Pantera Capital: How soon will there be a strong bull market in the future?

Authors: Dan Morehead, Paul Veradittakit, Cosmo Jiang, Franklin Bi, Erik Lowe, Source: Pantera Capital, Compiler: Deng Tong, Golden Finance< /p>

At the Bloomberg Investment Conference last June, I discussed the crisis in the banking industry, global macro markets and blockchain with former SEC Chairman Jay Clayton. At the end of the panel, the moderator asked me what I should expect from Black Swan. My response:

"People ignore black swans until they happen. Then all everyone wants to talk about is 'what happens next'. I would say the biggest surprise It's that we've been through all these big things in the last year -- and probably nothing crazy is going to happen next."

"But if you asked me to say something, I would say there's no regulatory clarity Something one expects. There are several ways to accomplish this."

A very important theme these days is that nothing bad happens.

In 2022 and most of 2023, all kinds of rare and crazy bad things are happening.

Global macro market volatility often exceeds historical expectations. According to an analysis by Edward McQueary, professor emeritus of historical investment returns at Santa Clara University, 2022 is the worst year on record for U.S. bond investors:

“Even if you go back 250 years, It’s hard to find a worse year than 2022.”

2022 is the worst year for a traditional 60/40 stock and bond portfolio since the Great Recession.

The impact is even greater in private markets, which in turn affects our venture capital universe. The amount of money raised in initial public offerings (IPOs) fell by 95% from the previous year, and the number of deals fell by 85%.

The blockchain market has been affected not only by all of the above, but also by the criminal actions of 5 million people launched by Sam Bankman-Fried and by several lending institutions. Blows of absurd leverage.

The total market value of the cryptocurrency market fell by 70%.

In my opinion, these are once-in-a-lifetime oddities. In the next 10 to 15 years, there will no longer be anyone borrowing money from leveraged cryptocurrency hedge funds without collateral, and there will no longer be a lack of transparency. (After a 25-year cycle, I know there will always be someone in the next group of people who does it again!)

Below is a diagram of what many consider to be a catastrophic event in blockchain history.

Because these events are Blockchains cannot be destroyed, so the lack of these extremely bad things is a huge positive on the margin.

Another big positive is the removal of some of the regulatory headwinds that have been holding back our industry and the institutions that want to invest in this new asset class.

The past year has seen positive rulings in high-profile cases, such as a ruling that Ripple’s native token XRP is not a security and Grayscale’s win in their lawsuit against the SEC regarding a Bitcoin ETF filing . In our view, these may be signs that regulatory clarity on blockchain is gradually being achieved, creating conditions for further innovation in the United States.

Institutional adoption appears to be accelerating following the launch of a spot Bitcoin ETF in January.

With Bitcoin’s halving expected to occur in late April 2024, we believe the confluence of these positive factors will provide a strong impetus for the next bull run.

Additionally, blockchain’s “dial-up” to “broadband” moment may be happening now. We can see this with the growth of Ethereum Layer 2 and hyperscale blockchains.

Pantera has been managing money in this space longer than anyone—more than a decade of wild bull-and-bear cycles. We went through three complete crazy cycles - huge gains and then, unfortunately, about 85% declines. I think we are now at the beginning of the fourth great cycle.

The 2022 stock market crash has a huge "denominator effect" on institutions - they are indeed withdrawing investment from private markets. With stocks back at all-time highs, they can invest in private markets again, so I thinkthe next 18 to 24 months could be a strong bull run for cryptocurrencies.

This is a critical moment when these painful, scary events that have happened in the capital markets and blockchain space over the past few years have been erased, coupled with positive things like the halving and regulatory clarity - All of this unfolds simultaneously.