Outlook for 2024: Bitcoin ETF New Cycle, Encryption Market Is Big and Fishy

"Fish where the fish are."

— Charlie Munger

Many friends have recently asked, does DeepQuant have any predictions for 2024? I read your early-year report last year. You were a bargain hunter in the currency circle, seizing the resurgent bull market and making huge profits. I would like to know what your thoughts are on this year?

Thank you for your trust and congratulations to To da Moon. If you are interested, you can browse the public account [DeepQuant Group]. But I would like to state again that neither personal nor team opinions constitute investment advice, but are for reference only. We have insisted on exporting knowledge over the years mainly for future review.

When I first entered the investment industry, my seniors taught me, What insights do you have that make you unique? will decide where you go. This article contains a large amount of information, involving behavioral finance, macroeconomic cycles, fundamental analysis, AI, and analysis of various tracks. It is recommended to save or share it first and read it carefully in the future. If you have any objections, please feel free to communicate.

TL , DR

1. 2023 The bull market that has recovered in 2018 has ended. In the short and medium term, pay attention to risk control. Bitcoin ETF will be launched after the passage of time. The good will be bad when the good is gone. Pay attention to risk control and do not increase leverage, otherwise it will be easy to explode both long and short.

2. It is currently expected to be bullish. If there is no paradigm shift in 2024, Bitcoin will most likely fluctuate between 30,000 U-50,000 U, and may also fall below 30,000 U.

3. Although the recovery bull market trend will end, the next wave will be the real super bull market, and the current market is just a warm-up.

4. Short-term sentiment orientation, but if you look at the longer term, such as 2-5 years, we are at the bottom of the super cycle of the crypto market, 2024 is the best time to enter.

5. Looking at developers in the medium term, developers will dominate the Web3 market. Currently, there is no growth in developers, so where can we go? Is there a bull market engine? The concept of constant speculation can activate existing leeks, but it cannot attract incremental users.

6. The long-term financial outlook depends on the Fed cutting interest rates. It is not sure whether Bitcoin will exceed 70,000 U in 2024, but there is a high probability that it will in 2025. to 150,000U.

7. It is not a super bull market for Bitcoin to stand out alone. It is like the rise of thousands of coins in 2017 and 2021. This time it is nothing like before. It’s different,Join the bubble, understand the bubble, question the bubble.

8. The next bull market engine of Web3 will come from AI. Web3 practitioners should not be too cautious. In the past, Lego-style financial gameplay was simple and crude, but if we can Combined with the productivity revolution, more content, more traffic, and more liquidity.

9. Using AI to drive the Web3 industry is an idea, such as GameFi’s NPC and DeFi’s intelligent transactions,but it is far less effective than using Web3 to transform the AI ​​industry. The idea is that it is a higher-dimensional valuation.

10. It’s not scary to miss out on inscriptions, MEME and other types of sudden wealth, but it’s scary to miss the super cycle. As long as you don’t mess around, you can catch it. Industry dividends,You only need to get rich once in life, don’t step on the wrong side, that’s enough.

The following 10 cognitions, 1-3 are judgments about trends, 4-6 are variable references about trends, 7-10 are About our analysis of the 2024 crypto market bull engine.

1. Bull market recovery in 2023

Many people don’t It is expected that the trend in 2023 will turn out to be a J-shaped recovery. Some institutions predicted an L-shaped recovery years ago, but the market is so random and often does not follow common sense.

According to my observation, many institutions and large investors have been waiting for Bitcoin to rebound and then buy the bottom. As a result, there has not been much correction for a year. Sometimes it is difficult to buy a cow back. However, it also confirmed user sentiment that the bear market has been suffering for a long time. With the expectation of a Bitcoin ETF in 2023, the momentum has been very strong, and within one year there have been three waves of booms: MEME, AI, and Inscription.

However, the bull market in 2023 will mainly be driven by Bitcoin, and it is approaching the end. Pay attention to risk control in the short and medium term. After the adoption of Bitcoin ETF, the boots will be launched. The market has fully priced in. When all the good news comes, it means bad news. The banquet is over. Pay attention to risk control and do not increase leverage. Otherwise, it will be easy for both long and short parties to explode.

