Long Tweet: Will there be a copycat season in this bull market?

Original author: @bitdot_eth

Original source: X

Note: The original text comes from

Whether there will be a copycat season in this bull market, my idea may be different from most people. I think there is probably no copycat season. I will express my views from the macro and micro levels. Before that, in order for everyone to have a better understanding, I will share with you some of my superficial understanding of the macroeconomic cycle. If you think that the macroeconomics is weak and will not help you make money in the currency circle, you can skip it directly. . Here are the threads:

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1] At the macro level, we will experience a complete Kangbo cycle every 50-60 years on average, from recovery to prosperity, from prosperity to recession, from recession to depression, and finally from depression to the recovery stage of the next cycle. So back and forth. Every technological innovation that changes the destiny of mankind promotes the birth and development of a new cycle.

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We are currently in the depression stage of the fifth Kangbo cycle, because the technological innovation that promoted this cycle has stagnated (the technological innovation of this cycle is the Internet, look at the wailing of web2 now, and compare it with the creation of web2 10 years ago) Rich effect, if you are familiar with web2, you will definitely feel how big the gap is),

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The global economy has stagnated; more importantly, in order to cope with the financial crisis that occurred during the previous recession (this time it was the 2008 financial crisis), governments around the world had to start a frantic money printing mode (the new crown epidemic has seriously exacerbated this action). In the short term, It saved the economy, but it also created an inflationary time bomb. In order to remove this bomb, governments around the world have to raise interest rates and lock up tables like crazy.

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These two things put together create the depression phase. The core feature of the depression stage is stagflation. For ordinary people, stagflation is far more terrifying than inflation or deflation (you can ask your friends who are engaged in non-web3 industries how they are doing in the past few years). To sum up the Kangbo Depression in one sentence: You lose money no matter what you do, and the cost of doing anything is still very high. No matter you are the boss or the worker, life is difficult for everyone.

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Many people will definitely be curious, what does this have to do with the currency circle? In fact, it has a lot to do with it. From 2019 when the currency circle began to be gradually accepted by the traditional world, to the recent approval of spot ETFs, if you have a relatively sensitive perception of the market, you will find that the trading methods of bookmakers before 19 years are completely different from those after 19 years. , in fact, it is essentially that old money has gradually entered the currency circle and replaced the original local bookmakers in the currency circle.

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And old money is deeply involved in all aspects of the economy. If there is no money in the entire traditional financial market, liquidity in the currency circle will definitely dry up. During the depression period, due to ultra-high interest rates, hot money will shift from the risk market to the risk-free bond market. The currency circle is a risk market within the risk market. This is the reason for the PVP in the currency circle in the past two years.

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So, when will this round of Kang Bo depression end? We can find a pattern from history: when interest rates are raised to the point where they can no longer be increased, the economy is on the verge of collapse, and the unemployment rate soars, the depression period is about to end. Many people expect that the Federal Reserve's interest rate cut will come soon, and imagine that Bitcoin will not rise to 200,000 US dollars by the time the interest rate is cut?

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But I think this view is too optimistic. It’s not that I don’t think Bitcoin will TO DA MOON, but the interest rate cut may not be as fast as imagined. The current U.S. unemployment rate, a key indicator to judge whether the recession is nearing the end, is still at a low level. At historical lows (see the chart below), simply put, despite such high interest rates, everyone is still living happily, so the Federal Reserve has more confidence to further control inflation.

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Real interest rate cuts are all forced, because interest rates are cut when the economy cannot bear it. It seems that the economy is quite resilient now, so I estimate that this era of high interest rates is likely to last for a long time. The current interest rates are already as high as It was almost the same before the 2008 financial crisis (see the picture below). The longer high interest rates last, the greater the probability that it will crush the global economy at some point. Crypto has been integrated into traditional finance and cannot be immune.

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Returning to the currency circle to look at this issue, as long as high interest rates continue, there will be less and less hot money in the market. Without new funds entering the market, it can only maintain the PVP state. It is a zero-sum or even negative-sum game, and the funds on the market will be very limited. It is difficult to move into higher-risk altcoins on a large scale.

