a hundred years ago, hundreds of thousands of gold diggers from all over the world flocked to California with the dream of getting rich overnight. However, most of them returned empty-handed, and some even lost their lives. In the 1960s, Levi Strauss took a different approach and used the large amount of canvas he had stockpiled to make trousers and sell them to gold miners. The trousers were very popular because of their practicality. He then improved the trousers and became The founder of jeans, and founded the now world-famous Levi's company.
Interestingly, Bitcoin mining in PoW and Ethereum staking in PoS are similar to this in some ways. The mining boom in PoW has made “gold diggers” carry mining machines forward, while the staking boom in PoS has made them However, characters like "Levis" are everywhere - behind this game, you are looking at the dream of getting rich overnight, while I am looking at the capital you have . The blockchain's 7*24-hour globalized and uninterrupted transactions have brought countless opportunities to "gold diggers", but it has also made the market particularly prone to ups and downs. High risks are accompanied by high returns, and profits and Risks constantly affect everyone's courage and diligence.
The fast-paced, non-stop trading and high volatility of the market are both tempting traps and unlimited trading opportunities. This is the greatest charm of Crypto. The dual blessing of strong financial attributes and low entry barriers makes Crypto a A large natural high-quality gold mine. We once shouted that the benefits of ETFs would bring more off-market funds, but the passage of ETFs also opened the door for more Levi Strauss, creating more arbitrage and Opportunities for indirect benefits.
The crypto market will involve more "Levi's"
ETFs not only provide exposure funds, but also provide risk hedging transactions. The biggest innovation of blockchain is to put finance on the chain, creating a "self-cultivating economic cycle" in the crypto market, and successfully Blocking the direct intervention of powerful forces and traditional capital. However, in the post-ETF era of cryptocurrencies, the crypto market has, to some extent, handed over a full range of financial derivatives, which will only attract more arbitrageurs and big funds to enter the market. This will further compress the already limited market profit margins and weaken the innovation driving force and freedom in the market.
3. The primary market is difficult to break
Primary market with low circulation and high FDV
Recently, the financing situation in the primary market has changed significantly compared with the past. The listed tokens generally show extremely high FDV (fully diluted valuation) and low liquidity. According to Binance’s “High Valuation, Low Circulation Tokens” According to the data provided in the "Observations and Thoughts on the Current Situation", the ratio of the market value (MC) of tokens launched in 2024 to FDV is the lowest in recent years. This indicates that a large number of tokens will still be unlocked in the future, and will be issued in the first few months of 2024. The token’s FDV is already close to the 2023 total.
Image source: @thedefivillain, CoinMarketCap and Binance Research, data released on April 14, 2024
In a market that generally lacks liquidity, tokens are gradually unlocked after TGE (token generation event), which brings a lot of selling pressure to the market. However, did VCs really make money in this round of market? ? Actually, not necessarily. Usually, for compliant and regulated project financing, token unlocking requires at least a year of cliff period. However, when a project has high FDV and low liquidity, it is very easy to encounter a break-even situation after unlocking. This does not rule out the possibility that some small VCs may make profits through secondary market dumping or early over-the-counter sales. As shown in the following figure, the circulating supply ratio of these tokens is generally less than 20%, with the lowest being only 6%. The high FDV phenomenon is very significant.
Image source: CoinMarketCap and Binance Research, data released on May 14, 2024
The current capital-driven benefits have obviously become ineffective temporarily. In addition to the aforementioned reasons, there are some objective factors that have led to the current low circulation and high FDV market situation:
1. Market fragmentation, more wolves and less meat: In the last round of bull market, global capital was working together to hype DeFi and public chains, but in this round of market, funds and participants are too dispersed, narratives are diversified, and Eastern and Western capital are not mutually exclusive. There are often not enough buyers for the coins offered, and the market is fragmented;
2. Lack of altcoin bull market and insufficient hype : The infrastructure of the EVM-based public chain has been perfected, funds and projects are rolling in the same direction, and the Ethereum killers have not brought new breakthroughs. In this case, after the benchmark project is launched, similar projects will quickly emerge, which will intensify the value depression effect.
3. Simple things are complicated, and complicated things are story-telling : Pseudo-innovation can be found everywhere in the market. Simple things are artificially complicated just to tell the market about bigger dreams, but in essence, the substance remains the same in a new bottle.
4. The Matthew effect is becoming more and more obvious : the crypto industry has been developing for nearly 16 years, and the monopoly effect of the head has basically been generated. Whether it is technology, projects, or investors that have survived to this day, the strong have become stronger and the weak have become weaker. The head companies The market voice is becoming more and more solid;
5. Lack of innovation and liquidity : The primary challenges facing the current market are the lack of innovation and insufficient liquidity, which makes it difficult for the market to rise in volume and the overall development is stuck in a bottleneck.