As a traditional trader, I may not be that optimistic about the short term. The adoption of the Bitcoin ETF means that the pricing power of Bitcoin has changed hands. Bitcoin prices will be more fair, and Wall Street institutions will have more influence on the crypto market. With the regular army entering the market, the original influence of USDT’s additional issuance, top exchanges’ momentum, and retail investor sentiment will be significantly weakened.

2. Stay awake

The recovery in 2023 is Although the recovery from the 2022 crisis has always had some wealth creation effects, most of them are the result of speculation, forced market control, and FOMO, and have not formed a solid positive cycle growth logic.

My predictions below are not important. We will correct them at any time. The key is that the countermeasures you take are very important and must be implemented in a disciplinary system.

The current encryption market is still in the concept stage of speculation. If there is no paradigm shift in 2024, Bitcoin will most likely be in the 30,000 U-5 The price of 10,000 U fluctuates back and forth for several times, and may even fall below 30,000 U. From the current analysis of the DeFi mortgage market,If Bitcoin is lower than 25,000 U, it will have a high margin of safety and will also be a rare bargain hunting opportunity.

Figure 1. WBTC pledge

Encryption The market is looking forward to fundamental paradigm shifts, including new out-of-circle applications, liquidity mechanisms, etc., which are essentially breakthroughs in industry traffic and liquidity growth difficulties, such as innovative gameplay such as DePIN, Fair Mode, Telegram Bot, etc. They are all valuable attempts and worthy of in-depth exploration.

3. Super cycle bottom

Although recovery in 2023 The small bull market trend will end, but the next wave is the real super bull market. We can see that the negative premium of GBTC has shrunk and has turned positive from more than -40%, which also shows that the encryption market has already passed its darkest moment.

Figure 2. GBTC premium

The adoption of BTC ETF will provide traditional financial services Institutions poured into the crypto market to build channels, and incremental liquidity was created. In 2024, the Bitcoin ecological infrastructure will be more complete and more scalable in the future. AI productivity lowers the threshold and empowers various fields of Web3. The DePIN track is very likely to give birth to out-of-circle applications and bring more traffic.

Based on the above changes, not only the super cycle of Bitcoin, but also the old narrative of Web3 will blossom into new flowers, and the market will become more prosperous. However, in emerging markets, there is speculation in the new rather than in the old. After all, new narratives have less selling pressure than old ones.

4. Look at emotions in the short term

The momentum of the recovery in the past year has been very strong, with almost no correction and rise. Many people have missed the opportunity to get on the bus, so the next wave of bull market will have a large wave of existing funds to join, thus increasing the momentum. Before that happens, the market needs a sharp correction, and may continue to consolidate, but all in order to gain momentum to break through the new high of 70,000.

If we look at the longer term, such as 2-5 years, we are at the bottom of the super cycle of the crypto market, and 2024 is the best time to enter without buying the bottom. The fear of picking up a knife will not be the anxiety of being trapped on the top of the mountain.

The market will not keep rising. There will be a big cold after the big heat. There will always be opportunities. Don't be too FOMO and go all in at once. Learn to react to market corrections and consolidations. Waiting. Don’t be too uncomfortable during the patience period. The longer you build momentum, the stronger the next bull market will be and the more likely it will be to hit new highs.

5. Look at developers in the medium term

An important data to stay awake comes from the developer activity rate. Due to the quantitative trading background, our team is technology-driven, and has been in the cryptocurrency industry for 7 years. We know that every bull market requires new narratives and traffic, even if Even if you don’t get out of the circle, you still need developers to enthusiastically open new disks.

The encryption market and the primary market are inseparable. The sectors of the secondary market are inseparable from the ecological promotion of the primary market. Often the developers of the ecology win the world, for example In 2021, Solona attracted a large number of developers with its unique positioning, which led to the myth of 200 times revenue.

Currently, according to public data, the number of weekly active developers in the industry has dropped from 10,000 in the 2021 bull market to 5,000. Although the data may not be comprehensive, But it can also reflect developer trends. If developers are not growing, where is the bull market engine? Continuously promoting new concepts can activate existing leeks, but it cannot attract continuous incremental users.

Figure 3. Summary of major public chain ecosystem developers

6. A long-term look at the Fed's interest rate cuts

There are many variables in the short-term trend. No one can accurately predict every rise and fall, and the long-term is more certain. According to analysis of U.S. non-farm employment data, swap transactions, etc., the Federal Reserve was originally certain to cut interest rates in March this year, but the probability has been reduced to about 70%. If the interest rate cut is delayed, it will affect the start time of the super bull market.

