Crypto's Hype Cycle #98
Market Meditations | February 15, 2021
? How long will the bitcoin bull run last
In today’s free newsletter, we tackle one of the biggest questions for crypto traders and investors:
? When is the next bear market and will it be like the 2017 price action?
Read, enjoy and share with your network. Let’s all grow richer together.
FTX was founded with the goal of donating to the world’s most effective charities ?Through the FTX Foundation, FTX, its affiliates, and its employees have donated over $10m ✅ to help save lives, prevent suffering, and ensure a brighter future.
Reddit, Robinhood, Citadel CEOs to Testify at GameStop Hearing ?
The CEOs of Robinhood, Citadel, Melvin Capital and Reddit will testify at a U.S. House Committee on Financial Services hearing this week relating to issues around the recent frenzied trading of stocks like GameStop. The virtual hearing on Feb. 18 is set to investigate how retail trading pushed the stock from trading below $20 at the beginning of January to around $340 at the end of the month, according to a New York Post report Saturday. Read more.
ARK Boosts its GBTC holdings to More Than 7 Million Shares ?
Active fund manager ARK Invest has scooped up more shares of the Grayscale Bitcoin Trust, according to a recent regulatory filing. ARK has seen its assets under management balloon five-fold thanks in part to its bets on high-growth technology plays like Tesla and bitcoin. Indeed, its Ark Innovation fund has delivered 39% returns on average annually since its launch in 2014, according to The Wall Street Journal. Read more.
Crypto Ban Could Make India 20% Poorer ?
The proposed cryptocurrency ban in India has been a hot topic this year as this is one of the many occasions where Indian lawmakers have threatened to ban digital currencies. The crypto community in India is actively trying to battle the government’s decision, and these efforts have received heavy support from industry leaders all across the globe. Former Coinbase chief technology officer Balaji Srinivasan is the latest to speak about the looming ban, and has warned that banning bitcoin and cryptocurrencies would be like banning the “financial internet.” Read more.
ZK-Rollup Tech Launches on Ethereum ?
ZKSwap, a decentralized exchange (DEX) built on ZK-Rollup technology, has launched its mainnet as a layer-2 protocol on the Ethereum network. L2Lab, the team behind the DEX, went live on Sunday, a move that came months after introducing a testnet in November. The firm raised an angel investment round of $1.7 million at the time backed by Bixin, SNZ, FBG and Longling Capita. Read more.
New Fund Targets Blockchain and DeFi Startups ?
Asset management firms Alpha Innovations and Arcanum Capital have launched a $10 million venture capital fund focused on driving blockchain innovation in emerging markets. The Arcanum Emerging Technologies Fund is to be the first of a series, with an initial close expected in late February, according to a company statement. The fund will provide seed and series A financing to blockchain firms in emerging markets, the companies said in a statement on Monday. Read more.
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The Crypto Supercycle
The crypto industry saw its fair share of good news over the last 12 months and signs of adoption are going up exponentially on multiple fronts.
Meanwhile, traders and investors keep calling the top after every 5% drop because ‘prices have only gone up’.
Is the 2017 bubble and the following bear market actually hindering many of us from staying exposed to this secular trend that will likely take years to fully realize its potential? Could this bull market potentially last longer now that crypto is maturing from a speculative industry to bitcoin being bought up by institutions and decentralized finance (DeFi) protocols generating real and growing cash flow?
Nobody is saying that there won’t be speed bumps along the way. The question we’re exploring is whether 2017 price action is the right framework to look at an industry that is so much more mature, is beginning to find product-market fit and has significantly better infrastructure compared to 3 years ago.
The Gartner Hype Cycle
The Gartner hype cycle is basically a visualization of how new technologies emerge through five phases.
Crypto has gone through multiple innovation cycles, notably the 2017 ICO bubble and the DeFi summer that lasted a couple of months last year.
During the 2018-2019 bear market, crypto as an industry experienced the ‘trough of disillusionment’ where a lot of people started questioning the potential of blockchain technology. Critics were loud and concluded that crypto’s main use case was speculation and had very little to show for a market cap valued at hundreds of billions of dollars.
✅ We now seem steadily on the ‘slope of enlightenment’ and heading toward the ‘plateau of productivity’.
2020 will be seen as an inflection point for crypto as an industry, due to the Coronavirus pandemic accelerating a few existing trends.
Especially bitcoin seems to have matured beyond speculation with now institutions, hedge funds and billion dollar companies buying the oldest cryptocurrency as a hedge against inflation.
? The big difference here is that most of these institutions buy bitcoin with a very long time horizon. A company like Tesla putting bitcoin on their balance sheet has no intention of selling their position for a 20% profit. That is supply that will likely never hit the market again.
One has to draw a line though. Established projects like Bitcoin and possibly Ethereum are close to or have already achieved a ‘too big to fail’ status because of the network effects they’ve accumulated over the years.
? Altcoins are still newer and don’t profit from the lindy effect as much and thus still have a very high chance of being disrupted in the long run. They will likely outperform in a bull market, but also have a bigger chance of correcting 70-90% once sentiment shifts and crypto goes through its next ‘bearish’ episode.
As Ari Paul attentively noted, much of what we wrote above depends on how big the speculative frenzy gets over the next couple of weeks/months. Markets have a tendency to always revert back to the mean, so if prices continue to go up parabolically at this pace, altcoin will inevitably see a big correction once again. The higher prices go, the bigger the correction will eventually be. That said, the general trend is up. The market will likely get overheated once again, but the next ‘bear market’ low will be significantly higher than the ones we saw in 2018. Taking profits in never a bad decision, but by selling too early you could leave a lot of profits on the table.
On Mondays, our ‘Scan The Week’ section is designed to show our community what events and headlines we will be keeping an eye on.
Monday, 15th February
AMA w/ROOK ?
@0XProject is hosting a live AMA with @Keeper_DAO founding member and 0x market maker, Joey Zacherl, on their Discord server on Monday, 2/15. During the AMA, Joey will answer questions about KeeperDAO, integration with 0x v4, and market making on 0x.
Tuesday, 16th February
Shrove Tuesday aka Pancake Day ?
Drop everything you are doing and make pancakes cause pancake day is here. Pancakes are associated with Shrove Tuesday, the day preceding Lent, because they are a way to use up rich foods such as eggs, milk, and sugar, before the fasting season of the 40 days of Lent.
Market Meditations Podcast Release ?
DeFi Dad: How to Earn Passive Income with DeFi. DeFi Dad is a DeFI super-user who provides education on bankless money apps on the Ethereum blockchain and currently acts as the Chief DeFi Officer for Zapper.fi
Wednesday, 17th February
SecretSWAP AMM Launch ?
A permissionless, cross-chain, front-running resistant, private-by-design DeFi ecosystem, Secret Network Front-Running Resistant AMM SecretSWAP Launched on Mainnet. Incentives for LPs were also announced.
Thursday, 18th February
GameStop Hearing ?
As mentioned in our Market Briefing ☝️ The CEOs of Robinhood, Citadel, Melvin Capital and Reddit will testify at a U.S. House Committee on Financial Services hearing relating to issues around the recent frenzied trading of stocks like GameStop.
Market Meditations Podcast Release ?
Trading 101: How Much Money Do I Need to Trade Full Time? In this episode, we cover how to find out whether you actually want to become a full-time trader, the best way to do this, and finally, how much money you actually need to start trading full time.
This is a special thank you to my team for their research and contributors, they make this Newsletter possible.
Today we have guest contributor ? Thijs Janssen (Cryptocurrency Expert) help extensively with our main article ?
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Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision.