Bear market - the end or a new beginning?
I decided to look at the bear market and the down trend from a completely different angle.
Is the crisis a collapse, or a new opportunity? In fact, we have the right to choose. Being able to make choices is the path to riches.
I looked at the current situation from several angles:
- I studied the current forecasts of analysts.
- I figured out what foundations do at a time like this.
- Dipped into history and inspected what projects were launched in similar market cycles.
This study was prompted by a series of seemingly contradictory events and news, to cite just a few examples:
Bitcoin is trading below its previous value for the first time in its history for 9 consecutive weeks.
Crypto companies raised an all-time high of $10 billion in investment in Q1 2022
And April 2022 was a record month for crypto investment, raising $6.7 billion dollars.
Given that May 2022 at a minimum estimate has already invested $4.3 billion, crypto in the 2nd quarter of 2022 has already attracted more than $11 billion of investment, which has already beaten the previous record, although not yet over the second month of the quarter. Bearish?
For the sake of interest, I decided to overlay the bitcoin price chart (it mirrors the usual one) on the chart of monthly investments in crypto. And we literally see that since the fall, the bitcoin price has doubled, while the amount of investment has only increased.
And this polarity has become the leitmotif of our research.
*spoiler* Unexpectedly, but not for us, answer the question, "Why is now the best time to invest in crypto?"
Buckle up, it will be interesting!
Is the crypt dead? Long live the crypt!
Let's not go far, in one of the best traditions of my channel, to give a few news and facts to take a different look at the current state of the market.
Let's take a deep breath:
Andreessen Horowitz has raised a $4.5 MLRD cryptocurrency fund to take advantage of bargains in a falling market.
Hedge fund SkyBridge Capital plans to invest most of its $3.5 billion in cryptocurrency.
April 2022 is a record month for cryptocurrency investment in history.
Q2 2022 was a record quarter in terms of crypto investment, and overtook the record Q1, although May is not even over yet.
Grayscale: The biggest risk now is not to take any risks.
A16Z: Web3 could have a billion users by 2031.
Grayscale: cryptocurrencies are now the internet in 1995 - in terms of number of users, capitalization and other metrics of adoption.
Grayscale: now the sphere of cryptocurrencies occupies only 1.2% of the total volume of the global market. In 5 years - 5%, in 10 years - 10%, in 30 years - 20% - in the share of the stock market. Within 25 years, the market will reach a capitalization of $100 trillion.
Whales are accumulating $BTC more aggressively than they did during the bear market of 2018 or the Covid 2020 crash. In the last 30 days, big wallets have increased their holdings in $BTC by 25%.
Longs by hedge funds and other big players increasingly prevail over shorts. Short positions used to dominate this category. At market peak, in October-November 2021, by contrast, shorts far outnumbered longs.
Ethereum, Opensea, Uniswap, MakerDAO, Ledger, Polygon, Solana, Chainlink, FTX - all these projects literally defined the foundation of the sphere, they built entire ecosystems of projects, early investors got rich by thousands. What also unites them is the fact that they evolved and launched in a bear market.
Exhale! Although we could go on for a long time.
At once I will give a few illustrations to complete some of the points above:
As we can see, these theses alone give us a hint that we should look at the present situation a little differently.
We are overcoming fear and discovering new opportunities. The big players continue to invest and even increase their positions.
There is much less competition among the players in the 1.5 and below range, which opens up the possibility for the new and the most daring.
This article could have ended there, but we will take a broader look at the situation.
I will introduce you to important players and give their opinions and analysis.
World Context.
The first country to officially adopt bitcoin is El Salvador.
There are predictions that five more countries around the world with growing economies will recognize cryptocurrency as a means of payment this year.
Brazil, in 2023, plans to use BTC to pay taxes.
Fairfax County, Virginia, U.S. is thinking about putting pension fund money in two crypto funds.
Russia is talking about legalizing cryptocurrencies at the state level.
CBDC (Central Bank Digital Currency) - The concept of a state-owned digital currency is being actively developed. China is actively succeeding in this. The Central Bank of Canada and MIT will collaborate on CBDC research. Swift will test transfers at CBDC. And Ripple has become part of the digital euro association.
Ukraine has signed a bill on virtual assets.
Global brands are embracing crypto payments.
I think it is important to point out that the so-called downtrend will no longer be what it used to be. Over the past year and a half, cryptocurrencies have attracted countless big brands and great companies.
You have to realize how many of the coolest products have started to be prepared in that period, and now imagine what will happen to the sphere when they start to come out en masse.
Yes, it takes months or maybe even a few years to develop. But simply think about it, right now the sphere has a tremendous amount of talent by any standards, and it's still in a downward trend. At one point these world-changing products will start to be launched, it is incredibly satisfying to be at least a witness to these events.
Facebook has officially changed its name to "Meta" as it seeks to become a "meta-universe company.
Nike has filed seven trademark applications, preparing to enter the metaciverse.
Tesla and Elon Musk are stirring up the market to the tune of the dog waltz. The company is now one of the top 5 "open" $BTC holders.
Epic Games, the parents of Fortnite, are ready to create a meta-universe. They formalized their intentions by announcing a $1 billion funding round to expand growth opportunities to create a meta-universe.
