2024 will be the main year of the bull market. A more prudent strategy is to increase positions.

Original title: "Preparing for the main bull market upswing, my thoughts on the stages of this cycle"

Original author: Alex Xu, Mint Ventures

Introduction

Last week, BTC completed the historical high in terms of US dollars, which means that we have entered the formal stage of this bull market. Compared with the rebound and warming from the bottom of the bear market, the sentiment in the formal stage of the bull market will further heat up and the fluctuations will be more intense.

The official stage of each bull market has some common characteristics, such as:

· The situation of BTC leading the rise gradually transitioned to altcoins leading the rise, and Bitcoin's market share declined

· The growth rate and increase of various currencies became more violent

· Becoming the darling of social media and search engines, and the public's attention increased rapidly

In this article, the author attempts to logically deduce the possible differences between this cycle and previous cycles, and put forward his own thoughts and coping strategies.

This article is the author's interim thinking as of the time of publication, which may change in the future, and the 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.

Factors driving the crypto bull market and the Alpha track bull market

After BTC’s market value reached a certain size, looking back at the past three cycles, the bull market was jointly driven by multiple factors, including:

· BTC halving (expectation of supply and demand adjustment), this round of halving will occur in April

· Monetary policy easing or easing expectations, the market has reached a consensus that the high point of interest rates has passed, and there are high expectations for a reduction in the next quarter

· Regulatory policy easing. 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 in Grayscale led to the approval of ETFs.

· New asset models and business model innovation

This round of bull market has the first 3 of the above 4 points.

Alpha track of each bull market

At the same time, in each bull market cycle, the most powerful growth is the new species born in that cycle (or the first outbreak). For example, in the 2017 bull market, ICO was popular, and the ICO platforms (smart contract public chains) such as Neo and Qtum rose the most; and in the 21st bull market, the most growth was DeFi, GameFi & Metaverse, and NFT assets. 20 was the first year of Defi, and 21 was the first year of NFT and Gamefi.

However, since the development of this round of bull market, there has still been no new asset model or business model with similar weight as the smart contract platform and Defi in the above two bull market cycles.

The current Defi, Gamefi, NFT, and Depin, whether new or old projects, have not evolved much in product form or narrative compared with the previous round. They are more about iteration and repair of product functions. In short, they are all "old concepts."

There are mainly two new species that appeared in this cycle:

· BTC ecology:Inscription assets represented by ORDI and Node Monkey, and second-layer projects mainly based on BTC L2

· Web3 AI projects:Includes distributed computing power projects that already existed in the previous cycle (Akash, Render network), 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. The AI track of Web3 is more the result of the penetration of the AI craze started by GPT in 23 years into the encryption industry. It can barely be regarded as a "new species" in half of this cycle.

Alpha tracks that may be misjudged in the deduction and strategy of this round of bull market

In many bull market investment portfolio recommendations that I have seen, Alt coins (altcoins) in the Gamefi, Depin, and Defi tracks are put into the asset pool. The main reason is that as crypto assets with smaller market capitalization and greater flexibility, they can significantly outperform BTC and ETH in the formal stage of the bull market (after BTC reaches a new high) and achieve Alpha returns.

However, as the author mentioned earlier, "In each bull market cycle, the most aggressive gains are new species that are born (or first exploded) in this cycle." Defi, Gamefi, NFT, Depin, etc. do not meet the characteristics of "new assets or new business categories" in this round. As tracks that have experienced the second cycle, don't expect them to reproduce the price performance of the first cycle, because an asset class can only enjoy a huge valuation bubble in the first cycle.

Because when a new business model or asset class appears in the first round of bull market, the main challenge it faces is "being falsified", which is difficult in the frenzy of the bull market. In the second round of bull market, the same track project faces the challenge of "proving", that is, proving that its business ceiling is still high and the imagination space is still large, which is also difficult, because it is not easy for people to believe the story they have told again, and they are still frightened by the experience of being trapped at the high point of the last bull market.

Some people may say that the L1 track was the "most handsome boy" on the list of gains in the two bull markets in 2017 and 2021. Isn't this a counterexample?

Not really.

The market demand for L1 track in the 21-year bull market has exploded exponentially. The explosion of multiple product categories such as Defi, NFT, and Gamefi has led to a rapid increase in the market size of users and developers, creating unprecedented demand for block space, which not only pushed up the valuation of Ethereum, but also caused the explosion of Alt L1s due to the overflow of demand from Ethereum. The 21-year bull market is the real first year for ALT L1s.

