We just launched the top spot ETF of all time, Bitcoin production has halved, Trump has gone completely crazy, and you're still bearish? Investors are simply expressing their pain rather than conducting objective analysis. Let us look back at the distance we have traveled and look ahead - how far we still have to go.
Every bull market goes through months of volatility, and this one is no different.
There are two views on the current situation:
(A) Return to high-quality assets
(B) All infrastructure VC 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 still have so much room for upside?
People say this cycle is over because the things they want to go up aren’t going up:
Meme
Bitcoin
90% of VCs are under-allocated in these assets and most new VC tokens will underperform in 2024.
Obviously, capital flows are a big part of this story, but many VC tokens are launched with huge oversupply.
But capital flows are not the only part of the story, the way tokens are issued in the market right now is also very stupid.
If you issued at $1 billion and 6 months later hit $5 billion, you would be ecstatic;
But if you issue at $10 billion and six months later you only have $5 billion, you're going to be frustrated.
I'm not going to write another 47 posts about how stupid point, short, high FDV/low float issuances are. But this issuance strategy is as much to blame for the current bear market as general economic flows. This is really bad!
It is we who set the trend of this "bear market" ourselves!
We need truly staggering retail flows to offset dozens of very large FDV (Fully Diluted Valuation) issuances. But now that retail investors are receiving free money from “Dad Eigen,” there are no buyers. “All down, not up” charts like $DYM are everywhere.
Image source: Regan Bozman
Even VC “blue chip” stocks like $ARB have been underperforming and are near the 2023 bear market lows. We’ve been calling for months – the biggest risk to any coin is that VC selling pressure far outweighs retail investment inflows, and that’s clearly happening.
The "bluest" blue chip - ETF.
Most VC firms (including us) are overweight Ethereum, and it has clearly underperformed this cycle. So the VCs are unhappy! The timeline looks like a grand funeral.
But I think it would be a mistake to call this cycle finished!
Previous cycles have had months-long swings or corrections, and this is nothing new. If you want to achieve a return rate of more than 100 times in an industry, you must accept severe market fluctuations.
Image source: Regan Bozman
Let’s look specifically at the performance of altcoins, the Total3 Index tracks the top 150 coins excluding Bitcoin (Bitcoin) and Ethereum (Ethereum).
Yes, there has been a general pullback since the local highs, but there have also been multiple pullbacks of equal or greater magnitude in the last cycle.
Image source: Regan Bozman
Maybe we are not in a "copycat bear market" but the market is returning to high-quality assets. I mentioned Dymension before, and as far as I know they only have one customer and less than 10,000 new users last week, so maybe a project like this shouldn't deserve a 10-figure valuation.
Image source: Regan Bozman
And teams that released in a smarter way performed better. For example, $SAFE was issued in a volatile market, but it has 42% of circulating supply, a more stable price chart, and appears to have real price discovery around 1.7 billion FDV.
Image source: Regan Bozman
The teams that made cool stuff did well too. For example, Ethena is so new that it performs better than most other projects. So maybe not all VC tokens are doomed, just those iterative zk modular DA solutions.
Image source: Regan Bozman
The current trend is moving away from redundant infrastructure and towards consumer applications, which is very healthy. I think public market valuations will reflect that this cycle.
Leading user-facing applications will be the decisive factor in this cycle as they become vertically integrated and capture more value.
Layer3 announced their token this morning. They are already the second largest application on Base after Uniswap. The winners this cycle will be those with unique allocations, and @layer3xyz definitely falls into that category.
Hats off to those like Fantasy.top and Pump.fun who have been helping lead the charge without even issuing a token, and that’s when the real fun begins.
We still have further to go. Financial advisors can take more than 90 days to add new stocks to their approved allocation lists, while ETFs are only approved 120 days ago.
Image source: Regan Bozman
Institutional time-weighted average price (TWAP) investing has only just begun.
Bitcoin ETFs are still not included in most general economic strategies. The amount of money in these ETFs is staggering considering the market capitalization of crypto.
Image source: Regan Bozman
Cryptocurrency becoming a U.S. election issue is bullish for markets at least until November.
More attention will bring more market participants.
Of course, some of the attention may be negative and a lot of people hate cryptocurrencies, but in this case, you may not have any selling points :)
Sorry to disappoint the haters, but we remain bullish.
This article is reproduced with permission from: "Deep Wave TechFlow"
Original author: Regan Bozman