Bankless: Has the bull market not started yet or has it already ended? How to view the future market direction?

Host: David Hoffman, Bankless

Guest: Ledger, Crypto KOL

Compiled by: Peyton, 7UPDAO Analyst

Has the bull market started? If not, what does this mean for future prices?

David Hoffman invited Ledger to discuss some charts and describe his views on the future market.

The Bankless channel is a media platform focused on cryptocurrency and decentralized finance (DeFi). Founded by David Hoffman and Ryan Sean Adams, it provides news, educational content, and analysis on cryptocurrencies, blockchain technology, and decentralized finance. The Bankless channel is known for its in-depth market insights, practical investment strategies, and analysis of industry trends, aiming to help users understand and participate in the decentralized finance ecosystem.

Ledger

Ledger Status is an active individual on social media, particularly on the X (formerly Twitter) platform. His content mainly focuses on the latest developments in the cryptocurrency market, industry news, and market analysis.

Ledger Status is recognized for his deep understanding of the cryptocurrency market and timely market updates. The content he shares includes market trends, technical analysis, and predictions for future movements, usually presented in the form of commentary, articles, or videos. This content is highly valuable for investors and enthusiasts looking to keep up with the dynamics of the cryptocurrency market. As of the time of writing, he has 233.5K Twitter followers.

He founded the website Ledger Status in September 2017 for crypto and blockchain enthusiasts, featuring a range of foundational resources, technical analysis, and exciting stories about the crypto industry, aimed at serving those interested in crypto and blockchain technology, with the goal of providing foundational and technical analysis for various crypto assets and the organizations behind them.

Four Charts (Four Indicators)

David Hoffman:

He introduced the discussion with Ledger and presented four charts: Bitcoin dominance, ETH/BTC ratio, ETH/Solana ratio, and Solana/USD price. He believes these charts reflect the current state of the market and aims to get Ledger's interpretation.

He mentioned that recent market volatility has increased due to the unfreezing of yen trading and suggested that this is a good time to assess the broader crypto market.

Ledger:

Bitcoin Dominance: Ledger acknowledges Bitcoin's strong dominance and believes the current market phase resembles the early stages of a longer market cycle rather than the end of a cycle. He compares it to the phase in 2019, noting that recent volatility may just be an experimental phase or the beginning of a new cycle.

Market Sentiment: He observed that despite some rapid ups and downs in cryptocurrencies, there is not widespread excitement among the public about buying cryptocurrencies or stocks, reflecting a more stable market rather than a frenzied state.

Solana's Position: Ledger emphasized Solana's significant progress, noting its resilience and active development despite challenges. He described Solana as having entered the "top league," similar to Ethereum's position in the previous cycle, and highlighted Solana's strong network effects and community engagement.

ETH/Solana Ratio: He pointed out that Solana has performed better relative to Ethereum and other assets. However, he also mentioned that neither Solana nor Ethereum has reached their historical highs, and Ethereum's relatively poor performance may be due to a lack of new participants.

Market Dynamics: Ledger holds an optimistic view of Bitcoin, Ethereum, and Solana, seeing the changes in their relative values as opportunities rather than negatives. He emphasized that these dynamics provide opportunities to identify value, making the current market conditions favorable for analysis and potential trades.

Market Sentiment Check

David Hoffman:

Bitcoin Market Share: Noted that Bitcoin dominance has been rising for a year, while the ETH/BTC ratio has been declining for two years.

Solana's Trend: Observed that Solana's upward trend has lasted nearly a year, attributing it to the excessive selling during the FTX collapse and the subsequent rebound driven by meme coin trends.

Market Cycle Perspective: He believes the current period does not reflect traditional market cycles but is an isolated phase of cryptocurrency activity. He thinks traditional market cycles would involve new retail participants and significant trends like NFTs or ICOs, but these are currently lacking.

Current Market Status: Feels we are in a stagnation phase, waiting for new participants to define the next cycle, while Bitcoin's market share is rising, and Solana's relative performance is also notable.

Ledger:

Solana's Rise: Agrees with this view and adds that Solana's rise is driven by meme coin trends, potentially similar to the rise of Ethereum's DeFi. He also mentioned that Solana has the potential to capture niche markets like decentralized physical infrastructure networks or quasi-real assets.

Ethereum's Role: Points out Ethereum's focus on durability and its role in major financial markets, supporting large lending platforms.

Ecosystem Differences: Emphasizes that while Solana excels in speed and specific niche markets, Ethereum focuses on reliability and large-scale financial applications. Both ecosystems are thriving but serve different purposes.

