Why is it "futile" to predict the crypto bull and bear markets?

Fearless of bull and bear markets, developers' progress in technological innovation and other aspects is the backbone of promoting the advancement of the industry.

We often see terms such as "bull market" and "bear market" on social media to describe the development of the crypto market. What does it mean to describe the market situation with animals?

In simple terms, the term "bull market" is derived from the upward movement of a bull's horns when it charges and attacks. In a crypto bull market, prices soar, prosperity is high, and the direction of the arrows on the price chart points upward. The term "bear market" is derived from the downward movement of the bear's claws when it attacks, and another theory is that it comes from the proverb "Don't sell the bear if you haven't caught it", and "bearskin" is a metaphor for speculative stocks (short selling). In short, a bull market is when market conditions are favorable, while a bear market is the opposite.

The last round of the crypto market's bull-to-bear transition began in the summer of DeFi in 2020. The DeFi track broke the conceptualism of decentralized applications and became the first track in the crypto field to be implemented. As a result, a large amount of capital poured into the crypto field represented by DeFi, and crypto assets expanded globally. Unfortunately, many scams with serious consequences also bred under the cover of the bull market boom.

Source: Chainalysist

The rotation of crypto bull and bear cycles is not without trace. First, let us understand what signs will appear in the industry bull and bear markets.

During a crypto bear cycle, you can see one or more of the following signs:

• Long-term decline in digital asset prices

• Increased hyperbolic media coverage of “crypto crash” or “crypto apocalypse”

• Investor confidence low

• Newbies flee the market

During a crypto bull cycle, you can see one or more of the following signs:

• Demand for digital assets is growing steadily

• Increased media coverage of market gains

• Investor confidence high

• A large number of novice developers and investors participate in the market

The following will combine the industry performance in different market periods to analyze whether the bull-bear rotation trend in the crypto market will occur this year from the two perspectives of crypto investment and developers.

From an economic perspective, the bull-bear transition in the crypto space is similar to the cycle theory of the "Merrill Lynch Investment Clock" : insufficient investment creates bull market conditions, excessive speculation in the bull market creates bubbles, the bursting of bubbles triggers a crash, and the long bear market leads to insufficient investment. That is, if there is little investment during this period, then the next cycle is likely to produce a wealth effect and a bull market.

According to Messari statistics, there were 1,769 Web3 crypto VC public investment projects in 2022, an increase of 30% compared to 2021, and a total financing amount of US$37.7 billion, an increase of 19% compared to 2021. It can be seen that due to factors such as overly optimistic market expectations, the investment amount of crypto VCs remained high in the 2022 bear market, resulting in a decline in relative returns, so the wealth effect of the bull market is unlikely to appear.

Even though the crypto market is sluggish in 2022, Web3 developers have not stopped building. According to the "Web3 Developer Report" released by Web3 development platform Alchemy, developers in the crypto field continued to be active in 2022. The number of developers who installed Ethereum's standard JavaScript API library Ethers.js and Web3.js library increased by 10 times, the number of new developers reached a new high, and the monthly active users increased by 5% year-on-year... All signs indicate that newcomers are pouring into Web3 and building a prosperous Web3.

As FTX’s bankruptcy and litigation progress, liquidity issues and bankruptcies may continue to be found in CeFi and DeFi projects. The breach of trust involved in this FTX incident not only seriously affects financial market regulation, but also causes a significant contraction in the yields of DeFi products, affecting investor activities and user confidence.

In addition, similar malicious fraud incidents will occur more this year, and the bubble in the crypto market is accelerating. However, the International Monetary Fund found that due to the global population reduction, considering labor and operating costs, DeFi provides lower capital costs, entry barriers and more accessibility and open source information flow, and its prospects are still worth looking forward to .

Web3 is an industry full of builders, and currently a large number of developers are entering and building Web3. According to the latest "2022 Web3 Developer Report" disclosed by Electric Capital, as of December 2022, 23,343 developers are active in the crypto field every month, of which more than 61,000 developers contribute code for the first time, a record high, and monthly active developers increased by 5% year-on-year.

It is worth noting that 72% of active developers work in crypto projects outside of the Bitcoin and Ethereum ecosystems . For example, the number of active developers in the ecosystems of Solana, NEAR, and Polygon increased by 40% year-on-year, while new star projects Sui, Aptos, Starknet, Mina, Osmosis, Hedera, Optimism, and Arbitrum also performed well, with year-on-year growth of more than 50%. This shows that although Bitcoin and Ethereum are still powerful, the contribution of developers to emerging projects cannot be underestimated, and the territory of the crypto ecosystem is still in a period of rapid expansion.

When most industry speculators have left, these visionary builders are still investing in long-term efforts. Developers will build more complete infrastructure and more valuable applications, thereby attracting more people to participate in Web3. Therefore, 2023 is the year for the development of projects that build Web3 down to earth, and it is also the year for the crypto field to transition from speculative investment to building crypto projects.

Traditional brands such as Nike, Gucci, and Dior have all deployed Web3 and used marketing tools such as the Metaverse to enhance brand value and visibility. At the same time, Web3 projects are also absorbing the high-quality core of traditional projects during their development, such as the DeFi protocol integrated with the traditional financial system, NFTs combined with sports events, and the new PTO Web3 game paradigm that combines the playability of traditional games.

One of the emerging sayings today is that "the line between decentralized solutions and the real world is becoming increasingly blurred" , and some people call this phenomenon "Web2.5" . In short, with the trend of continuous innovation and development combined with traditional industries, more Web3 projects will enter the mainstream public's field of vision.

In the crypto space, speculators only seek short-term high profits and have no interest in participating in and building the Web3 community. Such speculators appear in large numbers during bull markets. During bear markets, speculative opportunities decrease rapidly. After the shuffle of the big waves, those who can stay in Web3 may be the real members who build the future of crypto. Regardless of the bull or bear market, members who really want to make a difference in Web3 will not back down. Accumulating strength and then making a breakthrough is the way to survive in the long run.

Therefore, predicting bull and bear markets is futile for developers. The progress of developers in achieving technological innovation and promoting project progress is the backbone of promoting the advancement of the market and industry. Although the crypto field has experienced frequent bull and bear market fluctuations in the early stages of development, if we are confined to the bear market winter environment and attribute the reason for "doing nothing" to the sluggish market environment, we will only miss opportunities.

"The road ahead is long and arduous, but I will continue to explore." Exploring the development trend of Web3 down to earth is exactly the original intention of TinTinLand to launch the "2023 Crypto Industry Development Trend Forecast" series of articles. The next article in this series will focus on the development prospects of "zero-knowledge proof" in Web3, so stay tuned! We also welcome community friends to leave messages and interact with us in the background to share the crypto topics or industry insights you want to know.