Pantera Founder: How Long Until the Next Strong Bull Market?
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Pantera Founder: How Long Until the Next Strong Bull Market?
The future holds only good things.
Navigating Web3 tides with focused insightsAuthor: Dan Morehead, Founder and Managing Partner of Pantera Capital
Translation: Deng Tong, Jinse Finance
At the Bloomberg Investment Conference last June, I discussed crises in banking, global macro markets, and blockchain with Jay Clayton, former chairman of the SEC. At the end of the panel, the moderator asked me what black swan event I expected next. My response was:
"People always ignore black swans—until one actually happens. Then everyone only wants to talk about 'what comes next.' I'd say the biggest surprise is that we've already lived through all these major events—and perhaps nothing crazy will happen next."
"But if you insist I name something, I’d say regulatory clarity is the one thing nobody anticipated. There are several ways this could unfold."
Now, a very important theme is the absence of bad things happening.
For much of 2022 and 2023, rare and wild negative events kept occurring.
Volatility in global macro markets often exceeded historical norms. According to Edward McQuarrie, professor emeritus of finance at Santa Clara University specializing in historical investment returns, 2022 was the worst year on record for U.S. bond investors:
"Even looking back 250 years, there’s no worse year than 2022."
2022 was also the worst year since the Great Depression for traditional 60/40 stock-and-bond portfolios.
The impact was even greater in private markets, which in turn affected our venture capital space. IPO fundraising dropped 95% compared to the previous year, and deal volume fell by 85%.
The blockchain market suffered not only from all the above, but also from Sam Bankman-Fried's criminal actions affecting 5 million people and absurd levels of leverage at several lending firms.
The total market capitalization of the cryptocurrency market declined by 70%.
In my view, these were once-in-a-lifetime anomalies. For the next 10 to 15 years, no one will lend unsecured funds to leveraged crypto hedge funds or operate without transparency again. (Having lived through 25-year cycles, I know someone in the next generation will eventually try it again!)
Below is a diagram illustrating many events in blockchain history that many consider catastrophic.
Because none of these events managed to destroy blockchain, the absence of such extreme negatives is marginally a huge positive factor.
Another significant positive is the removal of some regulatory barriers and resistance from institutions that want to invest in this new asset class.
Over the past year, high-profile cases have seen favorable rulings—for example, the determination that Ripple’s native token XRP is not a security, and Grayscale winning its lawsuit against the SEC over its Bitcoin ETF application. In our view, these may be signs that regulatory clarity for blockchain is gradually emerging, creating conditions for further innovation in the United States.
Institutional adoption appears to be accelerating following the launch of spot Bitcoin ETFs in January.
With the Bitcoin halving expected in late April 2024, we believe the convergence of these positive factors will provide strong momentum for the next bull market.
Moreover, blockchain’s moment of transition from “dial-up” to “broadband” may now be underway. We can see this through the growth of Ethereum Layer 2 solutions and hyperscale blockchains.
Pantera has been managing capital in this space longer than anyone else—over ten years of wild bull and bear cycles. We’ve lived through three full boom-and-bust cycles—massive rallies followed, unfortunately, by roughly 85% drawdowns. I believe we are now at the beginning of the fourth major cycle.
The 2022 stock market crash created a massive "denominator effect" for institutions—they indeed pulled back from investing in private markets. As public equities return to new highs, they can reinvest in private markets again. Therefore, I believe the next 18 to 24 months could bring a strong bull market for cryptocurrencies.
This is a pivotal moment—the painful, terrible events in capital markets and blockchain from the past few years have been cleared out, while positive developments like the halving and regulatory clarity are unfolding simultaneously.
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