_{Brought to you by:}

Thursday still hopeful mailbag

Q: Is the bull market over?

I don’t know. But it is starting to feel that way, isn’t it?

That may sound weird with bitcoin having just recently made new all-time highs and neither ETH nor SOL having even gotten there yet — surely the bull market can’t be over before at least ETH has made a new high?

But have you seen the rest of crypto? Yuck.

OP is 60% off its highs, for example, ARB is at an all-time low, the big AI tokens are down 60-80%, “modular money” TIA is down 70%, memecoins are faltering — pretty much everything that this cycle was meant to be about is down bigly.

So, if this is still a bull market, it’s a Potemkin Village one — the exterior facade of BTC, ETH, and SOL looks fine, but there’s nothing but a wasteland of bombed-out tokens behind it.  

Q: Is it down because “macro”?

I keep seeing people warn that the crypto selloff is a canary in the macro coal mine, but I think that’s cope.

To think otherwise, you’d have to believe that crypto is reading the macro tea leaves more accurately than stocks, bonds or commodities, all of which have a lot more experience with economic cycles.

Crypto is down for crypto reasons, sorry.

Q: Are there just too many sellers?

I think that’s half the problem, yes — the other half being not enough buyers.

By one estimate, there are 5.7x more tokens now than there were at the 2021 peak, and that’s excluding the long tail of memecoins constantly flooding the market. 

That’s a problem because the pool of capital willing to buy crypto is certainly not 5.7x bigger — far from it: The market cap of stablecoins (a measure of real money available to buy crypto) is basically unchanged since 2021.

Another measure of the supply/demand imbalance: $740 million of lockups are expiring over just the next 30 days.

That doesn’t have to be a bad thing. In equities, when insiders sell previously locked-up stock, it’s generally considered a positive because it increases the liquidity of a stock, which allows larger investors to invest.

Generally, it only takes a discount of a percent or two to get those investors interested (they sometimes even pay above the last price for the privilege of accessing liquidity).

Crypto is suffering from a lack of such buyers (the flip side of the too-many-sellers problem).

Some say that’s because too much money is going into early-stage VC funds and not enough is going into later-stage funds that buy liquid tokens.

I’d say that’s half right. 

Funding in the crypto industry — mostly early stage — is now over $100 billion, raised in 5,295 funding rounds.

The problem is simply that few of the tokens those investments have created have been attractive enough to entice new capital into the crypto ecosystem.

All we seem to be getting is infrastructure, memecoins and clicker games, none of which is likely to resonate with non-crypto investors.

Q: What’s a clicker game?

Something like $19 billion has been invested in Web3 game projects and the only thing that seems to be catching on is clicker games, where all you do is mindlessly click on something, perhaps for the occasional reward.

“Click to earn” games like Hamster Kombat are wildly popular on Telegram, apparently. This is part of the reason why Telegram’s TON token is one of the very few non-major cryptos that have been trending higher.

Putting semi-decentralized slot machines on people’s phones is not the crypto use case we’ve been hoping for, but hey, slot machines are a $10 billion-a-year industry, so I guess it’s not nothing.

Q: I blame the ETFs.

Me too!

This may all prove to be a healthy correction in a secular uptrend, of course.

But it may also be that the spot bitcoin ETFs fired the starting gun on this bull market before we were ready for it.

That may have done us a grave disservice because it feels like we needed another year or so of Crypto Winter to get token prices down enough that they made sense to non-crypto investors and to get projects so desperate that they’d be forced to focus on making money.

The received wisdom is that the biggest success stories in tech investing emerge from bear markets because tight funding forces startups to be laser-focused on finding product market fit.

Crypto may lack that focus due to years of easy funding — and this lackluster bull market may be one of the consequences.

Q: Are we all building the same thing?

Well, not me, I’m not building anything. I just chirp from the sidelines.

But, thanks to a YouTube video from Josh Brown and a blog post from John Charb, there’s a line of thought trending this week that crypto’s builders — despite all the chirping they do at each other — are all working towards the same end product.

I watched the YouTube video on 2x speed and only skimmed the 13,000-word blog post, so I’m not an expert but I’m nonetheless predisposed to agree.

Blockchains are simply software that store data in digital ledgers.

The industry’s problem, from my non-technical perspective, is that we spend too much energy arguing about exactly how those ledgers should be built and not enough energy on what we might do with them.

The current bull market has been disappointing, but I’m not sure we’ll deserve a better one until we stop gaslighting each other (in Josh Brown’s phrase) and start finding some applications that people care about.

Q: Are you OK?

Yes, yes, you’re right — I’m getting overly pessimistic about things and it’s probably because prices are going down.

I’m a trader by background, so I’ve been hard-wired to be bearish when it’s going down and bullish when it’s going up; but there’s no need for that as a newsletter writer who can stay zoomed out on the big picture.

Just this week, I’ve noticed several non-crypto natives remaining surprisingly positive on the long-term outlook.

The famous value investor Bill Miller remains bullish on bitcoin because it represents a  “secular shift around how humans think about capital and its governance.”

An analyst at the blue-blood investment firm AllianceBernstein thinks bitcoin could hit $1,000,000 within 10 years. 

VanEck’s digital assets group thinks ETH could hit $22,000 within seven years.

Most optimistic, however, is a Bank of America report finding that crypto is “no longer just a speculative hedge against a loss of trust in government, monetary, and financial institutions,” but a “legitimate disruptor in industries like payments, cybersecurity, [and] healthcare.”

Let’s hope so.

(Even if that’s a dangerous thing for our investment portfolios.)

— Byron Gilliam

Brought to you by:

MANTRA, the world’s leading RWA L1 blockchain, has launched its incubator aimed at fueling the next era of Web3 innovation. The MANTRA Incubator program kicks off at the prestigious Dubai World Trade Centre (DWTC) and offers 5 promising projects a seed investment of $100,000. 

Reasons you should apply: 

• Seed funding: Each project will receive $100,000 in seed investment, personally funded by the CEO & Co-Founder, John Patrick Mullin. 

• Global exposure: Participants experience Dubai, Hong Kong and San Francisco ecosystems, while networking with experts, developers, VCs globally. 

• End-to-end concept to market support: Receive expert support in development, marketing, operations, and more to effectively go-to-market. 

Ready to take the leap? Apply now to transform your ideas into a successful venture.

The MetaDEX: Aerodrome & Velodrome Explained

Ace and Alex join us to discuss how Aerodrome and Velodrome are redefining the DEX model. They explain how the “MetaDEX” works, what their Superchain vision is, and why they chose to focus their efforts on the Optimism and Base L2s.

Watch or listen to 0xResearch on YouTube, Spotify, or Apple.

Thank you to our sponsor:

The PayPal stablecoin PYUSD is live on Solana. PayPal has over two decades of payments experience, and is now making low-cost, high-throughput web3 payments possible through the PYUSD on Solana launch.

Learn about PYUSD on Solana and start building the future of payments.

PayPal, Inc. is licensed to engage in virtual currency business activity by the New York State Department of Financial Services.