Although Nvidia is not building its own metaworld directly, it will be a key player. Omniverse Enterprise was announced in 2021, where creators can work together on 3D modeling, design and simulation. Omniverse combines 3D graphics with artificial intelligence and supercomputers, laying the groundwork for a meta-universe.
Microsoft aims to create a work-oriented meta-universe that connects its hugely popular offerings in a digital environment called Mesh.
Apple could be an unexpected dark horse in the race to the metaconsciousness. The company is currently working on cutting-edge virtual reality hardware that could revolutionize it.
Morgan Stanley has gone so far as to say that the adoption of the meta-virtual universe in the mass market depends on Apple, just like the smartphone and tablet markets before it. The company is also building a position in crypto.
And this is only a small part of what can be highlighted lately.
We are witnessing a tremendous infusion of investment.
Adaptation of new types of payments in different spheres of life. Gradual legalization and acceptance in different countries of the world.
Cryptocurrency is being taken more seriously. As a consequence - will begin to invest in cryptocurrency at the state level. Companies will gradually penetrate into web3, which already irreversibly affects the sphere.
Well, in such scary times, what do the most influential players already inside the cryptocurrency sphere do?
Sequoia Capital is a venture capital fund that originated in the 1970s. The most significant investments of the last half century: Google, Apple, Electronic Arts, Oracle, NVIDIA, Youtube, Instagram, WhatsApp, Reddit, ZOOM.
What do they do in times like these?
They opened a half-billion-dollar crypto-fund.
Supported Ilon Musk's acquisition of Twitter. Now you can put your NFT avatar on your profile. Coincidence?
In dark times, Sequoia projects are still growing.
Babel Finance (a crypto-financial services firm) boasts of reaching a new valuation of $2 billion.
Ethereum scaling firm StarkWare quadrupled its valuation to $8 billion amid a bear market.
Contrary to the current state of affairs, Sequoia Capital, points out the opportunities this situation presents to us.
Emphasizes that we should be more selective in our investments now, but we definitely should not miss these opportunities.
Cites a quote from the famous Formula 1 driver Ayrton Senna: "You can't outrun 15 cars in sunny weather ... but you can do it when it's raining.
The company is not shy about sticking to this thought.
Tier-1 funds almost always continue to only ramp up during prolonged bear cycles.
Given the capital, Sequoia can afford a mistake or two due to bad investments, but do you really think they haven't thought about whether it's worth it to put money in during such times? I suggest re-reading our article again.
The best investments are made at the bottom. This axiom is as old as the world, but it's no less relevant.
Hundreds of millions of dollars invested in crypto from Sequoia Cap alone for the bearish May of 2022 inspire peace of mind that a bright future is just around the corner.
A16Z Andreessen Horowitz
Direct quote from the announcement. Let's go with trumps:
Andreessen Horowitz raises $4.5 billion crypto fund to take advantage of bargains in a falling market.
a16z became very successful when it invested in big companies like Facebook, Pinterest, GitHub, Instagram, Skype, Coinbase. etc.
Chris Dixon, a16z's general partner, is at the top of Forbes' "Midas List," which features the world's top venture capitalists. The investor's name and the main company that brought him the title and enormous profits is prominently displayed on the list. By the way, it's Coinbase.
"We think we are now entering the golden era of web3 .
Programmable blockchains are quite advanced, and a variety of applications have reached tens of millions of users.
More importantly, a huge wave of world-class talent has come to web3 in the last year. They are brilliant and passionate and want to build a better Internet.
That's why we decided to go big. We've been investing in the cryptocurrency market since 2013, and today we're announcing our fourth crypto fund totaling $4.5 billion (a16z)."
Despite the rapid development of the crypto industry, there is one "but". Most venture capital funds are based in America and this centralizes the industry, despite its values.
Due to current events, funds have started to diversify their portfolios by entering new markets. For example, markets in India and Africa.
Interestingly, funds with very meaningful portfolios led the rounds, which shows the interest of big players to explore new markets and work at such times.
One of the big investment rounds was the $15 million Series A fundraiser for the African cryptocurrency exchange Yellow Card.
Funds have taken up this vector, entering into those projects that help scale and spread the mass-adoption effect.
For example, Chipper Cash, an African company that deals with cross-border payments. They raised a $150 million Series C round a couple of months ago, led by FTX.
Make money transfer as easy as a text message, and accelerate the adoption of cryptocurrencies in Africa and beyond. (c) Sam Bankman-Fried, creator of FTX and...
The guys are not standing by and investing in projects in the Africa segment:
Nestcoin, which aims to create an educational media resource for African content, and Jambo, which plans to give Africans access to financial tools via blockchain.
Many investors are positive about Jambo, like Santiago R Santos, investor and former ParaFi partner: "What WeChat did in China, Jambo will do in Africa. We are happy to support this A+ team that will become a Web3 super app on the continent."
To summarize this point, at the moment, funds do not want to stop and develop the crypto industry, diversifying their investments and thus making crypto more resilient to world events.
