Cryptocurrency is entering its final cycle

If you look closely, there are already signs that cryptocurrencies are entering their final market cycle before finally completing their development phase and entering a long-term era of maturity, stability, and growth.

"The next cycle will be the last cycle" is almost a word of mouth in the crypto space. I am not going to make a definitive prediction about this. I am just connecting some dots scattered around the crypto space, ultimately pointing to a new phase of crypto after the bear market ends.

1. Supervision and system approval

Cryptocurrency is going through its biggest regulatory battle ever. In fact, it was always inevitable. As an industry built on money and finance, we can’t just go mainstream without regulators. In order for the biggest players to be able to play in Web3, they need assurance that countries actually allow them to do so.

“Going mainstream” means that cryptocurrencies are able to pass regulatory scrutiny.

Don’t be afraid. Crypto is a winner no matter what. All we have to do is wait it out. It can only last so long.

Crypto is an unstoppable force, and the state is not an untouchable force. Gary Gensler will sign us in, Elizabeth Warren will stamp her feet, and the banks will try to strangle us.

Ethereum will still produce the next block.

History is ultimately defined by technological trends. Every blow thrown at us by cryptocurrency-resistant regulators and lawmakers will eventually be counteracted by the forces of the free market.

The current phase of cryptocurrency should not be seen as “state attack on cryptocurrency” but rather as “state coercion of disruptive technology.”

Ripple just gave Gary Gensler a chill sit-down. Blackrock, Fidelity and all the other big traditional financial players just signaled to the powers that be to calm down. Major brands are largely ignoring financial regulation and continuing to explore the crypto path.

Lawsuits will be fought, bills will be drafted, voted on, defeated, and voted on again. It will be frustrating and painful. But one day there will be an end. The regulators will finally sit down. All we have to do is wait. All we have is time.

Once regulation is behind us, the cautious curiosity of mainstream interest in cryptocurrencies will turn into a frenetic gold rush, as regulation sends the signal that there is fertile soil out there and that the path into these new areas is clear enough that the risks are acceptable.

2. Protocol maturity

At the same time we could start to see the light of regulation, we could also see the end of many of the protocols that this industry has relied on.

Many of the protocols Web3 requires are evolving into their final form. We’re not there yet, but the end is nigh.

Soon in the Web3 world, we will have more data available than we know what to do with.

EIP4844 will commoditize access to the most secure blockspace in the world.

Thanks to zk-rollups, transactions will be instant. Shared ordering blurs the lines between chains. All of these technologies are pursuing the same end: making blockchains invisible.

By the time the next bull run arrives, Web3 computing costs will reach a theoretical minimum. High gas fees and slow block times will not be bottlenecks for the adoption of decentralized protocols. The responsibility for innovation will shift to application developers, who will be responsible for utilizing the ample computing resources provided by protocol developers.

The next bull run will not be constrained by scaling limitations. No one will ever cite “high cost” and “protocol immaturity” as reasons for not integrating with Web3 systems. Ethereum’s “rollup-centric roadmap” will be expressive and customizable enough to easily customize proprietary chains to suit the use cases desired by any curious player.

This will open the door to a long tail of crypto use cases. When Web3 is slow and expensive, the only use cases available are currency, finance, and high-value assets. If it costs tens or hundreds of dollars to do something, the rational activity supported will be worth thousands of dollars or more.

When the cost of participating in Web3 is low enough, it starts to make sense for platforms to subsidize their own users. Once user transactions are subsidized by competing platforms, the full range of crypto use cases is finally open to everyone.

What else can be done when Web3 becomes free to access? What new applications can be developed? What new user groups can we attract?

The answer is: everything, everyone, every person.

3. Ethereum long arc

In 2015, Ethereum set itself an ambitious roadmap. Over time, that roadmap has only grown in ambition, much faster than its completeness. It turns out that Ethereum’s aspirations for itself are much more complex than initially thought.

Sometime around 2019, things took a turn. A lot of R&D work and some important engineering breakthroughs opened up a new chapter for Ethereum. “Ethereum 2.0” or “Serentity” (now collectively referred to as “Ethereum”) had a clearly defined roadmap, and the only things left to be done were testing and code writing.

From 2019 to 2023, the code was written and released. Ethereum has changed from a single PoW chain to a modular and expressive PoS chain, on the basis of which one network after another was born.

Promises were made and kept.

What’s most amazing about Ethereum’s development arc is its commitment to the original vision set out in 2015. While implementation details have changed, and the path itself is unknown, Ethereum’s original intention has never wavered.

Throughout Ethereum’s history, there has never been a better bet against the trajectory of Ethereum and Ethereum developers. With EIP4844 being released later this year (I estimate this will be the case), Ethereum will lock in a perfect record of commitment.