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[2] Every bull market in the past at the micro level probably followed this pattern: Innovative technology opens a new narrative - Early wealth effect - First wave (bubble wave) - The value of the technology is far lower than expected and the narrative collapses - Market Oversold bottoms out in search of reasonable value - a big wave washes away the sand, most projects return to zero, but at the same time a few leading companies that truly create value emerge - the second wave (value wave)

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This may be a bit abstract. Let’s give two examples:#1ETH: ETH opens the programmable era of blockchain, which is equivalent to turning the blockchain from Nokia to a smartphone. This is a disruptive innovative technology. At the same time, ERC20 Standards allow everyone to issue assets, ICOs brought early wealth effects, and various public chains emerged one after another. The 2017 bull market was the first wave of bubbles, and then everyone discovered that air coins are really just air.

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The market's expectations for programmable blockchains are too high. In reality, only air coins can be created. The narrative collapses the 18-year bear market. The market was oversold and bottomed out at the end of 2018. Most L1 public chain projects have returned to zero, and they have run out to truly create value. The leading ETH, including the second wave of programmable blockchains till now, the market only recognizes valuable public chains.

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# DEFI: @uniswap created the subversive AMM mechanism to make on-chain liquidation possible, which is the foundation of decentralized finance (if there is no liquidation on the chain, on-chain lending is impossible), from DEX to DEFI, 19 years DEFI summer, the wealth effect pushed up the bubble and brought about the first wave - Then the zoo narrative collapsed - After the big wave, most of the DEFI projects of the year have returned to zero, and a small number of valuable leading DEFI and DEX continue to this day.

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From the perspective of Leeks, the first wave is the easiest to get rich, and you don’t need to understand anything. As long as you follow the right narrative track, you can get rich with anything you buy; in the second wave, the difficulty index of making money becomes higher, and only those who have the ability to surpass most people in the market Only the best people can make money, not only if they are on the right track, but also on the right track.

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From a project perspective, the first wave is also the easiest to get rich. A PPT+fork valuation of tens of billions is not a dream. All you need to do is not to do anything. Being able to stir up troubles and speculate on concepts is the most important. The difficulty of making money in the second wave also increases exponentially. , The track business model has a self-generating business model. Only by winning against competing products in PVP can you survive. To survive is to make money from monopoly.

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In this pattern, the first wave of each new narrative is driven by bubbles, from a small-scale wealth effect within the circle to a large-scale wealth effect within the circle, and finally successfully exits the circle to attract new leeks from outside the circle. It is these new Funds drive the bull market's main rise, but eventually the bull market peaks and collapses because new funds are exhausted.

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So, now come back and take a look at this bull market. It seems that it is not the wealth effect caused by some innovative technology, thereby attracting new leeks from outside the circle to enter the market and promote the main rise of the bull market. It is ETF that drives the main rise of this bull market! ETFs have indeed brought a huge amount of old money and new money into the market, but the crux of the problem is that ETFs can only buy $BTC. If they make money on $BTC, they can only cash out into US dollars and cannot continue to invest in altcoins.

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(Just like if you buy the CSI 300 Index Fund, your money fund will only help you buy those 300 stocks. If you want to buy the 301st stock through this fund, you can’t buy it.) This is related to the copycat season caused by the spillover of foreign funds. (Guzhuang pulls mainstream coins, after making money, funds overflow and pulls altcoins, and after making money, the funds return to mainstream coins) There is an essential difference, so we saw some very strange phenomena this time:

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a) BTC is soaring, and there is a shortage of altcoins, which are constantly sucked by BTC. b) I feel that the market should be very hot, but it seems that the enthusiasm for leeks is not as high as in the previous bull market. Most people have not made any money, and there is no past. The large-scale wealth effect of the bull market c) The volume of open positions in the current contract is at a record high (see the figure below), indicating that the market is extremely hot, which is in sharp contrast to 2) the perception of leeks

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【3】Summary

Based on macro reasons, the total amount of hot money in global investable risk assets must be decreasing. On this basis, plus micro reasons, I think this bull market is most likely a BTC bull market, and the funds that can spill over to altcoins are far greater than in the past. There have been few rounds of bull markets, and the copycat market is still dominated by PVP with the amount of funds on the market. Before the interest rate cut cycle comes, it will be difficult for a real bull market to create wealth to come.

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