Pantera Capital
Pantera Capital, launched in 2003, became the first cryptocurrency fund in the U.S. in 2013, the company's return was 10,000%.
Its venture capital arm has invested in major players in the blockchain ecosystem, such as Coinbase and Wyre.
Pantera has been a RIA (registered investment advisers) for many years, which allows it to circumvent the rules limiting cryptocurrency investments for venture capital firms to 20% of the fund.
Let's move on to a surprise guest on our program, which brings us to the logical conclusion of the fund reviews.
Grayscale is the #1 Holder of $BTC.
The largest BTC-ETF fund, for investors from the U.S. and Europe. It owns more than 630,000 $BTC, just think about it!
BTC-ETF - roughly speaking, this is an opportunity for clients to invest and trade bitcoin, without actually owning it. This is important, because on traditional exchanges we can't get the $BTC we are used to.
That's more than 3% of the entire market. For a long time, they were the only fund that had a legal basis for trading crypto, but that has changed in recent years.
Competition is the engine of progress, which is why Grayscale is honing its skills in other areas, such as: Market analytics.
In the study they raise the topic that cryptocurrencies should become (and already have become) an integral part of today's portfolio of investors.
Cryptoassets are becoming a key component of today's portfolio, offering investors a new category that extends the spectrum of risk and return beyond traditional alternatives such as real estate or private equity.
The number of users in the cryptocurrency industry is growing at a rate that roughly matches the rate of development of the Internet in 1999.
The cryptocurrency market is showing strong growth, but is at an earlier stage of its market cycle than the Internet was in the mid-1990s.
Not taking risks now is the biggest risk.
Modern portfolio theory is based on the principle that a well-diversified portfolio yields a higher return on risk than if you invest in assets individually. Combining the classic portfolio ratio of 60/40 Shares & Bonds with 1%, 3% and 5% crypto portfolios, gives a significantly increased degree of profit.
The highest investment performance, in terms of profit to risk ratio, is achieved when crypto occupies 40% of the portfolio.
Cryptocurrencies are expected to be the most profitable assets for the next two decades.
Head is boiling, isn't it? And here is the condensed conclusion that Grayscale offers:
Cryptocurrencies will remain, and they have the opportunity to continue to have a positive impact on the market.
Web 3 is still in its early stages, but is already experiencing rapid growth and correlates with the development of the Internet in the 1990s.
As the most profitable asset class in eight of the past 10 years, cryptocurrencies have protected against inflation.
They expand the potential for risk and return.
Crypto-assets are becoming a key component of today's portfolio.
Thus, investors will find great value and some companies will create long-term success in this space.
And for the good stuff, I compiled the top projects that came out exactly in the "bad market", these projects defined the field, and their investors got fabulously rich.
Polygon - was created by an Indian team in October 2017, with the aim of reducing commissions and increasing speed on the Ether network. The growth of the project (1000x on ATH for early investors) made the founders the first billionaires in India.
Solana - launched in March 2020. The team worked hard, eventually the value of the token made almost 500x from $0.50 per unit in March 2020. And the price to funds was a fabulous $0.04.
Chainlink - yes, yes, the largest oracle launched in 2017.
Kusama - was released at $1.71 in December 2019. ATH $621.71, which is $363x if you look at December 2020 $0.87 $714x.
FTX $FTT- The FTX native token was launched in 2019. ATH $84.18 at the time the low was $1.15 73x, pretty good too. Does Sam know his stuff?
Uniswap, MakerDAO, Opensea, Ledger, Ethereum were founded during the bear markets of 2014 and 2018.
So, stop, are the most profitable investments made mostly in a "bad" market?
Now let's remember the endless number of low quality projects that were literally stampeded on the bullruns. "Very significant" NFT projects, "deepest" metaverse, "sphere-changing" play-to-earn.
Yep, and almost all of the projects that defined these trends originated during the bear market: NFT and CryptoPunks, Play-to-Earn and Axie Infinity, Metaverse and SandBoxGame and Decentraland.
Of course, there are also crucial projects that originated in the Bullruns and managed to expose these ideas to the best degree, as BAYC and their Metaverse did.
But are they possible without CryptoPunks, and Decentraland, SandBoxGame, Opensea and Ethereum?
Conclusion
The world is gradually adapting and opening up to the field of cryptocurrencies. Including countries, legislation, commodity-money relations. Penetrating into all spheres of life.
The idea of decentralization is scaling up: it is no secret that a significant part of crypto-projects are based in the United States.
Large funds are diversifying this aspect by investing resources in other regions. The adoption of crypto in Africa and India, will increase the decentralization of processes. In other words, the sphere will be less and less influenced by the U.S. jurisdiction and economy.
For some, it's a time of fear, and for others, the best opportunities.
And the statistics bear this out. Despite the market, we are at the peak of investment in the field. And it's no wonder, experience confirms that it's in these times that the most influential and profitable projects are born.
Hard times are just the beginning of a new stage. Where new opportunities open up for investment and/or to build something great.
It is active actions in such times that will thank you with experience and insight, which, under favorable market conditions, allow you to accelerate from almost any amount and competently dispose of profits.
With this research we want to show that favorable conditions will definitely happen, and if you look closely, they have already come.