IOSG Founder’s 2023 Summary and 2024 Outlook Bull Market is on the Horizon

IOSG Founder's 2023 Recap and 2024 Predictions Bracing for a Bull Market on the Horizon

Blazing the Bull Market Horn, Analyzing Market Vitality (2023 Summary and New Year Outlook)

Author: Jocy, Founder of IOSG; Source: Author’s Twitter

1. Scale effect growth brought by effective regulation

When Binance’s regulatory boot drops, many people see it as negative news for the industry, as the process of “Crypto’s largest unicorn finally compromising with regulations.” But in my opinion, this represents the biggest potential risk area being completely dismantled, making the industry’s overall risks manageable and moving towards a regulated market direction, which will also accelerate the progress and implementation of ETFs.

We can imagine: Currently, CME’s trading volume accounts for over 25% of the entire BTC Futures (verifying the speculation of large-scale entry of traditional institutions). With weakened regulations in the United States, BTC’s trading volume on compliant exchanges (such as Binance/Coinbase) will dominate the market share, and we may even see Nasdaq directly listing BTC and ETH. In such a scenario, just imagine how large the daily BTC trading market could be? Under the U.S. debt crisis, the Federal Reserve and the Democratic Party seem to have reached a consensus on some form of cryptographic governance, and they are likely playing a big game. Regulatory compliance can reconcile with the crypto market, which is one of the positive factors for the industry, pushing the industry towards a broader market.

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2. Data tells us the bull market is returning

Currently, we can see three events aligning closer in the coming months:

The first is the accelerated approval and implementation of ETFs mentioned earlier (this will become an inevitable event, and Wall Street seizing Bitcoin pricing power will also be a certain event);

The second is the Federal Reserve starting to take interest rate reduction measures as inflation peaks and recedes (given the current state of U.S. debt, interest rate reduction will also become a more certain event);

The third is the halving of Bitcoin production within our industry and the iteration of Layer 2 infrastructure and application innovations in the Ethereum ecosystem.

These three events will happen simultaneously in the next six months, indicating that the industry will start to rebound from the current market and have the opportunity to make an impact in a stronger bull market.

We can analyze the historical bull and bear market cycle data change rate (citing IOSG’s internal data analyst) to verify the current market situation. The median decline during a historical bear market cycle is -77%, with an average decline of approximately -75% (the recent bear market cycle has indeed fallen by 77%). The median price increase during a bull market cycle is 15 times, with an average increase of approximately 60 times.

As for the duration of the cycle, the median duration of a bear market cycle is 354 days, with an average duration of 293 days (the recent bear market cycle also lasted close to 354 days). For bull market cycles, the median duration is 604 days, with an average duration of 571 days.

It is valuable to analyze historical information to understand the cyclical nature of the market. Currently, we are buying into the middle phase of a medium-length bull market cycle and entering the climbing phase of this cryptocurrency bull market.

3. Continuous Ecological Innovation, the Unbreakable Ethereum

Speaking of Ethereum’s ecological innovation, we cannot ignore the DevConncet conference in November, which was the largest gathering of crypto developers this year and the event where V God appeared the most. Let’s take a look at what happened at Devconnect.

Strengthened infrastructure: New technologies and segmented market directions have emerged. At L2Day, zkDay, and zk Accelerator, we witnessed numerous ZK and L2 protocols showcasing their strengths on different stages. Innovative protocols based on zkRollup, including Risc0/Nil Foundation, and Scroll/zkSync/Aztec, are competing to present a diversified ecological landscape after their mainnet launches.

1) ZK Coprocessor is a promising direction. It includes Axiom, Brevis, Lagrange, and Herodotus. Axiom explains the application prospects in a simple and understandable way. The biggest difference between CEX and DEX is the referral program and loyalty plan. The more users you bring in, the more trading volume and income you generate, resulting in more fee reductions. Axiom hopes that DEX can also have these plans to help Uniswap track all relevant on-chain interaction data. Subsidies are provided by calculating the referrals and transaction records of each user in a trustless and secure manner.

