jakiro
Author: Alex Xu, Research Partner, Mint Ventures
introduction
Last week, BTC completed the historical highs of US dollar denomination, which means we have entered the official stage of this bull market.Compared with the rebound and recovery starting from the bottom of the bear market, sentiment in the official stage of the bull market will further heat up and the fluctuations will be more intense.
Each bull market has some common characteristics when the official stage begins, such as:
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From the situation where BTC led the rise gradually to altcoins leading the rise, Bitcoin market share declined
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The rise and increase of various currencies is more violent
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Become a favorite of social media and search engines, and the public attention has increased rapidly
This article author tries to logically deduce the possible differences between this cycle and past cycles, and proposes his own thinking and coping strategies.
This article is the author’s phased thinking as of the time of publication. It may change in the future, and its views are highly subjective, and there may be errors in facts, data, and reasoning logic. Please do not use it as an investment reference. Criticism and discussion from peers are welcome..
The following is the main text part.
The driving factors of the crypto bull market and the Alpha track
Bull market drivers
After the market value of BTC reaches a certain scale, looking back on the past three cycles, the bull market is driven by a combination of multiple factors, including:
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BTC’s halving (expected supply and demand adjustment), this round of halving will occur in April
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The market has reached a consensus on the high point of interest rate level in the past and has high expectations for the decrease in the next quarter.
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Relaxation of regulatory policies.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 at Grayscale led to the passage of ETFs.
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Innovation in new asset models and business models
This bull market has already reached the first 3 of the above 4 points.
Alpha track for every bull market
At the same time, in each bull market cycle, the strongest increase is the new species that was born (or the first explosion) in this cycle. For example, in the 2017 bull market, ICO was prevalent, and the most increase was the ICO platform (smart contract public chain) such as Neo, Qtum , etc.; and the most bull market rises in 21 are Defi, Gamefi meta-universe, and NFT assets. 20 is the first year of Defi, and 21 is the first year of NFT and Gamefi.
However, to this bull market, there is still no smart contract platform and Defi’s similar to the previous two bull market cycles.
The current Defi, Gamefi, NFT, and Depin, whether it is new and old projects, have not evolved much from the previous round, and are more about the iteration and repair of product functions. Simply put, they are all “Old concept.”
There are two main new species that appear in this cycle:
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BTC Ecology: Inscription assets represented by ORDI and Node Monkey, as well as second-tier projects dominated by BTC L2
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Web3 AI project: includes distributed computing power projects (Akash, Render network) that already existed in the previous cycle, as well as AI projects that emerged in this round such as Bittensor (TAO)
But strictly speaking, AI is not the native track of the currency circle. Web3’s AI track is more of the result of the penetration of the AI boom started by GPT in 23 years into the crypto industry. It can barely be regarded as a “new species in this cycle.”.
Deduction and strategies of this bull market
Alpha tracks who may have been misjudged
In many of the recommendations of bull market portfolios that I have seen, the Alt coin (alt coins) of Gamefi, Depin, and Defi tracks will be placed in the asset pool. The main reason is that they are crypto assets with smaller market value and greater flexibility.In the official stage of the bull market (after BTC highs), it can significantly outperform BTC and ETH and achieve Alpha returns.
However, as I mentioned earlier, “In every bull market cycle, the strongest increase is the new species that was born (or the first explosion) in this cycle.” Defi, Gamefi, NFT, Depin, etc. do not meet this round of market because it does not meet this roundThe characteristics of “new assets or new business categories” are tracks that have experienced the second cycle. Don’t expect them to reproduce the price performance of the first cycle, because an asset category can only be enjoyed in the first cycle when it appears.Huge valuation bubble.
Because the main challenge facing new business models or asset classes when the first bull market emerges is to be “falsified”, which is difficult in the fanaticism of the bull market.In the second bull market of the same track, the challenge of “to prove” is to prove that the ceiling of its business is still high and the room for imagination is still very large. This is also difficult because the story I have told wants toIt is not easy for people to believe it again, and they are still scared of their experience of being trapped at the high point of the last bull market.
Some people may say that the L1 track was the “most beautiful boy” in the two bull markets in 2017 and 21 years. Isn’t this a counterexample?
Not.
The market demand in the L1 track in the 21st bull market has increased exponentially. The explosion of Defi, NFT, Gamefi has caused a rapid increase in the bilateral market size of users and developers, creating an unprecedented area.Block space demand not only pushes up Ethereum’s valuation,The overflowing demand from Ethereum also caused the explosion of Alt L1s. The 21-year bull market is the real first year for ALT L1s.
