In the past 10 years, the crypto market has experienced four bull-bear cycles, including the current round. This round of bull market seems to be very different from the previous bull markets. People who have experienced the first three bull markets should not find it difficult to find clues after careful analysis:
1) Similarities and differences between the first three bull-bear cycles
a. Similarities
Bitcoin will always remain the narrative and consensus of “digital gold”;
Bitcoin halving has always been the fuse and catalyst for major market movements, and the bull-bear cycle is highly consistent with the Bitcoin halving cycle;
In the bull market, all sectors rotate equally, almost all projects can perform well, and many people make money.
b. Differences
The main narratives are different: decentralized applications such as digital gold, smart contracts, DeFi, and GameFi have exploded;
As time went by, new narratives emerged, institutions multiplied, and infrastructure gradually improved;
As the size of crypto assets grows, the volatility of Bitcoin is gradually decreasing.
2) Obvious anomalies in this bull market
In addition to the expected changes that come with the industry’s development and maturity, including more narratives, more institutions, and more complete infrastructure, we have discovered obvious anomalies such as “no mutual takeover”, “almost no sector rotation”, and memes flying everywhere. Even Ethereum, the protagonist of the past bull market, is “not doing well”…
In fact, this round of incomprehensible changes includes "no mutual takeover", "almost no sector rotation", and memes flying all over the sky. This is because the substantial participation of institutional capital has changed the grassroots gameplay of the past encryption industry. The influence of capital is getting bigger and bigger. With the listing of Bitcoin spot ETF, capital inflows are accelerating, which makes the old leeks a little uncomfortable and at a loss for a while. It is better to play the fairer meme by themselves than to expect the institutions to take over the project. In addition, institutional funds are more rational and favor new narratives such as Bitcoin, AI, and DePIN. This has led to the old narratives and old projects that no one paid attention to becoming deserted.
Institutions have more and more say, and it is difficult for retail investors to influence the market. With more narratives, institutions may not necessarily reach a consensus, and there are even factions between different institutions. The Chinese area develops the Bitcoin ecosystem, while the Western area deploys AI and DePIN.
As for Ethereum, it was definitely the most dazzling star besides Bitcoin in the first two rounds of bull market, but now it is a bit cold, partly due to the diversion of new narratives that are not Ethereum itself, and partly due to the preference of new funds for Bitcoin, which has led to Ethereum's current embarrassing situation. Of course, in this special situation, Ethereum may also be undervalued. For details, please refer to the previous article of Plain Blockchain "Is Ethereum Undervalued?". Whether it can find value in the future, we will wait and see.
In fact, the impact of Bitcoin's four-year halving on the crypto market is gradually decreasing. In addition, the direct cause of each bull market comes from external factors and new narratives, rather than simply repeating history. Whether this bull market will continue depends on the external and internal factors that affect this bull market in the future...
Next, the external and internal factors that will really affect this round of bull market
1) External factors: Mainstream crypto assets cater to the external environment
In recent years, it is not difficult to find that Bitcoin and crypto assets are increasingly affected by the external environment, among which the greatest influence is the relevant policies of the Federal Reserve. Behind every market boom and pullback, it is almost always because of the main external factors such as the macro environment.
The Fed's interest rate hike will cause a large amount of global funds to flow back to the United States, leading to an increase in the US dollar and a fall in the prices of commodities, precious metals, and foreign exchange markets denominated in US dollars. On the contrary, when the Fed cuts interest rates, the US dollar exchange rate falls, which is conducive to improving the performance of commodity prices. After the Fed's interest rate hike, interest rates and exchange rates will fall, and US dollar liquidity will gradually recover, bringing momentum to the market to rebound. Due to the international status of the US dollar, the global economy will be affected accordingly.
Bitcoin, denominated in US dollars, has gradually moved from its original small circle of cryptocurrencies into the category of mainstream assets. Today's Bitcoin is no longer a niche digital asset that could be promoted by a group of enthusiasts in the "grassroots" era. The increasingly mainstream Bitcoin will change in the future more due to the influence of the rhythm of the Federal Reserve's interest rate hikes and cuts.
2) Internal factors: New narrative is the real bull market engine
In fact, the reason why each bull market is accompanied by a halving is because Bitcoin halving is a very good opportunity in the crypto industry. Before and after the halving, the crypto community tends to be active due to strong expectations. Institutions and innovative developers make arrangements along the halving cycle and resonate with the community to achieve twice the result with half the effort.
At the same time, the active crypto industry and the surge in crypto asset prices have also continuously attracted more new builders during this period. In fact, the reason why more and more people have been able to come together to conduct "large-scale human society" experiments like Bitcoin is because of consensus, and consensus needs a main narrative to support it, such as "digital gold", just like the past few rounds of crypto bull markets have been supported by new narratives.
Behind the new narrative are the new "shining points" of blockchain and Web3 explored and discovered by KOLs and innovative entrepreneurs in the crypto community, and more and more solutions. They not only solve the problem of high cost and low efficiency of blockchain, but also solve the landing problem of crypto applications like DeFi and GameFi, bringing funds and a steady stream of new users to the entire crypto industry. Of course, innovation will not stagnate. More and more new narratives are empowering the crypto industry, bringing stronger momentum, becoming the source of the intrinsic value of the crypto industry, and driving the market higher.
Is the cow still there?
First of all, we still need to have a correct mindset. It doesn’t really matter whether there is a bull market or a bear market, because people lose money in both bull and bear markets. In a bull market, because of all the slogans and exciting narratives, it is easier for people to rush in on impulse, and end up stuck at the top of the mountain, with even greater losses. For more people, a bull market is the beginning of losing money.
In addition, "stop predicting" is indeed a mature attitude in investment. Mature investors usually focus on fundamental analysis, asset allocation, risk management and long-term investment planning, rather than trying to find short-term profit opportunities in every market fluctuation. They understand the uncertainty and volatility of the market and accept this uncertainty, so they are more inclined to adopt a stable and long-term investment approach.
Both the internal and external factors of this round of market trends tell us that there is a high probability that there will be follow-up. At present, it is impossible for the printing presses of countries around the world to stop for a long time. Once the gears of the printing presses are turning, crypto assets led by Bitcoin will always be an important part of many asset allocation portfolios. In the future of AI, Web3, and the metaverse, crypto assets will definitely stand at the center of the stage.