Can this round of cycle reproduce the explosion of Dapp product categories and asset categories in the previous round, bringing further growth in demand for L1?

It is still not visible at present. Therefore, the premise for this round of L1s to achieve the previous round of gains no longer exists, and the expectations for Alt L1s in this round of bull market should also be lowered.

BTC and ETH have better odds this round

The biggest driving force of this round of bull market is still the inflow of funds brought by the opening of the ETF channel and the optimistic expectations for this long-term inflow. Therefore, the first major beneficiaries of this round are mainly BTC and ETH (potential ETF listing targets). Combined with the above views on Gamefi, Depin, Defi and L1, it is more difficult to bet on Alpha in this round of bull market, and the return-risk ratio of the main warehouse configuration BTC+ETH will be better than the previous round.

So, as BTC and ETH, which one is the better choice that also benefits from ETFs?

In my opinion, in the short term, it may be ETH, because the ETF expectations of BTC have been digested in the current price, and there is no other focus on BTC after the halving in April. As for ETH, the ETH\BTC exchange rate is still at a low level, and the expectations for 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. In general, ETH is now more and more like a technology stock. Its value lies in providing block space services, similar to a Web3 cloud service project. This market is highly competitive, and it is constantly being eroded and squeezed by other block space service providers (L1, Rollup and DA projects) and various new technology solutions in terms of narrative and market share. Once Ethereum's technical route is wrong, or the product iteration speed is too slow, these will become reasons for funds to vote against it.

On the contrary, BTC's "electronic gold" positioning is becoming more and more stable with the steady expansion of its market value and the opening of ETF channels. Its consensus as a value reserve asset to combat fiat currency inflation is gradually gaining acceptance from financial institutions, listed companies to small countries.

The argument that "ETH's value in value storage can surpass BTC" is no longer mentioned by fewer and fewer people.

Strategy summary of this round of bull market

Although the author believes that overweighting BTC+ETH in this round will have a better risk-return ratio than the previous round, it does not mean that we do not need to configure other Alt coins. We just need to consider carefully when planning the ratio.

In general, the strategies I am currently considering are as follows:

· Make a higher allocation ratio on BTC and ETH

· Control the allocation ratio on old tracks such as Defi, Gamefi, Depin, NFT, etc.

· New tracks that have emerged in this round can be used as the direction of choice for Bo Alpha, such as:

· Meme: The best speculative medium, each round will have concept renovations, and each round will have amazing wealth stories, so it is also the easiest project category to understand and trigger cross-circle dissemination

· AI: A new web3 business category with constant external business hotspots

· BTC ecology: including inscription assets, and BTC L2, etc. I am relatively more optimistic about the former because it is a new asset category that has emerged in this round, while BTC L2 is actually the concept of Ethereum Rollup in a new shell, which is "old wine in a new bottle".

The cycle still exists, but it has obviously moved forward

In addition, in terms of the cycle, I believe that unlike the rule of "the main uptrend is one year after the halving" in the past bull market cycles, the biggest main uptrend year in this round of bull market should be 2024, not 2025.

In the past, BTC halved in 2012, 2016, and 2020, and the current halving year is 2024.

Tonghuashun Finance last year compiled a comparison of the returns of major financial assets in the past 10 years, as follows:

In general, BTC conforms to the rule of "rising for three years and falling for one year", that is, it rises in the year before halving, halving, and one year after halving, and then falls for one year.

In the first round of Bitcoin halving cycle, BTC rose by 186% in 2012 after halving, and rose by 5372% in 2013, the year after halving, and the same was true in 2017. Therefore, before the bull market cycle in 2017, BTC basically conformed to the rule of "small rise before halving, big rise one year after halving".

This rule began to be broken in the last cycle. First, there was a significant increase in 2019, the year before the halving (93.4%, higher than 40.9% in 2015), and then the increase in 2020, half a year after the halving, was 273%, higher than the increase of 62.3% in 2021, the year after the halving.

The trend of this "upward cycle" moving forward in this cycle is even more obvious. BTC achieved a 147.3% increase in 2023, a year before the halving, continuing to surpass the increase in the year before the previous halving (2019). Before the first quarter of 24 ended, BTC had already achieved a nearly 60% increase.

The author believes that 2024 will most likely be the year of the main uptrend in this round of bull market. Don’t delay and wait for the big rise in 2025. It may be a more prudent strategy to increase positions and seize the present. 25 years should be the year of our lightening and harvest.

Finally, I wish you all a smooth hunting in this round of bull market and a full return.

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