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Don't be afraid to dream a little bigger

From knower's substack

If you’ve been chronically online this past week or two, you’ve more than likely seen a few dozen tweets discussing where we’re at in this current cycle and how much time there is until the music stops. Bitcoin is now sitting above $56,000 and has been climbing steadily since a handful of ETFs launched, with each day’s inflows displaying the wonderful situation you can get when insatiable demand meets a less than prepared supply side. Fidelity is recommending that individuals allocate between 1-3% of their portfolio towards crypto as a safe and responsible investment, showing the wider world that crypto is no longer something to fear after FTX, it’s something to accept and embrace.

From around March 2023 to October 2023, BTC ranged between 27-30k and was probably very frustrating if you’d attempted to long it with hopes of a breakout. During this time there were a handful of occasional bright spots, though there wasn’t really that much happening in public markets if you’d expected to make 2021 types of money. We got lucky with PEPE, Friend Tech, Telegram Bots and a handful of other activities that mostly served as temporary time wasters while the broader market sorted itself out. There was a lot of talk concerning rate hikes, soft landings and other macroeconomic issues that are honestly too far removed from my mind for me to recount.

The bear market most likely ended in March 2023 where Bitcoin shot up from 20k to 28k in just a couple weeks, a moment in time I look back at with a lot of nostalgia, even though it was only about a year ago. It was a time where the collapse of FTX was finally getting put behind us, the media had (for the most part) stopped its crypto witch hunt and there was finally some solid price action to get crypto twitter back on its feet.

So now we’re here, a year later. Bitcoin and Ethereum’s all-time highs are within reach, alts are generally moving very fast, narratives are beginning to form and private markets are once again rampant and disconnected from reality. It would be quite easy to view crypto’s recent behavior and believe that we’re closer to the end than we are the beginning, but I think this is incredibly short-sighted and naive. Not only have we not broken all-time highs, but there really aren’t that many indicators we’re approaching some type of peak euphoria.

If you were to look at Bitcoin price action on its own, it might appear somewhat overbought. But we aren’t living in that world anymore. Larry Fink took a leap and put his reputation on the line for a Bitcoin ETF whilst everyone in the media and traditional finance looked at him with some combination of astonishment and bewilderment.

How could an asset manager with trillions of dollars stoop so low? It’s not even real money, it’s not backed by anything! Didn’t you see that SBF is on trial for scamming with crypto and ruining lives?

This isn’t going to be a post about how Bitcoin is essential or why it’s worthy of being respected by the traditional financial machine - if you’re reading this you are probably already aware of these reasons and believe strongly in them. Instead, I’m going to talk about why we might still be relatively early, or why there are a variety of reasons to stay bullish for longer.

The presence of ETFs makes this cycle infinitely different from previous ones, given there’s now an accessible liquidity cable between crypto and traditional finance. Unless you’ve been living under a rock or willingly ignoring the obvious, institutions and players from traditional finance have been here since last cycle. Crypto had become more mainstream, socially acceptable and people wanted to invest or get their clients exposure to digital assets, along with the obvious fact that volatile markets in an uptrend will attract more liquidity and more eyeballs. Blackrock, Fidelity and VanEck are now able to market Bitcoin to clients without any regulatory or legal concerns - the floodgates have been opened and there’s no indication they’ll ever be closed again.

It’s difficult to develop realistic models around ETF inflows due to this being an extremely new, unique and unprecedented type of event. When was the last time an entirely new asset class was released to the broader public? Well, it was probably whenever they made a gold ETF, which means it’s been about 20 years. You can search online and find the performance of the gold ETF within those first 5-10 years and come to your own conclusions.

Another reason that this cycle could play out differently from previous ones is due to the fact that crypto has matured considerably every year, despite so many patterns playing out again and again. People on twitter often point out previous cycles’ top 10 coin lists, with many of these being far removed from public memory and totally wiped from the market, but this is yet another example of just how quickly the space moves. If you looked at the top 10 stocks by market capitalization since the start of the 21st century, you would definitely see a lot of shake-ups and power struggles, as it’s necessary for any economy to have competition in order to foster growth and advancement. With crypto, much of this process has been sped up as the industry has morphed from a white paper written by an anonymous individual into a technological phenomenon increasingly capable of disrupting the entire global financial system. There are far more market makers, crypto-focused funds and seemingly a larger amount of venture money willing to invest in crypto. Another observation I’ve made is that the batch of recent project raises are more respectable than in any previous cycles, almost as if crypto is slowly becoming a legitimate asset class right before our eyes.

