Listed companies are entering the Bitcoin and Ethereum markets one after another. How long can this bull market last?

This is the 1276th original issue of the Vernacular Blockchain
Author | Mumu Produced | Vernacular Blockchain (ID: hellobtc)

As the first anniversary of 312 approaches, the current market is really like a world of difference compared to last year’s historic “crash day”. A few days ago, people in the community were joking: “We won’t be fooled by 312 again this year.”

In fact, we all know that the reason for this confidence is that this year's Bitcoin and crypto markets are very different from previous years, because the Wall Street institutions and listed companies that we could only imagine before have really come. So will the market continue to expand like this and will this round of bull market continue?

01
Will institutional layout be “contagious”?

As early as August last year, when DeFi had a small bull market and the market began to waver, Plain Language Blockchain published an article titled "The similarities and differences between this bull market and the previous one may indicate the next direction of the market". By comparing the two bull markets, the article boldly predicted the future market. The article mentioned the basic logic of this bull market and listed 7 major directions.

Looking back now, these 7 major directions have almost all been hit without exception in the past six months: DeFi continuation, NFT, Layer2, CEX, ETH itself, Polkadot, and the bull market.

There is a consensus now that the last bull market was a "retail bull" and this bull market is more like an "institutional bull", which is the difference between whether the market is dominated by "retail investors" or "institutions".

The biggest difference between retail investors and institutions is that institutions pay more attention to "certainty". Perhaps it is because of the anti-inflation demand in the context of global "flooding" that the adoption of Bitcoin continues to expand, and the DeFi craze on Ethereum continues to drive it, allowing institutions to see the future of Bitcoin and cryptocurrency.

In addition to the different logic of the two bull markets, there is actually another big reason.

Why do institutions, especially listed companies, enter the market one after another? It is still because of the virtuous cycle brought by the bull market. Many institutions have seen the early entrants taste the sweetness and followed suit.

Especially after Tesla, the electric car leader owned by "the richest man on earth" Musk, suddenly announced a large allocation of Bitcoin as the company's asset reserve, the mentality of global capital has undergone subtle changes.

Unlike the purely speculation-driven financial giants on Wall Street, the asset allocation of listed companies needs to be decided unanimously by the board of directors and shareholders. All decisions must be made for the collective shareholders. They will not allocate certain assets on a whim and then throw them away the next day when their minds turn cold. Moreover, these allocations are real, visible investments.

Simply put, listed companies are beginning to include crypto assets such as Bitcoin as part of their asset allocation because they see their future.

As Meitu, a listed company that recently announced its allocation of Bitcoin and Ethereum, said in its announcement, it sees the future of crypto assets and is preparing in advance to enter this technology field.

Of course, listed companies are quite rational, and not all of them will get involved. It also depends on whether conditions permit, just as it is impossible for people to reach a consensus and accept something like Bitcoin.

Companies and institutions are also made up of these different individuals and represent their will. In any case, the involvement of listed companies has set a precedent for the large-scale adoption of Bitcoin and brought more confidence to the market.

02
How long can this bull market last?

Whether it is a project or a market, many things are like this. It is often easy to become popular, but it is difficult to sustain it. Therefore, when market sentiment becomes more and more greedy, many rational people have begun to prepare to leave the market and are already thinking: How long will this bull market last?

It is impossible to accurately predict the market. Like before, we can preliminarily judge the market trend from some logical perspectives.

1. How long can the “massive money printing” last?

The large-scale adoption of Bitcoin is largely due to the global "flooding", so most of the funds flowing into crypto assets go into Bitcoin, while Ethereum and DeFi in the Ethereum ecosystem are the value support after a large amount of funds flow into Bitcoin. Therefore, how long the "flooding" can last is a very important factor for the market.

Recently, Biden's $1.9 trillion anti-epidemic relief bill, which has attracted everyone's attention, was passed by the House of Representatives and the Senate yesterday, so Bitcoin has risen again. The United States's monetary easing means that it will "suck blood" from the world as usual, and it is also foreseeable that other countries will continue to "release money" one after another.

