Author: Alex Xu, Research Partner, Mint Ventures
Last week, BTC completed touching the all-time high against the US dollar, which means that we have entered the official stage of this bull market. Compared with the rebound and recovery starting from the bottom of the bear market, the sentiment in the official stage of the bull market will further heat up and the fluctuations will be more intense.
The official stage of each bull market has some common characteristics, such as:
The situation has gradually transitioned from BTC leading the rise to altcoins leading the rise, and Bitcoin’s market share has declined
The growth rate and increase of various currencies are more violent
Become a social media and the darling of search engines, public attention is increasing rapidly
The author of this article attempts to analyze the possible differences between this cycle and past cycles. Carry out logical deductions and put forward your own thinking and coping strategies.
This article is the author's staged thinking as of the time of publication. It may change in the future, and the views are highly subjective. There may also be facts, data, If there are errors in the reasoning logic, please do not use it as an investment reference. Comments and discussions from peers are welcome.
The following is the text part.
After BTC ’s market capitalization reached a certain size, looking back on the past 3 cycles, the bull market was jointly promoted by multiple factors. Movements, including:
BTC ’s halving (expected supply and demand adjustment), this The round of halving will occur in 4
Monetary policy is expected to be loose or loose, and the market has already reached the high point of interest rates. We have reached a consensus in the past and have high expectations for the easing of regulatory policies in the next quarter.
This cycle is reflected in the update of US accounting standards, crypto assets can be reflected in the financial statements of listed companies at fair value, and the SEC's defeat against Grayscale led to the adoption of ETFs.
New asset model and business model innovation
This bull market already has the first 3 points among the above 4 points.
At the same time, each bull market cycle Among them, the biggest increases are the new species that were born (or broke out for the first time) in this cycle. For example, in the bull market of 2017, ICO was popular, and the ones that rose the most were the ICO platforms (smart contract public chains). ) such as Neo, Qtum , etc.; and Defi, Gamefi Metaverse, and NFT assets will rise most in the bull market in 2021. The year 20 is the first year of Defi ;21 is the first year of NFT and Gamefi.
However, with the development of this bull market so far, there has still not been a new asset model or business model of similar magnitude as the smart contract platform of the previous two bull market cycles and Defi Similar.
The current Defi, Gamefi, NFT, and Depin, whether they are new or old projects, their product forms and narratives are not much better than the previous round. Great evolution is more about iteration and repair of product functions. To put it simply, they are all "old concepts".
The relatively new species that have appeared in this cycle are mainly two:
BTC Ecology: Inscription assets represented by ORDI and NodeMonkey, and second-tier projects dominated by BTC L2< /p>
Web3 AI project: including distributed computing power projects (Akash, Render network) that already existed in the previous cycle, And AI projects that have emerged this round such as Bittensor (TAO)
But strictly speaking, AI does not It is not a native track in the currency circle. Web3's AI track is more the result of the AI craze started by GPT in 2023 and penetrating into the encryption industry. It can barely be considered half of the industry. The "new species" of the cycle.
In many bull market investment portfolio recommendations that the author has seen, Gamefi, Depin, Defi Alt coin of the track (Altcoins) are put into the asset pool. The main reason is that as crypto assets with smaller market capitalization and greater flexibility, they can significantly outperform BTC and ETH in the official stage of the bull market (after BTC's new high), achieving Alpha Profit.
However, as the author mentioned before, "In every bull market cycle, the strongest gains are those that were born (or first broke out) in that cycle. "New Species", Defi, Gamefi, NFT, Depin, etc. do not meet the characteristics of this round of "new assets or new business categories". As tracks that have gone through the second round of cycles, do not expect them to be able to reproduce the results of the first round of cycles. price performance, because an asset class only enjoys huge valuation bubbles during the first cycle of emergence.
Because when a new business model or asset class appears in the first round of a bull market, the main challenge it faces is "being falsified", and this is not true in the enthusiasm of the bull market. It's difficult emotionally. In the second round of the bull market, projects on the same track faced the challenge of "proving", that is, proving that their business ceiling is still very high and their imagination space is still very large. This is also difficult, because the stories that have been told before want to It is not easy for people to believe again. They are still frightened by the experience of being trapped at the high point of the last bull market.
Perhaps some people would say that the L1 track was the "most beautiful" on the growth list in the two bull markets of 2017 and 21 Zai", isn't this a counterexample?
No.
The market demand for the L1 track in the 2021 bull market has experienced exponential explosive growth, with Defi, NFT, Gamefi multiple product categories The outbreak has caused a rapid increase in the scale of the bilateral market for users and developers, creating unprecedented demand for block space. This has not only pushed up the valuation of Ethereum, but the demand overflowing from Ethereum has also caused With the outbreak of Alt L1, the 2021 bull market is the real first year of ALT L1.
