The bull market in the crypto market can last for another 1-2 years

Recently, many KOLs are pessimistic about the crypto market for two main reasons:First, the increasing risk of a US recession will lead to shrinking global demand; second, the resilience of inflation may constrain the Fed's policy space, resulting in a lower-than-expected rate cut. Although these concerns are not without reason, our view is just the opposite: Bitcoin is the "counter-attacker" of this cycle.

First,Under the policy combination of "manufacturing repatriation + high tariffs", the US dollar will inevitably enter a depreciation cycle, which will lead to a substantial increase in demand for safe-haven assets such as gold and Bitcoin. Since US capital has a strong pricing power over Bitcoin, they are more willing to promote Bitcoin to replace gold and become the new king of safe-haven assets. (Analyzed before, no more repetition)

Secondly,The prosperity of the crypto market objectively provides a strategic buffer for the US dollar system. Miran, chief economist of the Trump team, proposed the US debt solution - levying "seigniorage" on US dollar users and forcing them to buy ultra-long-term US bonds - which is difficult to implement in the traditional financial system, but is perfectly realized in the crypto market. Stablecoins such as USDT and USDC are essentially equivalent to zero-interest US dollar bonds. Investors give up interest income in exchange for liquidity and market access (on-chain US dollars), which is actually equivalent to charging "user fees" to global US dollar users. As long as US regulators force stablecoin issuers to use US Treasuries as reserve assets, the growth of stablecoins will become a "perpetual motion machine" for the growth of US Treasuries demand.

The "Dollar Payment Stablecoin Act" passed by the US House of Representatives on April 2 is a key patch for this closed loop of the system. The bill clearly stipulates that the reserve assets of stablecoins are limited to highly liquid assets such as cash, short-term US Treasuries and repurchase agreements based on US Treasuries, and strictly prohibits the use of reserves for lending, investment or other purposes. This regulation will force issuers such as Tether and Circle to standardize their reserve structure to a configuration ratio of 0.8 US Treasury bonds + 0.2 cash (although there is no rigid requirement for the ratio, it is the choice that maximizes returns). In other words, for every additional $1 of stablecoin in the future, the issuer of the US dollar stablecoin must also increase its holdings of $0.8 of US Treasury bonds as reserves.

According to the forecast of the US Treasury Borrowing Advisory Committee (TBAC), by 2028, the market size of US dollar stablecoins will reach 2 trillion US dollars. If the US Dollar Payment Stablecoin Act is approved by the Senate, the US Treasury bonds held by stablecoin issuers will reach 1.6 trillion US dollars, almost equivalent to the total US Treasury bonds held by China and Japan.

Therefore, under the general pessimism in the market, Bitcoin may perform better than expected due to its unique currency attributes and strategic position in the US dollar system. Of course, the Bitcoin market alone is still not enough to support the prosperity of the encryption market, which means that the top currencies such as ETH, SOL, XRP, SUI will also become a supplement to the market's money-making effect. Even when the top currencies receive a large valuation increase, the bottom altcoins will also have the opportunity to make up for the periodic increase.

On May 7, Ethereum successfully completed the Pectra upgrade. This is in sharp contrast to the market performance after previous historical upgrades: after The Merge in 2022 (September 15) and the Dencun upgrade in 2024 (March 13), the price of ETH fell all the way, showing a typical "good news dies in the light" trend. However, after the Pectra upgrade, the price of ETH continued to rise. What's even more bizarre is that this change, which is regarded as the most important efficiency and user experience improvement since the London upgrade (August 5, 2021), has received little attention and discussion. This reflects that the confidence of ETH holders has been exhausted in this avalanche of declines. Historical experience shows that when market sentiment drops to a freezing point and major positive news is ignored, it often indicates that a trend reversal is imminent.

In fact, the significance of Ethereum's Pectra upgrade goes far beyond superficial technical optimization - its more critical role is to clear the way for the launch of ETH pledged ETFs.

First, EIP-7251 raises the upper limit of single-account staking from 32 ETH to 2048 ETH, allowing institutions such as BlackRock to manage millions of ETH through a single account, reducing the complexity of multi-node operations. At the same time, EIP-6110 shortens the validator activation time from 12 hours to 13 minutes, which willreduce the time cost of validators waiting during the deposit process, enabling validators to complete deposit operations more quickly and start participating in staking.

Secondly, EIP-7002 allows validators to trigger withdrawals through smart contracts without waiting for a queuing mechanism. Previously, ETFs had to wait in line for 57 days to enter and 28 days to exit after staking ETH, but after the upgrade, the withdrawal process can be shortened to a few hours, effectively avoiding the ETF being forced to sell at a discount when the market fluctuates violently. At the same time, the staking income will be automatically reinvested through the contract, increasing the annualized return rate of the ETH ETF to 4%-5%, further enhancing the motivation for institutional allocation.

Simply put, after the Pectra upgrade, the confirmation time of ETH ETF pledge income will be shortened from the fastest 12 hours (excluding queuing time) to 13 minutes, and the liquidation cycle will be shortened from at least T+28 days to the fastest T+2 days (ETFs in the US stock market are usually T+2 to T+7 days), and the income can be automatically re-pledged. In general, after the Pectra upgrade, the possibility of ETH pledge ETF approval and its attractiveness to institutions will be greatly improved. In a sense, the Pectra upgrade is ETH's "Davis double click".