This is not a short-term thing, and the economic recovery will be quite slow. Economists have previously inferred that under an optimistic scenario, the United States will start raising interest rates as early as September 2021, under a neutral scenario, from June 2022, and under a pessimistic scenario, not until July 2025.

2. When will Ethereum’s problems be solved?

As the main battlefield of DeFi and NFT, Ethereum has become the second largest "engine" in the market after Bitcoin. Ethereum's well-known problems have severely limited the development space of blockchain applications in the fields of DeFi and NFT.

Therefore, people have proposed various Layer2 and competing public chain solutions to optimize and solve these problems. Of course, people have the highest expectations for Ethereum's own upgrades. Once Ethereum 2.0 is successfully implemented, it will be a major breakthrough in the encryption field, and many applications that were previously only dreamed of but could not be implemented will become a reality.

Recently, according to a report released by the Australian Accountants Association (CPAAustralia), the Australian government is considering launching a CBDC project on the Ethereum community. Ethereum 2.0 may become the main network of digital currencies of central banks in many countries around the world, and this space will be unimaginably large.

However, based on the current progress, Ethereum 2.0 is expected to be launched at least in 2023 or even longer, and there is a certain probability that it may be significantly advanced.

3. Can DeFi and NFT continue?

This is one of the reasons why this round of bull market is stronger than the previous one, that is, this round has the landing of applications such as DeFi, which has certain self-sustaining functions and sustainable development.

The sustainability of DeFi itself has basically been verified, and NFT has also made progress. NFT has attracted many players in the gaming field. In an optimistic scenario, it can win by the "quantity" of users.

But there are two problems. One is that DeFi is valuable and has a certain degree of sustainability, which is true, but if the market is already overheated and far exceeds expectations, it is only a matter of time before it falls back.

Another is that, as mentioned earlier, the current performance issues of Ethereum are also a development ceiling for applications such as DeFi and NFT. If DeFi cannot bring in a steady stream of funds, then the yield and attractiveness will plummet. If game NFT cannot bring in more players, then it is very likely that it will not be sustainable in the future.

Of course, Ethereum is not working for now, but there are still backup plans, which are Layer2 and some competing public chains...

4. Can Ethereum Layer2 and competing public chains truly “take over”?

The blockchain finally has the hope of the whole village: DeFi can bring in more funds, and NFT, an application that "goes out of the circle" to attract users. Wouldn't it be a pity if it stood still?

Fortunately, unlike the last bull market where we could only "draw big pictures", Layer2 that takes into account both security and performance is now available for use. Some solutions including the popular Rollup are already available. Of course, they are just available and not mature.

At present, Rollp still has some problems to be solved, such as user operation habits, interoperability between the two layers, the cost and time of transferring tokens between the first and second layers, and real security issues, which may also take time to verify.

In addition to Layer2, many public chains with high popularity have emerged recently, such as Polkadot, BSC, HECO, Cosmos, Nervos, etc. Rather than competing, they are now more about being compatible with Ethereum and helping Ethereum solve problems.

This is different from EOS, which was born in the last bull market and stood in opposition to Ethereum. Compatibility means that they can also allow the Ethereum ecosystem to migrate seamlessly and quickly like Layer2, forming a new ecosystem.

However, the question is, it is still a trade-off between performance and security in the impossible triangle. If performance is temporarily chosen, will it bring security problems? Will big funds pay for the solutions they provide?

At present, tens of billions of dollars of funds have been invested in these competing public chains, which shows that there is still a large group of people who are willing to try it out. However, the risks of ecological collapse and constant security accidents in competing public chains are still greater than those of Ethereum itself, so investors are still quite cautious.

Although Layer2 is not yet very mature and competing public chains cannot accommodate too many, at least there are better solutions to take over in this bull market. If the overflowing value of Ethereum can be continuously connected, the market will be able to continue.

03
postscript

Although the crypto market has strikingly similar "cycles", the logic behind each round of bull and bear markets is different. We cannot rely solely on cycles to predict the market, but must use logic to judge trends.

In any case, the massive entry of institutions, especially listed companies, has brought unprecedented confidence to the future of crypto assets and allowed the dream of future blockchain applications to continue. I believe that one day we will realize these dreams one after another.

END