Whether this cycle can replicate the previous round Dapp product category and asset category explosion will bring about the impact of L1 Further growth in demand?
Still not visible. Therefore, the prerequisite for L1s to achieve the last round of gains in this round no longer exists, and expectations for Alt L1s in this round of bull market must also be lowered.
This The biggest driving force of the current bull market is still the capital inflow brought by the opening of the ETF channel, as well as the optimistic expectations for this long-term inflow. Therefore, the first beneficiaries of this round are mainly BTC and ETH (potential ETF listing targets). Combining the above views on Gamefi, Depin, Defi and L1, it is more difficult to win Alpha in this round of bull market, and the return-to-risk ratio of the main position allocation of BTC+ETH will be higher than that of the previous round. better.
So, as BTC and ETH, which also benefit from ETF , which one is the better choice?
In the author's opinion, in the short term, it may be ETH, because BTC ETF expectations have been digested in the existing price. After the 4 monthly halving is completed, BTC has no other hot spots for the time being. For ETH , the ETH\BTC exchange rate is still at a low level, and ETH 's ETF expectations are gradually heating up, which makes ETH the short-term odds better than BTC .
In the long term, BTC may be a better allocation choice. Generally speaking, ETH is becoming more and more like a technology stock, and its value lies in providing block space services, similar to a Web3 cloud service project. This market is highly competitive, and it continues to suffer from other block space service providers (L1, Rollup and DA projects) and various new technology solutions are eroding and squeezing narratives and market share. Once Ethereum's technical route goes wrong, or the product iteration speed is too slow, these will become reasons for being voted against by funds.
On the contrary, BTC 's "electronic gold" positioning is becoming more and more stable with the steady expansion of market value and the opening of ETF channels , its consensus as a value reserve asset against fiat currency inflation is gradually gaining acceptance from financial institutions, listed companies to small countries.
The argument that "ETH's value in value storage can surpass that of BTC" has become less and less popular.
Although the author believes that this round of overweight BTC +ETH will have a better return-to-risk ratio than the previous round, but this does not mean that we do not need to configure other Alt coins, but we need to consider it carefully when planning the ratio.
In general, the strategies I am currently considering are as follows:
Higher allocation ratios on BTC and ETH
Control the allocation ratio on Defi, Gamefi, Depin, NFT and other old tracks
New competitions will appear in this round The road can be used as the choice direction of Bo Alpha , such as:
Meme: The best speculation medium, there will be concept renovation in every round, and there will be amazing things in every round wealth story, so it is also the project category that is easiest to understand and trigger break-through communication
AI: a new web3 business category, with constant external business hot spots
< p style="text-align: left;">BTC Ecology: including inscription assets, and BTC L2, etc. The author is relatively more optimistic about the former, because it is a new asset category that has emerged in this round, and BTC L2 is actually the concept of Ethereum's Rollup, which belongs to "old wine in a new bottle"In addition, in In terms of cycles, the author believes that unlike previous bull market cycles where "the year after halving is the main rise", the year of the biggest rise in this bull market should be 2024, not 2025.
The past BTC halving years are: 2012 , 2016 , 2020 The year of this round of halving is 2024.
Tonghuashun Finance last year made statistics on the income comparison of major financial assets in the past 10 years. The details are as follows:
Generally speaking, BTC is in line with the trend of "rising for three years and falling for one year." "The rule is that it rises the year before the halving, the year after the halving, the year after the halving, and then falls the year after.
In the first round of Bitcoin halving cycle, the halving year 2012 year BTC increased 186% The year after the halving, 2013 the annual increase was 5372% , 2017 was similar. Therefore, before the bull market cycle in 2017 , BTC basically conformed to the "small increase before the halving. The rule of "big rise one year after halving".
And this pattern began to be broken in the last cycle. First, there was a considerable increase (93.4%) in 2019, the year before the halving. , higher than 40.9% in 2015 ), and then the annual increase in 2020 the year of the halving was 273% , higher than the increase in 2021 the year after the halving 62.3% .
The trend of this "up cycle" moving forward in this cycle is further obvious. BTC in 2023 the year before the halving ; achieved an increase of 147.3%, continuing to exceed the increase in the year before the last round of halving (2019), and the first quarter of 2024 has not yet been completed, BTC has already achieved nearly A 60% increase.
The author believes that there is a high probability that 2024 will be the main rising year of this bull market. Don’t delay and wait for 2025. With the sharp rise in 2020, it may be a more prudent strategy to increase positions and grasp the current situation. 2025 should be the year of harvest for us to reduce our positions.
Finally, I wish you all good luck in hunting in this bull market and return home with a full load.
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