Examining the Dilemmas and Opportunities of the Cryptocurrency Market through Financial History

Produced by: ThePrimediaDAO
Authors: 0xSheldon@TPTrade, Jerry@TPDAO

Introduction

If we look at the rise and fall of Athens as the origin of world financial history, we are pessimistic—finance only serves money, allowing money to generate more money; the prosperity and diverse development of finance rely on war, bloody and brutal.

However, the ups and downs of New York give us confidence. The crisis of Wall Street's impending demise has occurred more than once, but it has not fallen; instead, it has thrived because New York's finance was infused with the gene of "optimizing capital allocation" from the very beginning. It is worth mentioning that in the process of modern financial development in New York, the role of funds has been indispensable, playing a very special role.
So, what about the crypto market?

01 The Rise and Fall of Athens

Taking Athens as a representative example of the origin of world finance, we can more easily see that the essence of finance is exploitation. Look at the cruelty of Athens' "sixth part"—debtors had to pay five-sixths of their harvest as interest, leaving themselves only one-sixth; if five-sixths of the harvest was not enough to pay the interest, creditors had the right to sell the debtor and their children into slavery.

With its unique geographical position, Athens rose through commerce but was destroyed by finance.

The splendid Athenian civilization once represented the light of human civilization. In the context of war, Athens, which heavily relied on trade, had to seek support from finance—maritime credit emerged, primitive banking began to take shape, and temples also started lending… Finance brought economic prosperity to Athens, but under the impact of money, once defeated, the civic duty to participate in wars vanished. More seriously, the former sense of morality among citizens also deteriorated. Moral decay follows an irreversible ratchet effect—once consumption habits are formed, they are irreversible, easily adjusted upward but difficult to adjust downward.

It can be said that the destruction of Athens began with internal collapse.

02 The Ups and Downs of New York

A typical representative of modern financial history is undoubtedly the tumultuous Wall Street, and one of the most stimulating elements in this is the fund. As the financial market develops to a certain extent, individual investors become less important on Wall Street, and more and more funds are entrusted to institutional investors for management. In 1961, the trading volume of individual investors accounted for 51.4% of the total trading volume on the New York Stock Exchange, while institutional investors accounted for 26.2%; by 1969, the share of institutional investors rose to 42.4%, while the share of individual investors fell to 33.4%.

The subsequent bull market was primarily driven by the significant increase in the turnover rate of institutional investors' portfolios, which steadily boosted trading volume. In 1955, the annual turnover rate of mutual funds was about 1/6; by 1960, a 50% turnover rate had become quite normal; institutional investors were also engaging in block trades (buying or selling securities in quantities of 10,000 shares or more).

By the late 1960s, people attributed the bear market to Wall Street. Similar to the rhetoric of "Wall Street is about to perish" during the Great Depression of the 1930s, it reappeared.

However, Wall Street not only did not perish; on the contrary, it welcomed a new round of victory. Thanks to the timely promotion of the Securities and Exchange Commission, technology came to save Wall Street. This was possible because New York finance, which rose under the wave of the Industrial Revolution, possessed the excellent gene of "financial empowerment of industries," with Wall Street playing the role of "capital optimization allocation."

This is enough for countries around the world to learn from and will also apply to the crypto ecosystem.

03 New Opportunities in Crypto

Benefiting from the support of Wall Street brought by Bitcoin ETFs, this bull market so far has only been a Bitcoin bull market. Therefore, we believe the reason this bull market is "not bullish" lies in the lack of motivation from "native crypto funds" in the crypto market.

There are many analyses regarding why the bull market is not bullish, with the most mainstream being the complementary takeover of VC coins and meme coins. We believe that behind this is still the lack of "native crypto funds" in the crypto market.

VC institutions capable of discovering quality projects are extremely rare; many VC institutions are merely choosing to co-invest, leading to inflated valuations before VC coins are listed, resulting in a situation where they peak immediately upon listing; meanwhile, those who have experienced hundredfold coins remain immersed in it, thus becoming enthusiastic about meme coins, but their fate is more tragic than a near-death experience, as most meme coins are destined to go to zero, and hundredfold meme coins are even rarer.

Drawing a parallel with the ups and downs of New York finance, in the annals of crypto market development, this bull market is the moment for "native crypto funds" to take center stage (here, the concept of crypto funds excludes venture capital funds, specifically referring to quantitative hedge funds and value investment funds focused on the secondary market).

Compared to crypto funds in traditional financial markets, they must have the ability to invest in coins other than Bitcoin and Ethereum; whether through quantitative investment or value investment, they have their own logic and keen instincts.

Clearly, whether it is crypto funds in traditional financial markets or "native crypto funds," they are all passionate about money; but for "native crypto funds," faith is even more important. In 2021, a large number of traditional financial funds and excellent traders from traditional institutions flocked in with enthusiasm for money, but after experiencing the baptism of 2023, what remains are those who are still passionate about this industry.

The activity in the secondary market will bring prosperity to the primary market. It is precisely because the market has not withstood the baptism that the anticipated development of "crypto applications" has also fallen into a bottleneck. In the context where the performance of public chains in the crypto world has significantly improved, cross-chain interoperability has made great progress, and foundational elements like NFTs and DIDs are continuously being perfected, "AI + Web3," "DePin," and gamefi/blockchain games that had practical foundations in the previous cycle are merely thunder with little rain, constrained by the roles of "financial empowerment of industries" and "financial promotion of capital optimization allocation" in the crypto market.

The starting point of all these changes should lie in the breakthrough of this "not bullish bull market." The key factor for the breakthrough is "native crypto funds." We believe that the role, status, and function of "native crypto funds," as well as the value opportunities they bring, will gradually emerge in this cycle. Will you be part of it?