Beyond Bull & Bear Markets
Curated Thread #13
1/ Crypto’s Evolution:
Bull and bear markets are relics of the past.
Crypto has matured, and the rules that once governed it are no longer relevant.
Here's an in-depth look into the new dynamics.
2/ Rethinking Market Context: The Quadrant Model
The traditional view of bull and bear markets is outdated.
Crypto investor Rancune, among the brightest minds in crypto, has proposed a new model for understanding the market.
Rancune’s quadrant model, based on liquidity and token scarcity, provides a more nuanced framework for market analysis.
Source: Rancune
3/ Liquidity: The Lifeblood Of Crypto Markets
Liquidity is the driving force behind prices, but it’s not just about money supply.
Unique barriers like on-ramping and access to CEXs heavily influence liquidity flows, shaping the entire crypto landscape.
4/ The ETF Impact: Redefining Altcoin Performance
Spot ETFs have changed the game, especially for altcoins.
The traditional trickle-down effect from BTC and ETH to other coins isn't working as it used to.
Analyzing the 'OTHERS/BTC' ratio reveals that altcoin performance is currently weaker than during the 2022 bear market.
Note, OTHERS measures the top 125 crypto by MC (excluding the top 10)
Source: owen1v9
5/ Token Scarcity: The Supply Side Of The Equation
Token scarcity is the second key variable in the quadrant model.
As Rancune explains, it’s about how liquidity is distributed.
The shift from 2021’s high liquidity and low supply to today’s low liquidity and high supply underscores the difficulty of this bull run.
Source: CoinGecko
6/ Navigating The Quadrants: A Market Roadmap
By mapping out liquidity and scarcity, we identify four key market conditions:
High scarcity & high liquidity (e.g., 2021)
High scarcity & low liquidity (e.g., 2019)
Low scarcity & high liquidity (2025?)
Low scarcity & low liquidity (today).
7/ Entering The "Realm of Rotation":
Rancune forecasts increased liquidity in the next 6-18 months (rotation phase).
This forecast aligns with many macro experts expecting liquidity to surge in 2025.
However, a 2021-style bull market is unlikely due to extreme token saturation.
Source: TomasOnMarkets
8/ Strategies For A Rotational Market: Focus On Real Value
In a market full of rotations, the key to success is focusing on real value.
Binance’s latest report highlights the need to focus on demand, revenue and sustainable yield, rather than just hype.
Source: Binance Research
9/ The Hype Trap: Avoiding Short-Term Fads
Current market trends are driven by narratives, but these forces are short-lived.
We've seen mini-bubbles inflate and burst repeatedly.
Understanding the fleeting nature of these trends is crucial for long-term success.
10/ The Rise & Fall Of Popular Narratives:
Popular trends, from AI to re-staking, have surged and faded quickly.
Retail investors often chase these fads, ignoring long-term growth and sustainability.
This year's heavy focus on memes highlights the lack of attention to fundamentals.
Source: CoinMarketCap
11/ Fundamentals: The Path To Sustainable Growth
To avoid the pitfalls of hype, focus on real value: real demand, real revenue & yield.
These fundamentals provide a more stable foundation for long-term growth in the crypto market.
Source: Binance Research
12/ Two Paradigms: Fundamentals Vs. Periodic Mania
Felipe Montealegre outlines two dominant paradigms in crypto:
The fundamentals-driven approach
The periodic mania paradigm
Source: TheiaResearch
13/ The Fundamentals-Driven Paradigm:
The fundamentals paradigm trusts in long-term industry growth and doesn’t expect tokens to exceed their true value.
Investors team up with strong teams to build real businesses, while builders focus on products and utility.
It’s about lasting value, not short-term hype.
14/ The Periodic Mania Paradigm:
The periodic mania paradigm aims to play a market bubble every 4 years.
Investors time their moves to dive into hype-driven tokens at the peak of the mania.
In this view, fundamentals are sidelined in favor of inflated asset values.
Source: The DeFi Edge
15/ Why Fundamentals Will Prevail:
Investors following the periodic mania paradigm are likely to underperform as fundamentals gain prominence.
With an oversupply of tokens and insufficient buyers, the market is shifting towards strategies rooted in value creation and sustainable growth.
This shift is needed because capital is much scarcer this cycle compared to the liquidity-rich 2021 cycle.
Source: TheiaResearch
16/ Lessons From Silicon Valley: Power Of Fundamentals
Felipe envisions a crypto future thriving through hard work and first principles, much like Silicon Valley after 2001.
This mirrors the rise of tech giants in the early 2000s.
Source: TheiaResearch
17/ Crypto’s Future: Fundamentals Or Perpetual Hype?
Will crypto’s future reflect the success of Amazon, Apple, and Google through strong fundamentals? Or will memes and hype still rule the day?
The answer lies in our approach to investing and building in this space.
18/ Summary: Embrace The Shift To Fundamentals
Simple bull and bear thinking is outdated. To succeed now, focus on liquidity, token scarcity, and real value.
The market is shifting to fundamentals for long-term investing, while short-term trading is driven by narrative rotations and attention.
Be clear on your strategy and good luck!
Disclaimer:
All content is for informational purposes only and does not constitute financial advice. Crypto investments are highly risky. For more details, see the full disclaimer.