Analyzing the current status of the encryption market: When will the next round of bull market come?

By Tascha, Founder of Tascha Labs

Compiled by: Felix, PANews

What does it take for cryptocurrencies to usher in a new bull market? The real answer no one is talking about.

The most common answer heard from cryptocurrency investors when faced with the question "when is the bull run" is "once the Fed starts printing money again...".

If central bank monetary expansion is inevitable for price increases, how to explain the fact that the Nasdaq rose 10% in May alone while the Fed's balance sheet continues to shrink? Even the belated Russell 2000 index (Note: The Russell 2000 index represents the market capitalization indicator of mid- and small-caps in the market, an index covering stocks of small companies with huge growth potential), has risen since June 6%.

In fact, the market is not illiquid. Even after 15 months of quantitative tightening, the Fed's asset holdings are still 80% higher than pre-Covid. Financial conditions have shown little sign of tightening since last summer.

That's why there hasn't been a real sell-off in risk assets since then, because the macro environment hasn't been so tough.

Quite the contrary, ample liquidity is sitting on the sidelines, just waiting for a good reason to re-enter.

Then an AI tool called ChatGPT gave the reason.

Market price movements are random walks 95% of the time. There is no reason for the price to make a directional move because today is no different from yesterday.

But every once in a while, an unexpected event (good or bad) will jolt the market out of its slumber, forcing it to assume that the old price tag of the underlying asset no longer reflects the fundamentals.

This is why large directional price moves almost always occur, as they are triggered by unforeseen events that have not yet been priced in. If you look back at history, 9 out of 10 of any bull market starts this way.

In the recent U.S. stock market, artificial intelligence has been around for a long time. The market certainly knows what artificial intelligence is. But artificial intelligence is a specialized niche market, and its explosion may be many years in the future.

With the sudden rise of ChatGPT, a consumer application, it seems that the market is not far away from realizing artificial intelligence, and the current market valuation is obviously underestimated.

Overnight, investor sentiment revived, from complaints about interest rate policy to salivating over a future of AI-powered 10x productivity (and profit) growth. The perceived outlook and market size of the industry as a whole has changed.

Like NVDIA (Note: Nvidia, an artificial intelligence computing company, on May 30, 2023, NVIDIA became the first chip company with a market value of $1 trillion*, and the ninth company in history to enter the market value of $1 trillion. *Club” enterprise) and MRVL (Marvell Technology, Inc. was incorporated in Delaware on October 23, 2020. The company is one of the world’s largest suppliers of Fabless-mode semiconductors for high-performance applications Standard products) and other companies that have thrived on the AI boom have generated huge profits that confirm the price trend and convince more and more investors that the boom is sustainable.

Ultimately, investor expectations for rising AI will far outpace the rate of progress that businesses can achieve in the short term. Prices will adjust, orderly or violently. The market picks up the pieces, picks itself up, and starts over. But that's for later.

So, what does all this have to do with the crypto industry?

same.

As the stock market has shown, the macro environment is no longer an obstacle to higher prices. But as mentioned earlier, price increases need a reason, real stimulus from unexpected events.

The crux of the matter is: When will the crypto industry’s “ChatGPT” moment be? Or will there be?

If you don’t remember anything about the last bull market, here’s a reminder: what’s the potential of Web3?

The encryption field has invented something called a public blockchain, an open, decentralized transaction network that anyone can participate in building. This is an exciting invention.

Number one, these are borderless networks. From the first day of birth, any asset on the public blockchain can obtain global liquidity. On the other hand, anyone anywhere in the world can use these global assets. This has the potential to deliver a qualitative leap in financial access and capital allocation efficiency.

Second, these networks are programmable and composable, meaning applications can be built faster and at lower cost, increasing the rate of innovation.

Third, tokenization enables Web3 projects to develop using a cooperative business model, allowing contributors and customers to benefit more from the development of the project and distribute the growth benefits more equitably.

Most importantly, public blockchains combined with tokenization offer the potential for many potentially revolutionary business innovations.

When DeFi and NFTs were just emerging, their surge in popularity provided "early evidence" of this potential and fueled a 2021 bull run. These are basically the crypto industry’s mini “ChatGPT” moments.

But Crypto hasn't had a similar event in a while. At present, some of the more attention-grabbing new projects on the market are mostly based on minor changes to popular projects in the past. A better way to stake, does it matter? Isn’t there already 5 multi-chain wallets with better user experience? Another meme coin with innovative token economics is even more difficult to describe.

Author Tascha believes that many "innovations" in the crypto space are too close or similar, and this phenomenon does not help the expansion of use cases or the adoption of public blockchains, which is what the industry really needs.

You could argue that Web3 innovation is limited by crypto-unfriendly regulations.

But is regulation friendly to any innovation? no.

Uber and AirBnB had to battle regulation during their growth stages. But because of their innovations, which create new jobs and tax revenues, improve the lives of customers, and increase productivity across industries, they have broad supporters and strong arguments. So they basically won the fight against outdated regulations.

Can the same be true in the field of encryption? Not so sure, especially given the current state of innovation. The crypto space crossed that Rubicon a long time ago In fact, bargain hunters are bullish on large-cap stocks, and the recent negative headlines may appeal to a large number of them.

For an industry that not long ago had more than 300 million users worldwide, the bar to survive is actually low, and the important question is what does it take for the crypto space to realize its promised potential?

The author Tascha believes that innovation is to allow the blockchain to effectively serve the wider economy, rather than innovation from the spiritual masturbation of some so-called crypto natives. When and how the former will happen remains to be seen.