What drives the market up?
1. Creating wealth through innovation (Airdrop)
Airdrops have become a powerful mechanism for wealth redistribution in the crypto market, creating significant wealth effects that benefit a wide range of participants.
The wealth effect is not limited to direct economic gains. These airdrops have transformed users into stakeholders, enabling them to participate in governance and protocol development. This mechanism creates a virtuous cycle: benefiting participants reinvest their wealth into the ecosystem, further driving market expansion and innovation.
These strategic distributions have proven to be powerful market catalysts, triggering broader bull market cycles in their respective fields.
2. Appreciation of wealth (Marginal Buyers)
When the market experiences positive catalysts like strategic airdrops, it attracts previously passive participants who bring new capital and enthusiasm. The influx of these marginal buyers creates a virtuous cycle of market expansion and innovation.
Airdrops trigger positive FOMO, encouraging both new and old users to engage more deeply in the market. Observing successful airdrops and the resulting market momentum, previously passive investors begin to deploy capital, transitioning from bystanders to active market participants. This shift from cash to crypto assets represents a true influx of new funds into the ecosystem, rather than just a transfer between existing participants.
3. Creating wealth through leverage (Multiplicative Expansion)
Towards the end of a bull market, leverage becomes the main driver of price increases, marking a transition from value creation to value multiplication. As the market enters the price discovery phase, traders increasingly use leverage to amplify positions, creating a self-reinforcing upward momentum cycle.
When Bitcoin enters a price discovery phase above historical highs, the leverage ratio rises sharply as traders seek to maximize their risk exposure. This creates a chain reaction where borrowed stablecoins drive further purchases, pushing prices up and encouraging more leveraged positions. This multiplicative effect accelerates price volatility.
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