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

The crypto industry’s “ChatGPT” moment is coming, and more productive innovation is needed. Innovation that allows blockchain to effectively serve the broader economy, rather than innovation that comes from the mental masturbation of some so-called crypto natives. When and how the former will happen remains to be seen.

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

When faced with the question of “when will the bull run come?”, the most common answer heard from cryptocurrency investors is “as soon as the Fed starts printing money again…”.

If central bank monetary expansion is inevitable for prices to rise, how do we explain the fact that the Nasdaq rose 10% in May alone while the Fed's balance sheet continues to shrink? Even the Russell 2000, which came late , is up 6% since June.

In fact, there is no lack of liquidity in the market. Even after 15 months of quantitative tightening, the Fed's asset holdings are still 80% higher than before 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 that tough.

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

Then an AI tool called ChatGPT gave the reason.

Market price movements are a random walk 95% of the time. There is no reason for prices to move in a specific direction because today is no different than yesterday.

But occasionally, an unexpected event (good or bad) wakes the market from its slumber and forces it to conclude that the old price tag of the underlying asset no longer reflects 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 times any bull market starts this way.

In the recent US 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 outbreak may not come until many years in the future.

With the sudden rise of a consumer application ChatGPT, the market has realized that artificial intelligence does not seem to be far away, and the current market valuation is obviously underestimated.

Overnight, investor sentiment revived, from complaints about interest rate policy to salivating over a future of 10x productivity (and profit) gains driven by AI. The perceived prospects and market size of the entire industry changed.

Companies like NVDIA ( Note: NVIDIA, an artificial intelligence computing company. On May 30, 2023, NVIDIA became the first chip company with a market value of US$ 1 trillion and the ninth company in history to enter the "trillion club" in terms of US dollar market value) and MRVL ( Marvell Technology, Inc. was incorporated in Delaware on October 23, 2020. The company is one of the world's largest Fabless semiconductor suppliers, providing high-performance application standard products ) that have thrived on the AI ​​boom have generated huge profits that confirm the price trend, making more and more investors believe that this boom is supportive.

Eventually, investors’ rising expectations for AI will far outpace the pace of progress that companies can achieve in the short term. Prices will adjust, orderly or violently. The market will pick up the pieces, pick itself up, and start over. But that’s for another day.

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

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As the stock market shows, the macro environment is no longer an obstacle to price increases. But as mentioned earlier, price increases require a reason, a real stimulus from unexpected events.

The bottom line is: When will crypto’s “ChatGPT” moment come? Or will it ever come?

If you remember nothing about the last bull run, here’s a reminder: What is the potential of Web3?

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

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

Second, these networks are programmable and composable, which means applications can be built faster and at a lower cost, increasing the speed of innovation.

Third, tokenization allows Web3 projects to develop using a collaborative business model, allowing contributors and customers to benefit more from the project’s growth and distribute the benefits of growth more fairly.

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

When DeFi and NFTs first emerged, their surge in popularity provided “initial proof” of this potential and fueled the bull run of 2021. These were essentially mini “ChatGPT” moments for the crypto industry.

But it has been a while since Crypto has seen anything like this. Most of the new projects that are getting a lot of attention are based on minor changes to the popular projects of the past. Is a better way to stake important? Aren’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 expand use cases or public blockchain adoption, which is what the industry really needs.

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

But is regulation friendly to any innovation? No.

Uber and AirBnB had to battle regulation during their growth phase. But they had broad supporters and strong arguments because of their innovation, which created new jobs and tax revenue, improved the lives of their customers, and increased productivity across the industry. As a result, they largely won their battles against outdated regulations.

Can the same be said for crypto? Not so sure, especially given the current state of innovation. Crypto crossed that Rubicon long ago. In fact, bargain hunters are bullish on large-cap stocks, and the recent negative news could attract a large number of them.

For an industry that not long ago had over 300 million users worldwide, the bar for survival is actually very low, and the important question is what does the crypto space need to realize its promised potential?

Author Tascha believes that innovation is what allows blockchain to effectively serve the broader economy, rather than innovation that comes from the mental masturbation of some so-called crypto natives. When and how the former will happen remains to be seen.