The nature of the crypto market is a new type of technology risk asset. High growth also comes with high risks. Only when interest rates are cut and relaxed, a large amount of hot money will be converted into liquidity. Although it is uncertain whether Bitcoin will exceed 70,000 U in 2024, in the medium to long term, it is imperative for the Federal Reserve to cut interest rates, and there is a high probability that Bitcoin will reach 150,000 U in 2025.

If the Federal Reserve starts to cut interest rates, the Bitcoin ETF channel has been established, and the interest rate cut will increase the water, and the big fish will be bigger.This is really In compliance with Charlie Munger’s motto of “fishing where the fish are”, the entire crypto market will usher in a super premium. Value investors originally criticized Bitcoin as a rat store, but now it has become a favorite on Wall Street, which shows that times have changed.

7. Dancing with the Bubble

Although in 2023 There are some 10x and 100x coins, but they are relatively few, and most of them are driven by emotions. There is also a survivor effect in media promotion. Ignoring these noises, the essence of the market is that Bitcoin is unique, so it is not a super bull market, like the Qianfan Athletics in 2017 and 2021. The current bubble needs to be squeezed.

But I am not denying bubbles, and I just believe that bubbles are the prelude to every round of paradigm shift. My point is to join the bubble, understand the bubble, and question the bubble. If you don't join the bubble, you will never understand its essence, but don't be obsessed with the bubble. Instead, you must see clearly the driving engine under the bubble. That is the constant you can grasp.

Soros has a famous saying, to the effect that world economic history is a series full of illusions and lies. If you want to gain wealth, you must recognize the illusion and participate in it. Which, then quit the game before public recognition. This sentence is easy to think about, but difficult to do. Looking back, during the Internet bubble in 2000 and the currency boom in 2017, only a few people made money. Many people had in-depth knowledge, but lacked discipline. In the end, Despite all the wealth, you still lose money.

It can be expected that 2024 will be bombarded with various new narratives. Join the bubble, understand the bubble, and question the bubble, so that you can quickly gain insight into the real bull market engine.

8. AI drives Web3 bull market

Let’s put Looking from the encryption industry to global trends, in 2024 we are in the midst of a major change in decades. In the past 20 years, the impact of the development of the Internet has exceeded the impact of the Industrial Revolution in the past 200 years. The impact in the past 200 years has also exceeded the impact in the past 2000. Technology is accelerating development, and we are in an era of exponential growth.

The encryption market is not an isolated island. The engine of the next bull market is likely to come from AI. Web3 practitioners should not draw a line to protect themselves. In the past, DeFi The Lego-style gameplay is simple and crude, and the myth of wealth creation has indeed attracted many people to follow. If it can be combined with AI productivity, more magical chemical reactions may occur.

In the process of quantitative analysis of blockchain projects, we came up with a "critical point" theory. Many Web3 projects are very valuable and have self-consistent logic. However, due to various reasons such as imperfect infrastructure, high operating costs, and low growth ROI, they cannot break through the critical point of user growth and will naturally shrink. If we use AI empowerment to break through the critical point and form a distributed network effect, many of the original valuable Web3 products can indeed be implemented, allowing more people to enjoy the commercial value of Web3.

Let’s look at some potential AI+Web3 cases:

-  ; Use AI to develop GameFi's NPCs to reduce development costs and create a richer user experience.

- Use AI to conduct smart transactions in DeFi, create huge profits, and even play new tricks with DeFi composability.

- AI can reduce content creation costs, prosper the Web3 creator economy, empower more ordinary people, and thus attract more traffic.

- The most difficult thing about the DePIN track is to break through the critical point of network effects. Most of them are difficult to succeed, but a few can be successful when combined with AI scenarios, because they can create more High ROI, once successful, will bring huge traffic and liquidity to the industry.

9. Web3 empowers the AI ​​industry

Use AI Driving the Web3 industry essentially uses AI as a tool to reduce costs and increase efficiency in the Web3 industry. However, the stock market for Web3 is limited, the incremental market still needs time to develop, and valuations are limited. However, because it is easier to tell stories and is more popular in the crypto secondary market, NFTPrompt and Sleepless recently launched on Binance have similar logic.

