Alliance DAO Founder's Reflections on the Bear Market: Advice for VCs, Builders, and Retail Investors
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Alliance DAO Founder's Reflections on the Bear Market: Advice for VCs, Builders, and Retail Investors
The current bear market will be a prolonged state, similar to previous bear markets in the crypto world.
Navigating Web3 tides with focused insightsAuthor: Founder of Alliance DAO
Compiled by: TechFlow Intern
Recently, I've had many conversations with builders and investors about the current bear market, and I’ve also read through related discussions on Twitter. From what I can tell, there's a broad consensus that this bear market will be prolonged—similar to previous crypto bear markets.
Bullish voices argue: "This is currently the most unpopular consensus in crypto—the era of the 4-year cycle is over. We are now in a new regime." In this model, macro forces drive a decade of high volatility, shorter cycles, and an ongoing tug-of-war between growth, inflation, and policy.
In fact, the recurrence of a roughly 4-year cycle this time was largely coincidental. Not only has the current bear market been driven by macro factors, but so too was the 2020 bull run. Likewise, had the Federal Reserve pursued a different policy path, this cycle could easily have lasted five to six years.
I understand why people predict 4-year cycles—because every prior crypto cycle has lasted about four years. But what’s different this time? This certainty stems from projecting past patterns onto the future, giving us a false sense of predictability.
However, using old market models to forecast the future only works when market size and composition remain relatively unchanged. That’s why quant funds make so much money in traditional markets. But in crypto, each cycle brings order-of-magnitude changes.
More importantly, market composition has shifted dramatically since the pandemic. This is evident in Bitcoin trading—unprecedented monetary and fiscal stimulus launched in the post-COVID era flooded the market with macro-driven liquidity. Bitcoin now reacts more autonomously to macro events like FOMC decisions. You can feel the increasing correlation between traders arbitraging Bitcoin and those trading the Nasdaq. You can sense long-term allocators rebalancing their portfolios by selling Nasdaq when Bitcoin falls, and vice versa.
This is an unfortunate consequence of “institutional adoption.” Typically, non-native capital—driven by macro liquidity—now dominates the crypto market. Evidence suggests this wasn’t true before the pandemic, and certainly not in 2017. If you view the market as a voting machine, macro-driven capital now holds more voting power than native crypto capital. Macro-driven capital views crypto as a long-duration asset or hedge against fiat devaluation—not as an independent asset with a rigid 4-year cycle.
By the way, why are people in this space suddenly talking about macro—something barely mentioned during the bull run two years ago? My guess is that people tend to blame external factors like macro for losses, while crediting themselves for gains: "I didn’t make money because of the bull market—I made it because I’m brilliant."
Back to the shift in regime. Another crucial factor is that the impact of Bitcoin halvings diminishes over time, progressively approaching zero. In the past, I could accept the argument that halvings caused the 4-year cycle. But looking ahead, the influence of halvings on market cycles will continue to shrink.
What does all this mean for builders, venture investors, and retail investors?
Venture Investors
Over the past few months, they’ve clearly been tightening their belts. This is completely irrational. In such a market, they should be greedy, not fearful. They should act like Warren Buffett—placing bigger bets rather than whining and waiting 6–12 months for valuations to bottom out, thinking they have an edge on macro timing.
Builders
I hesitate to give universal advice to builders because every startup is different. But generally speaking, like venture investors, I hope you won’t obsess over the market, delay token launches because you think we’re in a bear market, or pivot because you believe your product is a “bull market product” that won’t work in a downturn. Instead, build for the next five years, not the next six months. That said, do remain mindful of the current challenging fundraising environment.
Retail Investors
Below is my personal framework—take it or leave it. If you’ve taken an intro statistics course, my approach resembles linear regression: a weighted average of several factors. More specifically, it’s a weighted average between “crypto-native” and “macro” signals.
Despite my earlier criticism of the 4-year cycle narrative, I still believe historical on-chain native metrics—like moving averages and on-chain indicators—hold some value, though there are fewer reliable signals than before. I assess the weight ratio between "crypto-native" and "macro" as 3:7.
On the macro side, I know I have zero edge. So in my life, I’ve done enough financial work to recognize who actually does have an edge. Ultimately, I’ve identified 5–10 individuals with genuine macro insight, and I take a rough weighted average of their views. I place significant weight on people like Ray Dalio and Druckenmiller. (Their downside: they don’t speak often.) I also assign some weight to a handful of well-known, data-driven researchers on Fintwit. (Their downside: they’re researchers, not portfolio managers.) By the way, no one on Crypto Twitter has a real edge.
When Bitcoin fell below $20,000, I put this framework into practice and began building long-term positions. Even though nearly all historically reliable crypto indicators suggested risk assets hadn’t yet bottomed, I bought in anyway—because the weighted average of the 5–10 macro experts I trust signaled that we had already hit bottom.
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