Ethereum's commitment to keeping its promises and sticking to its vision shows the outside world that there is conviction, intent, and purpose in what is being built. We are not crazy - we have been working towards the same vision for 8 years.

Before this, the outside world might look at Ethereum and see a group of confused monkeys jumping around in chaos. But now, when Ethereum finally develops into what the world needs - a decentralized value calculation layer of the Internet - people will see a kind of beauty in the chaos: a network of networks.

4. ETH

Along with Ethereum’s boom comes the narrative arc of ETH. Ethereum was a complete shitcoin in 2015, and the protocols that run alongside it have made corresponding progress. From high inflation and arbitrary 5 ETH/block in 2015, ETH has now developed into a native yielding asset with algorithmic monetary policy. It has real returns and no human intervention, in stark contrast to the US dollar’s ​​monetary policy and the Fed farce.

Aside from MEV burn (which further increases ETH’s monetary strength), there have been no further upgrades to ETH’s monetary policy.

If there is one thing that big capital likes, it is yield. ETH's yield is much higher than other tokens. ETH investors get income, while ETH itself is in a deflationary state. Bondholders get a positive nominal yield, but a negative real yield - "real" is more important here!

In contrast, there is a global consensus that the real value of the U.S. dollar and U.S. Treasuries must fall in order for the world’s financial system to remain stable, and Ethereum’s future will unfold naturally.

Ethereum’s evolution to the throne of ultra-sound money shows the world that there is something uniquely new in crypto. Through cryptography and networks, we can create financial assets that have never been created before. No, the narrative arc of crypto assets with strong value propositions does not stop with Bitcoin… We will not settle for “digital gold.” We are breaking new ground with an asset like ETH that fits nicely into existing mental models of asset value while being radically different from everything that came before it.

The maturity of Ethereum and ETH can be summarized by the growing Lindy effect and success in uncharted territory. When society's attention turns back to cryptocurrencies, people will see such a protocol and its assets, which have long been making continuous progress towards a vision that has never wavered since its inception.

The legitimacy this earns for the Ethereum ecosystem will propel it to become a sufficiently “safe” crypto asset that people will be willing to make a career out of it and start suggesting “studying it” at higher and higher levels.

This kicks off ETFs – a ball that was already rolling.

5. ETFs have arrived

The race for ETFs is on. Like I said in the regulation section above, all we have to do is wait. The arc of history is defined by technology. Gary can only keep the door closed on crypto ETFs for so long — eventually free market forces will kick in.

It seems that the sooner the better. Once Bitcoin opens the door to crypto asset ETFs, it will be difficult to prevent other assets from entering their own ETFs.

We will have BTC ETFs, and ETH ETFs won’t be far behind. If they combine with the upcoming bull run, the pipeline of capital between crypto and the outside world will be the largest ever. At the end of the upcoming cycle, ticker symbols BTC and ETH will become commonplace stocks next to Apple and Amazon, and will be available to all major brokerages in the world.

6. In any case, the cycle is shortening

Bitcoin's returns have been suppressed for years. If you bought Bitcoin in 2010, congratulations, because the 2011 run-up was the most dramatic Bitcoin run ever. Each subsequent cycle has taken more time to achieve lower returns.

Apparently that's the case.

One of the biggest topics in society is that crypto assets are too volatile. However, in each cycle, the volatility of crypto assets is the smallest ever, while the volatility of traditional stock and bond markets is the largest in more than 30 years.

The trading markets simply accepted this volatility. The crypto markets were born out of it, shaped by it! Now, due to the hands-on nature of the Fed, our markets are moving toward stability while the trading markets are in turmoil.

As regulatory pressures ease, and as the maturity of network infrastructure makes crypto networks attractive for sustainable, non-speculative adoption, much of the volatility in cryptocurrencies can be contained through adoption. After all, the bigger the ship, the less it rocks.

And, our crypto-ship is ready to scale to whatever size society requires.

The Ark is ready, it's time to board!

7. Crypto Civilization Development

There will always be a Wild West in crypto. There is no way to put the genie back in the bottle - once you provide permissionless finance to society, the quest to go west cannot be stopped. With ERC20, anyone could mint meme coins, but now thanks to OP Stack, in the next market cycle, anyone can mint meme chains.

In the current cycle, we will see the establishment of Eastern civilization. The safety and security of civilization. The East and West are in opposition to each other. Those seeking freedom and adventure will head west to escape the tyranny and oppression of civilization. But some want the safety and security of civilization! Mainstream adoption requires routes, pipelines, laws, and police. The borders of crypto will move westward, but the body of crypto will evolve into a predictable, reliable, regulatory-approved environment where the less adventurous can feel safe.

Some cryptocurrencies will start to be considered secure enough, and Web2 norms will feel safe here. Smart contract wallets with account recovery, battle-tested applications, high-traffic L2, Base… these will become crypto civilization and a place where less adventurous people can still safely participate in the crypto world.