The New Crypto Bull Run: Why Is This Time Different?

Some fundamental differences, and their surprising implications for the 2024 and 2025 bull markets.

As we approach the fourth or fifth inning of this bull market, I am starting to notice some fundamental differences from the 2021 bull market. These changes are building a very different infrastructure on which the bull market will be built, and they are changing the trajectory of the market.

This time it will indeed be different, and there are some unexpected conclusions to be drawn from these differences. The way this bull market is unfolding is setting the stage for a very unique journey, with a destination that most people would not expect... by no means a mirror image of previous cycles.

Two huge differences and what they mean:

#1 - This is a sell-side (project) market, the VC ecosystem has lost its essence.

This is perhaps one of the most fundamental changes. In the 2021 bull run, projects initially raised funds on very favorable terms to investors. The vesting period was often less than 3-4 months, and the fully diluted value (FDV) was small. There were also far fewer investment opportunities for retail investors, which led to greater secondary market demand. (Prices initially went much harder). In early 2021, it was a buy-side (investor) market.

As the 2021 bull run matured, vesting and terms began to lengthen, everyone scrambled for pre-sale opportunities, and the market shifted to a seller's market. As the supercycle talk intensified, terms began to get ridiculous, with inflated FDVs and vesting rights extending into the bear market.

In this bull run, terms were heavily skewed toward sellers (projects) from the start. Pre-sale terms in 2024 were 3-4x worse than in 2021, and they are getting worse, with many projects raising hundreds of millions of dollars in FDV and vesting periods often exceeding 18 months, often up to 4 years. Worse, about 1 in 5 projects will retroactively change terms or refund investors months after raising funds, with zero recourse for investors.

Despite this, VCs are desperate to throw money at projects, paying little attention to terms as they scramble for allocations.

Many are simply passing on investments to retailers for fees, so they have an incentive to get more volume regardless of terms. Exchanges are asking projects to extend their vesting and reduce their TGE unlocks, and market makers are siphoning off more and more tokens. In short, while presales are still very profitable, it’s not the money-printing machine it once was.

What does this mean?

• The velocity of capital turnover will slow dramatically. A much larger portion of paper gains will be locked up and never realized than liquid tokens ready to enter the latest narrative. Much of this will likely be offset by passive inflows into BTC and ETH ETFs.

• Since locked tokens can’t be sold, and many investors are forced to become diamond hands, the bull run could last a long time, beyond the widely expected end date of early 2025. My expectation remains for the bear market to begin in the fall of 2025.

• With circulating tokens remaining stubbornly low despite inflated FDV (due to long cliffs and long vesting schedules), altcoins’ late bull run prices may be more difficult.

• Altcoins will face a dilution effect as the number of projects proliferates, giving all capital seeking investment more options. Having credible projects, legitimate teams, and strong fundamentals will become increasingly important to sustain outsized gains.

• Not surprisingly, as liquidity becomes increasingly locked up in illiquid presale investments, VCs will be forced to go further out of the risk curve, using leverage and margin to maintain active participation in the market. This will make the bubble more likely to burst than it otherwise would, especially as bear markets begin to destroy the underlying investment value that supports their profits and leverage.

In summary:

• Extended cycle

• Altcoin performance will focus on reliable projects

• Presales are still profitable, but lower than in the previous cycle (so far)

#2 — Carryover altcoins (bear market survivors) create a higher base for the bull market to break out.

There is all sorts of talk about a shift-left cycle, referring to the earlier and more explosive start to this bull run compared to previous ones. I believe this earlier start is largely a result of the larger number of altcoins left over from the 2021 cycle, and the lack of disruption from the COVID-19 pandemic. In fact, this seems more indicative of a larger, longer, and more explosive bull run than a shift-left bull run. These altcoin survivors have pre-existing communities and package holders, as well as teams that have built products throughout the bear market.

There are more fundamentally strong investment opportunities than at this stage in previous cycles. This is important to consider because it suggests that we are starting this bull run from a higher starting point, rather than us driving it forward.

During the 2017 cycle, there were far fewer altcoins and very few carryovers from the previous cycle. This meant that choice was limited and competition for capital to invest in the same small basket was fierce. In 2021, the carryover from the 2017 cycle is back again, and the infrastructure for private sales is very new and evolving, making entry even more exclusive and harder to get.

By 2024, we have a large number of projects that have survived the bear market and continue to build, and now have a fundamental value proposition. We also have a mature VC and private sales landscape that has simplified access, and the value add is now no longer about simply getting VC, but getting a reliable platform that offers the best deals. The value has shifted from simply getting access to getting quality access through the best launchpad platforms.

Conclusion:

In general, humans are hyperbolic creatures. In general, we are an emotionally driven herd that reacts to events directly in front of us, unable to suppress emotional reactions in favor of sound logical thinking. The crypto masses are an amplified version of this phenomenon, a herd of volatile bipolar degenerates that gleefully chase the latest green candle and flee in terror from the dreaded red candle. In fact, those degenerates need to do the exact opposite…buy red, sell green, and tune out the noise.

Zoom out. This is still considered the most explosive crypto cycle to date. I would be very surprised that Bitcoin doesn’t roughly triple from here and Ethereum 4-5x from here. We are still in the early stages, and the halving is coming. ETFs, corporates and sovereign funds are consuming all Bitcoin while Crypto X (Twitter) is going crazy with 15-20% drops.

Scaling down and buckling up, we are very close to the parabolic phase of the bull market