Pantera Capital: The absence of black swans is the biggest positive for this bull market

Source: Pantera Capital

Translator: Odaily Planet Daily Azuma

Editor's Note: From last night to this morning, the crypto market has once again experienced a sudden change, with BTC briefly breaking through $57,000, rising 10% in a single day. At this critical moment, many investors are striving to find various bullish signals, trying to find answers for BTC's sudden rise. However, Odaily Planet Daily has discovered that Pantera Capital recently published a report titled "The Absence of Bad Things," which provides a unique perspective— the biggest feature of the current market is the absence of any negative events, which in itself is the biggest positive signal.

Below is a summary of the Pantera Capital report, compiled by Odaily Planet Daily.

Last June, I discussed the banking crisis, macro markets, and blockchain with former SEC Chairman Jay Clayton at the Bloomberg Invest Conference.

At the end of the discussion, the host asked me a question: "What potential black swan events should we be on the lookout for?"

My response at the time was: "Before a black swan occurs, everyone tends to ignore it, and once it happens, people start to think about what the 'next (black swan) will be.' In my view, the best news right now is that we have witnessed all potential black swans materialize over the past year, and nothing crazier is likely to happen… If you insist that I say something, I can only say that the regulatory attitude is something no one anticipated, which could lead to several different outcomes."

Regarding the current market situation, a very important theme is the absence of bad news.

For most of 2022 and 2023, various rare and crazy bad news kept emerging.

The global macro market experienced unprecedented volatility. Edward McQuarrie, an emeritus professor at Santa Clara University who specializes in historical investment returns, stated that 2022 was the worst year for U.S. bond investors— "You won't find a worse year than 2022 even if you look back 250 years."

2022 was also the worst year for the "classic 60/40 stock-bond portfolio" since the Great Depression.

The private equity market was even more severely impacted, directly affecting our venture capital business. The total amount raised through IPOs decreased by 95% compared to the previous year, and trading volume dropped by 85%.

The cryptocurrency market was no exception, with the collapse of FTX and the absurd leverage operations of six lending institutions leading to a total market cap shrinkage of over 70%.

In my view, these should be crazy events that only a generation would encounter. In the next 10 or 15 years, no one will lend to cryptocurrency hedge funds, especially those without collateral and with opaque operations, but based on my over 25 years of cyclical observation experience, there will definitely be someone in the next generation who will do so again.

Below is a visual representation of catastrophic events in blockchain history.

These black swans did not kill cryptocurrency; rather, their absence has become a huge bullish signal for the new cycle.

Another significant positive is that some regulatory obstacles previously faced by the cryptocurrency industry have been removed, especially for financial institutions looking to build based on this emerging asset class.

Over the past year, the victories of Ripple and Grayscale, along with the approval of ETFs, suggest that the regulatory environment in the blockchain space may be becoming clearer.

Since the approval of the Bitcoin spot ETF in January, the adoption rate among institutions seems to have accelerated.

Given that Bitcoin will undergo a halving at the end of April 2024, we believe that the interplay of these positive factors will drive BTC towards the next bull market.

Additionally, the blockchain industry may be experiencing a leap from the "dial-up" to the "broadband" era. We can witness this transition through the growth of Ethereum Layer 2 and other high-performance Layer 1s, which will be a major focus of our investor communications in March and will become the centerpiece of our next thematic seminar.

Pantera Capital has focused on the cryptocurrency industry longer than any other company—over a decade, witnessing multiple bull and bear cycles. We have experienced three complete cycles, witnessing numerous surges and crashes. We believe the market is now at the beginning of the fourth major cycle.

The stock market crash in 2022 had a huge impact on institutional investors, many of whom withdrew from the private equity market. Now, as the stock market returns to historical highs, they will likely re-enter the private equity market, so I believe that in the next 18 to 24 months, the cryptocurrency market is likely to experience a strong bull market.

This is a pivotal moment; the traumas of the past few years in the financial markets and the blockchain space have become history, while positive factors such as halving and regulatory easing are occurring simultaneously, all of which indicate the direction of future developments.