Let me first say the conclusion, halving-driven growth may be the last chapter of this story. The cyclical growth of the cryptocurrency market is always closely related to the macro economy.
Since Bitcoin was created in 2009, its market capitalization of more than $1 trillion would not have been possible without regular injections of liquidity to stimulate the economy.
The only constant in financial markets is change, and even if you manage to hold your position, you have no idea how deep the recession will be.
If we consider the beginning of the bull market from early 2019 to early 2021, the price of Bitcoin was between $4,000 and $10,000, while Ethereum was between $130 and $330. The overall size of the crypto market is relatively small, with plenty of room for growth. Bitcoin's current market capitalization ranks 10th in the world, second only to Facebook, and its growth potential is about 3 times that of Apple and about 15 times that of gold. The growth prospects this time are smaller than in the previous cycle.
To this day, the US dollar still controls the world with its pricing power, and gold is regarded as a "safe haven" for risk aversion and preservation of value. Historically, it has often set new highs during major crises.
The first gold price rise began with the collapse of the Bretton Woods system after World War II, when the U.S. dollar was decoupled from gold, driven by geopolitical tensions and inflation. The second rise began in 2005, when gold prices soared, especially after the outbreak of the subprime mortgage crisis, when a large amount of investment capital flocked to gold for safe havens, and finally ended after the Libyan War in 2011, when geopolitics once again became a major factor. The turning point of the third rise came in 2019, with the global COVID-19 pandemic and central bank liquidity injections as the main driving factors, as well as local geopolitical conflicts. Gold has always been the first choice for safe havens, and the Federal Reserve's quantitative easing and geopolitical factors are the main forces driving gold prices.
In the context of economic globalization, countries are eager to use their own currencies for international transactions, international reserves and international settlements, but are hindered by the "three difficulties" of monetary sovereignty, capital flows and fixed exchange rates. "Currency Wars" summarizes that paper money itself has no value, and its value comes entirely from national credit. Whoever controls the right to issue currency can effectively bypass the country's legal framework. Even the powerful US dollar will find it difficult to maintain its huge credit support for a long time.
Economic globalization itself contains the difficult-to-resolve contradiction between global currency dominance and national interests. For example, in order to promote the use of Bitcoin nationwide, El Salvador has adopted a "dual legal currency" policy to weaken the influence of the US dollar; Mao Zedong began to allow residents to trade cryptocurrencies and use them for trade settlement from September 2024 to circumvent sanctions.
The dilemma of Bitcoin may be that its value comes from hedging against fiat currency trust risks, but its rising momentum is still very dependent on powerful country policies, the adoption of monopoly capital and macroeconomic conditions.
Bitcoin was born in the context of an economic crisis. The unique properties of blockchain can resist the excessive issuance of sovereign currencies and monetary policy intervention. Anti-authority, freedom, and decentralization used to be our beliefs and slogans. In the currency circle, all kinds of "players" have speculative ideas, and the dream of getting rich overnight seems to have become the main driving force for the growth of the industry. Fomo is the ultimate emotion-oriented. But in the final analysis, Bitcoin ETF is just a one-time, inevitable stimulus.
What used to be a belief in resisting authority has now become a hope for authority. It seems that in our crypto utopia, we only care about profits, not direction. But the two are inseparable. Only with direction can there be traffic, and only with popularity can there be profits.
The direct impact of the post-ETF era is that prices will be more aligned with traditional financial markets. Only those who hold the most tokens have the greatest influence, and the United States is gradually gaining ideological control over the crypto industry. According to a report by QCP Capital on September 10, 2024, macroeconomic uncertainty continues to dominate the crypto market, and the 30-day correlation between Bitcoin and the MSCI World Stock Index has reached 0.6, the highest level in nearly two years.
There is no doubt that the crypto industry first sprouted from "Panda", but now the "big players" have changed, and more professional players are on the way. In the future, not only the selection of brand IP 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 crypto world is steadily evolving towards "Wall Street-level" transaction complexity.
Looking back at the California Gold Rush more than a hundred years ago, hundreds of thousands of people from all over the world flocked to California for the dream of getting rich overnight, but most of them returned empty-handed, and some even died. However, Levi Strauss took a different approach and used the gold rush to sell a large amount of stockpiled canvas to make durable pants for gold miners. Because of its practicality, it became very popular. Later, he improved the pants and became the founder of blue jeans, and founded the world-renowned Levi's brand.
Fast-paced, non-stop trading, and volatile markets have both tempting traps and endless trading opportunities, which is the charm of cryptocurrency. The combination of strong financial attributes and low barriers to entry makes cryptocurrency a natural high-quality gold mine. Before, everyone cheered for ETFs and expected them to bring in more external capital, but the reality is that ETFs are opening the door for more "Levi's"-like people.
Obviously, the capital-driven momentum is currently ineffective. In addition to the above factors, there are other objective factors that lead to the low liquidity and high FDV situation.
The market is fragmented and there are too many competitors. In the last cycle, domestic and foreign capital jointly hyped DeFi and L1 chains. However, in this cycle, funds and participants are too scattered in multiple narratives, and Western and Eastern capital tend not to take over each other's projects. This leads to a situation where the number of buyers is not enough to meet the number of sellers.
There is no altcoin bull market, and there is a lack of speculation. The chain infrastructure based on EVM is mature, and funds and projects are competing in the same direction. So far, the "Ethereum killer" has not come up with anything new. In addition, in a market without an altcoin bull market, when a project succeeds in a specific field, imitations will spring up like mushrooms after rain, becoming the next undervalued opportunity.
Complicate simple things, turn complex things into stories: Pseudo-innovation that complicates simple things can be found everywhere. Repackaging old concepts is often just to sell bigger dreams to the market.
The Matthew effect is everywhere: the crypto industry has been developing for more than 16 years, and the monopoly interests at the top have been basically solidified. Whether it is technology, projects or capital, the strong become stronger and the weak become weaker, and those who survive have strengthened their control over the narrative.
Challenges to sustainable growth. Lack of innovation and liquidity are the most pressing challenges facing the market today.
It has been a long time since I talked about it from a macro perspective, so it is a bit messy, but let me summarize the key points. Unlike the previous round of bull market driven by macroeconomic prosperity, this round of crypto market is mainly affected by macroeconomic uncertainty. In addition, the passage of ETFs is nothing more than "Ibuprofen sustained-release capsules" in my opinion, which relieve pain but not cure diseases. The trend of cryptocurrencies imitating the US stock market has become a constraint on the growth potential of the industry.
In addition, the generally accepted view in the market is that it is only the Bitcoin bull market, and altcoins have not yet started to pick up, mainly because of insufficient industry innovation, insufficient liquidity, and unreasonable valuation in the primary market, which leads to insufficient capital momentum and difficulty in achieving volume-driven growth. Repeating the old narrative cannot maintain market value, and with traditional institutions such as BlackRock entering the field and the lack of innovation in the industry, internal competition seems inevitable.
Last year, we kept saying that the cold winter was over and that spring would soon be here and flowers would bloom. Are you still here?