Sometimes we need to think in reverse. The above idea is far inferior to using Web3 to transform the AI ​​industry. Only AI-native has a higher-dimensional valuation, because the AI ​​industry chain It is a trillion-level market. We need to think more about the unique value of Web3 and how it can become an essential part of the AI ​​industry. For example, the distributed economic advantages of DePIN and the decentralized governance value of DAO.

The secondary market has given the direction. For example, Render on Binance has a market value of more than 2 billion U.S. dollars and focuses on distributed GPUs. Although they are all in Storytelling and user base are average, but AI-native’s valuation is higher. There is also Bittensor, which is also mining DCG and Polychain. It is a decentralized machine learning model market with a market value of $5 billion. It is also a leading AI+Web3 project.

Of course, everything still needs to return to the essence of business. It is not +AI for the sake of +AI. Which aspects of AI require Web3, and we must think about the AI ​​industry. What is the dilemma of the chain? For example, the d/acc concept proposed by Vitalik uses democratized technology acceleration methods to ensure AI security, which directly points to the centralized supervision problem of AI optimists.

The Web3 industry has formed decentralized finance, the monetization mechanism is relatively mature, and the chain has advantages such as transparency and trustworthiness , can it reduce the risk of algorithm development? Can the operating costs of large AI models be reduced? In this super cycle of the encryption market, it is very likely that Web3 unicorns such as decentralized OpenAI, Huggingface, and Character.AI will be born. Focusing on AI+Web3 has a high winning rate and high return rate, and it is best to focus on the platform layer, similar to the next Ethereum level.

10. From the inscription craze to the Bitcoin ecosystem

After being in the currency circle for a long time, it is more uncomfortable to watch others make money than to lose money yourself, but this is the reaction that the market wants. If there is no myth of wealth creation, it will eventually end up in stagnant water, such as a big A that cannot save 3,000 points. Users in the currency circle are prone to FOMO, and the market lacks an investor protection mechanism. There are sickles everywhere. Even if there are good opportunities, most people cannot seize them. There is always no shortage of hot spots in the currency circle. If you want to survive the bulls and bears, it is very necessary to cultivate your internal strength.

The popularity of Bitcoin Inscription is essentially because retail investors have seen through the rules of the currency market maker's game and began to pursue the Fair model. This is the market demand and the next big round. The inevitable trend of the bull market. The current inscription model is inherently unfair. Although there are some cases of wealth creation, they are still in the minority, so it is difficult for the inscription 1.0 era to last long.

Although the inscription craze is a bit darkly humorous, it at least gives the Bitcoin ecosystem a start. If various applications can be grafted on the Bitcoin ecosystem and have rich scalability, it may also be the growth engine of the next round of bull market. Of course, the most important thing is that the industry is in urgent need of a new Fair Launch model.

Figure 4. BRC-20 inscription casting quantity

Missed Inscriptions, MEME and other various opportunities to get rich are not scary, but missing out on the super bull market is scary. As long as you don't mess around, you can capture the industry dividends. You only need to get rich once in life and don't step on the wrong side. That's enough. Every big bull market in the crypto market starts from the Fair paradigm, such as the low-cost 1co in 2017 and the Fair Launch in the DeFi summer of 2020.

Finally

In November 2023, I propose a A very good friend went to buy Bitcoin at the bottom. She asked me how sure I was and how much I wanted to buy. She said it was like selling a house in Shanghai, and then I stopped talking. I don’t know if she followed through. So the most important thing in investing is not prediction, but how much you make when your prediction is right, and how much you stop losing when your prediction is wrong. Cognition is only the foundation, the difficult thing is to implement discipline.

Maybe some of our perceptions are wrong. The most important thing about investing is to think independently and don’t be gullible. DYOR, you are responsible for your profits and losses. If you win, you don’t need to invite me to the club. If you lose, don’t blame others. If there is a coincidence in prediction, it is purely luck. I am also a fool who walks randomly, but the hit rate is occasionally higher.

Many years later, when we look back, we will discover the current meaning. Maybe the current economic environment is not good, but this is indeed the best of times. At the turning point of the two major waves of AI and Web3, we may have overestimated the impact of 2024 in the short term, but we have definitely underestimated the turning point of 2024 in the long term.

Look at sentiment in the short term, developers in the medium term, and Fed interest rate cuts in the long term, don’t miss this rare opportunity, new rules of the game are changing Re-formulate, the water is big and the fish is big, and the rapids are strong.