Each bull market presents an opportunity for crypto to experiment with new ideas in a way that was never really possible on traditional financial rails, using financial speculation as a trojan horse for innovation. The bear market is a time of cleansing, where the bad ideas, blow-ups and tragedies are washed away, to hopefully never be repeated. This is healthy, as it’s extremely obvious crypto is far from being a mature market - this will continue for some time, much to our benefit. You generally don’t get opportunities like DOGE in the stock market. The closest example of crypto price action in the real world was the GME phenomenon, though even this pales in comparison to the average alt L1’s performance in 2021. This is a special market, one that people like Larry Fink have decided is worth advancing and taking advantage of.

I’d also like to add that despite the negative connotations that are taken when institutions start entering the space, it’s far more of a positive that there are Bitcoin ETFs than it is a negative. Blackrock is a blessing, and I feel that this cycle will be the most spectacular we’ll ever see. It will take a little while longer for the general public to forget about FTX and accept that crypto is larger than a single fraudulent centralized exchange, but this is to be expected. It’s difficult enough for the average person to fathom putting money in such a volatile market, let alone after every major media organization shoved the FTX controversy down their throats for months on end, scaring them from ever wanting to buy a token ever again. It’s not like the entire stock market saw everyone leave after Bernie Madoff, he was just one bad apple.

I don’t know how long it will be until we reach 2021 levels of speculation, but I believe we are still absolutely nowhere close to that point. When I see people on twitter discussing how we’re in the later innings of this cycle, it makes me wonder what audience they’re trying to appeal to. There’s a screenshot I took sometime in the heat of the last bull market. It was a list of trending coins, names like Dogelon Mars, BabyCare and Rainbow Token. What do these tokens do? I don’t know. What are these tokens trading at today? I’m not sure. I don’t see anything nearly as scammy as these trading today; I don’t see any Safemoons or Shiba Inus grabbing the entire internet’s attention and separating fools from their money. Sure, it’s healthy to exercise caution and not get ahead of yourself too soon, but is it really that bad to say that we’re still early? From an objective point of view, it can very much be argued that we are still early.

Bitcoin experienced an over 20x gain in price back in 2017. Bitcoin went 10x from the March 2020 lows and double topped. If Bitcoin were to do a 10x from its November 2022 lows, its peak would be $160k. And I know what’s coming when I say this, but I already have a counter. The obvious rebuttal is that Bitcoin’s market capitalization was much smaller in 2017 and 2020, and this is correct. It’s not like I’m calling for Bitcoin to pull a 25x from here due to the ETFs, but it’s worth noticing just how silly the financial system has become, and how quickly our world is changing due to AI advancements. It’s entirely possible we create AGI in the next 2-3 decades, which would have an unprecedented effect on our daily lives and what our future might hold. Sam Altman is trying to raise trillions of dollars to prepare the world for this, which in my view is more bullish than anything else you could present to me. The US was printing an astounding amount of money during the pandemic and things got out of control - this was just the beginning.

I believe that in a world where AI is quickly shredding all prior assumptions about humanity and intelligence, it’s not too wild to make a case for Bitcoin reaching over $160k this cycle. The bear market poisoned the minds of many and the damage is beginning to manifest in poorly reasoned tweets on my timeline. While this might come to mark a local top, it doesn’t change my views at all. I’m not afraid to be wrong, though I wouldn’t be writing this if I didn’t believe it. Even with public and private markets as red hot as they are, they will only continue to diverge from the realm of realistic expectations and leave all nonbelievers behind. If there was a timeline where Su Zhu’s supercycle thesis had come true, I’d be lying if I said I didn’t believe we’re living in it.

Disclaimers: The materials presented herein are my opinions only, are provided for informational purposes, and should not be construed as investment advice. It is not a recommendation of, or an offer to sell or solicitation of an offer to buy, any particular security, strategy, or investment product.


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