2) Different protocols in the Layer3 and RaaS competitions, including Conduit, Caldera, and Gelato, are launching application chains based on gaming/social/DeFi, etc. Due to the Israeli-Palestinian conflict, many developers with Jewish backgrounds did not attend this conference. Nevertheless, you can still see countless developers and founders constantly promoting their Rollup as a service solutions to the market. This is a rare early market! At one moment, I was sitting in a café surrounded by founders from various L2/L3 backgrounds, who were pitching their solutions on how to better help deploy applications on the chain and provide industry application experiences equivalent to Web2. It’s a bit like the early Web1.0 market around 2000 and the eve of the mass eruption of Saas around 2012.

Many people say that Ethereum’s network innovation is very slow, and many modules have been delegated to different development team communities. However, this actually verifies its powerful network effect. The aforementioned mainstream L2/L3/DA projects are helping Ethereum solve performance and use case problems. Under the competition of technological development, it seems that the entire crypto ecosystem, whether it’s infra/dapps/vc, has become employees of the Ethereum network. Everyone is not receiving salaries but is working together to contribute to the growth of this network.

3) Recently, some new developments in the field cannot be separated from the widely discussed technologies, such as distributed GPU and ZKML. The narratives and gains of Bittensor have shocked many people, and in the same field, the seed round valuation of Gensyn, reaching 500 million US dollars, has also attracted attention. They are all dedicated to bringing decentralized AI computing to users.

This hot field is not just a theoretical concept without practical applications. There was a game developer who showed me how they combined Crypto with AI. Their presentation surprised me with the natural connection between Crypto and AI. They developed a fully on-chain soccer game platform where 5 people can play against each other, and every pass and goal is supported by ZKML. The game results are automatically uploaded to the blockchain. Players can set different strategy models (ZKML) for the game (similar to the use of Bot/AI strategies in Dark Forest in the past).

Although there is still debate and varying degrees of acceptance regarding the use cases of on-chain LLM and ZKML, I believe that we will soon witness more AI-centered crypto platforms. Recently, Vitalik also mentioned “d/acc” (decentralized acceleration), and in the future, we will see new projects from Unibot and former Flashbot founder Stephant. This will attract more new users to change their trading habits and start using bot-based trading methods.

The last direction is fully on-chain gaming. I mentioned this direction before and would like to share with you a young gaming genius developer I have come across, Small brain– the designer behind thoughtfully designed fully on-chain games like Word3, Drawtech, and Gaul. They not only developed many outstanding gameplay mechanics but also created games with blockchain features. With their unique perspectives in the AW community, they have gathered a group of like-minded developers and rapidly iterated on the mud. They are progressing towards the goal of launching a new fully on-chain game every six weeks and have conducted many interesting experiments.

I think the critics of Ethereum overlook its compatibility and evolution capabilities. Especially when new application products encounter bottlenecks, Ethereum can quickly absorb new technologies and solve these bottlenecks (such as TPS and gas fees), providing solutions to the problems encountered by most applications. The new alt L1 does not have any obvious advantages in terms of application scenario segmentation.

In this cycle, Ethereum has two particularly typical network expansion patterns that are different from before.

The first is the currency and “security” output, through LSD assets, which is similar to the extension of the US dollar. It is output to various Layer2, altchains, restaking protocols, and DA protocols. With the overflow of Ethereum’s LSD, the extension of Ethereum’s currency will greatly enhance the network effect of Ethereum, making the moneyness and store of value characteristics of ETH more prominent;

The second one is technology absorption and mergers. In each cycle, Ethereum absorbs new technological paradigms based on the failures of previous platforms, whether it’s POS, which was observed and summarized for four to five years before implementation, or scalability, from Plasma, sharding to various rollups, all of which draw lessons from many failed projects. In an open-source system, this ability is equivalent to the billions of dollars in R&D sunk costs that most competitors have invested over the past few cycles. And this is all Ethereum’s investment capital. I don’t think any platform (including Bitcoin) has benefited as much as Ethereum in this regard. Fortunately, Ethereum has continued to absorb and merge throughout this cycle.