And can this cycle reproduce the previous round of Dapp product categories and asset categories explosions, bringing further growth in demand for L1?
Still not visible.Therefore, the premise for L1 to achieve the previous round of upward trend in this round will no longer exist, and the expectations for Alt L1 in this bull market should also be lowered.
BTC and ETH have better odds in this round
The biggest driving force of this bull market is still the capital inflow caused by the opening of the ETF channel and the optimistic expectations for such long-term inflows.Therefore, the number one beneficiary of this round is mainly BTC and ETH (potential ETF listing target).Based on the above views on Gamefi, Depin, Defi and L1, it is more difficult to gain Alpha in this bull market, and the return and risk ratio of BTC+ETH in the main position configuration will be better than the previous round.
So, which one is the better choice, BTC or ETH, which also benefits from ETF?
In my opinion, it may be ETH in the short term, because BTC’s ETF is expected to be digested in the existing prices, and BTC has no other hot spots to pay attention to at the moment after the halving in April.For ETH, the exchange rate of ETH\BTC is still at a low level, and the expectations of ETH’s ETF are gradually heating up, which makes ETH’s short-term odds better than BTC.
In the long run, BTC may be a better configuration choice.Overall, ETH is now becoming more and more like a technology stock, with its value in providing block space services, similar to a Web3 cloud service project. This market is fiercely competitive and it is constantly suffering from other block space service providers (L1, Rollupand erosion and squeeze of narrative and market share by DA projects) and various new technical solutions.Once Ethereum’s technical route is wrong or the product iteration speed is too slow, these will become reasons for the funds to vote against.
On the contrary, BTC’s “electronic gold” positioning is becoming more and more stable with the stable expansion of market value and the opening of ETF channels. Its consensus as a reserve asset to combat fiat currency inflation is gradually gaining from financial institutions, listed companies toAdmission from small countries.
The argument that “ETH’s value in value storage can surpass BTC” has become increasingly unmentioned.
Summary of strategies for this bull market
Although the author believes that this round of over-equipment of BTC+ETH will have a better return-risk ratio than the previous round, this does not mean that we do not need to configure other Alt coins, but we need to carefully consider when planning the ratio.
In general, the strategies I currently consider are as follows:
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Higher configuration ratios on BTC and ETH
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Control the configuration ratio on old tracks such as Defi, Gamefi, Depin, NFT, etc.
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This round of new tracks can be used as the choice direction for Alpha, such as:
Meme: The best speculative medium, each round will have a concept renovation, and each round will have an amazing wealth story, so it is also the category of projects that are easiest to understand and trigger the spread of the circle.
AI: New web3 business category, external business hotspots continue
BTC ecology: including inscription assets, as well as BTC L2, etc.The author is relatively optimistic about the former because it is a new asset category that appears in this round, and BTC L2 is actually a shell replacement of the concept of Ethereum Rollup, which belongs to the “new bottle and old wine”
The cycle still exists, but it has moved forward significantly
In addition, in terms of cycles, the author believes that unlike the previous bull market cycle that “the year after halving is the main upward wave”, the largest main upward wave year in this bull market should be 2024, not 2025.
In the past, the years for the halving of BTC were 2012, 2016, and 2020, and the year for this round of halving of BTC was 2024.
Tonghuashun Finance calculated the returns of major financial assets in the past 10 years last year, as follows:
Overall, BTC conforms to the law of “three years of rise and one year of decline”, that is, it increases one year before halving, then falls one year after halving.
In the first round of Bitcoin halving cycle, the 2012 BTC increased by 186%, the 2013 year increase by 5372%, and the 2017 year increase by 5372%, so before the 2017 bull market cycle, BTC basically meets the “reduction”The rule of “small rise before half a day, and a big rise after half a year”.
This rule began to be broken in the previous cycle. First, the year before the halving was halved, there was a significant increase in 2019 (93.4%, higher than 40.9% in 2015), and then the halving was 273% in 2020., higher than the 2021 increase of 62.3%.
This “upward cycle” trend of this cycle has become more obvious. BTC achieved a 147.3% increase in 2023, the year before the halving, continuing to surpass the increase in the previous year (2019) of the previous round of halving (2019)., and the first quarter of 24 has not yet been completed, BTC has achieved an increase of nearly 60%.
The author believes that it is highly likely that 2024 will be the main upward year of this bull market. Don’t delay waiting for the big rise in 2025. It may be a safer strategy to increase positions and grasp the current situation. 25 years should be our reduction of positions.Year of harvest.
Finally, I wish you all a smooth hunting round of bull market and a full return.