So why should we question Ethereum? Even in a bear market, there are still countless projects and developers creating different products and protocols on the Ethereum network. There are still tens of thousands of developers and projects creating new modules and components for this network without expecting returns. All Web3 funds and investors cannot avoid investing in the Ethereum ecosystem, which means that under the current market capitalization of hundreds of billions of dollars for ETH, they will continue to invest billions of dollars in scale into Ethereum ecosystem projects. Ethereum will only grow bigger and stronger.

4. The Notable BTC Ordinals Ecosystem

With the rapid recovery of the market, Bitcoin, as the pride of heaven, has many Bitcoin ecosystem projects competing in various themes. It is extremely difficult to think about Ordi’s value proposition from the original ideology of Bitcoin. As a totem of the crypto world, value storage is its core function. With the broader social acceptance, consensus enhancement, value appreciation, institutional entry, ETF expectations, and Bitcoin halving, the prosperity of the ecosystem is a coincidence. Whether it’s Bitcoin’s Layer 2, Ordinals, or other protocol applications, they should first respect and protect Bitcoin’s core function, which is value storage.

The rise of Bitcoin memes and NFT-like assets is closely related to the retail investor movement against VCs’ “Fair Launch”. After all, under VC dominance, retail investors can only eat scraps while the meat is consumed by VCs. Compared to the ICO era, the barrier for retail investors to enter is very high (Ethereum’s ICO in 2014 was valued at only $23 million). Most projects in this category have a market valuation in the tens of billions of dollars on the secondary market, which is very low in terms of EV for retail investors.

It is precisely under this market structure that retail investors initiated the “Occupy Wallstreet” of the current cryptocurrency market. However, this trend itself is unhealthy. During DeFi Summer, there were also a large number of “fair launch” projects, but in the end, they turned out to be pump and dump projects, with various crude forks from “month-long trips” to “day trips”, driving out the good coins with bad ones.

Finally, after a cycle of ups and downs, there are very few projects left that truly adhere to the concept of “fair launch.” The ones that remain are the established projects with a solid financial structure and a proven track record. Long-term projects require long-term capital investment, while the fast and furious “fair launches” struggle to support the development of a sustainable ecosystem. The reason why mainstream crypto institutions have not followed suit in embracing Bitcoin technology is because there is a lack of substantial technological scalability. It is mostly just a call to action fueled by the sentiments of retail investors (although we can’t completely rule out the possibility of some institutions and exchanges manipulating these sentiments).

We do not support applications of technology that threaten the robustness of the Bitcoin protocol. Speculative hype and emotional trading cannot last in the long run. The BRC20 protocol still has many shortcomings. As institutional investors, we do not encourage speculation. However, we are willing to support more builders who bring forth valuable and meaningful protocols that enrich the ecosystem. Therefore, the cryptocurrency market is a vast melting pot. Tokens like Ordi and other BRC20 tokens have amplified the speculative and manipulative aspect of the market. I believe many people will profit from this, but when we engage in opportunistic trading without a clear thesis, we will gradually lose our way, and as a result, incur losses in certain projects.

So, if you are a new entrant who sees this tweet, or if you have friends and family who are succumbing to FOMO and want to start buying in, I hope you can do the necessary work of informing and reminding them of the risks involved. Advise them to stick to choosing between BTC/ETH, as that is the simplest and least likely path to make mistakes. It is extremely difficult to uphold principles in the world of investment. Speculation and memes have brought about wealth effects, but it is crucial for us to not only focus on these aspects in the cryptocurrency market but also to support protocols that have more valuable propositions and promising applications. This will become an important responsibility and role for the industry to benefit as a whole.

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