Resilience of DeFi: Impressed by the resilience of cross-chain DeFi, despite challenges such as liquidations on Curve or attacks on platforms like Compound.

Market Cycle Perspective: Expresses skepticism towards extremist views and believes we are in a consolidation phase rather than the end of a market cycle. He notes the absence of new significant narratives or external capital entering the market, indicating that a pessimistic view of the cycle's end is misguided.

Price Discovery

David Hoffman:

Bitcoin and Ethereum Price Levels: Observed that Bitcoin only briefly exceeded its historical high in 2021, reaching $72,000 in March and $71,000 in May, but failed to maintain those highs. Ethereum also failed to stay above $3,000, struggling to reach its previous high of $4,000, making its historical peak seem out of reach now.

Solana's Performance: Noted that Solana also failed to reach its old historical high, despite news related to ETFs (exchange-traded funds), indicating a lack of new users in the cryptocurrency space and suggesting no significant new price discovery has occurred.

Ledger:

Market Cycle Hypothesis: Challenges the four-year cycle hypothesis based on halving, believing that ETFs may have a greater impact on demand. He also points out that global market and election-related uncertainties may affect the crypto market.

Consolidation Trend: Believes that consolidation after reaching historical highs is normal and advises patience. He thinks that while Bitcoin is consolidating, other areas of the market may experience growth, leading to a redistribution of funds across a broader market.

DXY and Crypto: Emphasizes that the DXY (Dollar Index) measures the strength of the dollar, and its decline is usually favorable for cryptocurrencies. Longer periods of consolidation are normal, and a weaker dollar is typically associated with bullish phases for cryptocurrencies.

Economic Context: Agrees with David's view on the potential for a soft landing, noting that if inflation remains manageable and the economy balances without excessive monetary printing, this could be positive for assets like Bitcoin and Ethereum.

Ethereum's Position: Points out that Ethereum is relatively weak compared to Bitcoin and needs significant progress or adoption to surpass it. He believes that if Ethereum's technology gains widespread financial or governmental use, there is potential for upward movement.

David Hoffman:

Ethereum's Future: Agrees that Ethereum needs real-world applications and significant advancements to regain and surpass its previous highs.

ETH/BTC Ratio

David Hoffman:

ETH/BTC Ratio: Points out that the ETH/BTC ratio was once close to parity with Bitcoin's market cap. This suggests that Ethereum has the potential to equal Bitcoin in market cap, reflecting the concept of "flippening."

Ledger:

Flippening Discussion: Acknowledges that the term "flippening," which once referred to Ethereum surpassing Bitcoin's market cap, was an important discussion point but is no longer common. While not expecting Ethereum to surpass Bitcoin, Ledger still sees potential for Ethereum to regain strength.

Target Range: Sets a more realistic target, expecting the ETH/BTC ratio to reach a range of 0.075 to 0.08, with the possibility of reaching 0.1, indicating strong performance for Ethereum but not surpassing Bitcoin.

Performance and Moving Averages: Points out that the ETH/BTC ratio has been declining in recent years, with Ethereum underperforming compared to Bitcoin and Solana in the past cycles. Historically, the 200-week moving average of Ethereum has provided little support for ETH during bear markets. Currently, Ethereum is below this moving average, indicating relative weakness.

Future Outlook: Despite current challenges, Ledger believes Ethereum remains an investable asset, with the potential to reach new historical highs if its technology gains widespread financial or governmental use. He notes that removing Grayscale ETH from the ecosystem could improve market dynamics.

ETF Impact: Believes that ETFs can provide significant purchasing power for retirement accounts and large investment pools, benefiting Bitcoin and Ethereum. However, addressing existing challenges is crucial to fully realize these benefits.

David Hoffman:

Market Environment: Acknowledges that Ethereum faces mixed challenges and opportunities in the current market environment, resonating with Ledger's analysis.

Narrative Shift

David Hoffman:

ETH's Struggles in Market Dynamics: Reflects on the challenges Ethereum has faced recently, particularly during the unfreezing of yen arbitrage trading, which led to significant selling pressure. He acknowledges a misconception that Jump Capital was involved but emphasizes that it was a participant with substantial leverage that had to exit, similar to the situation during the Three Arrows Capital liquidation. He highlights that Ethereum, often used as collateral, tends to be more impacted during chain liquidations, significantly affecting the ETH/BTC ratio. He notes that while Ethereum has rebounded, the current market trend is unfavorable for Ethereum, with Bitcoin (BTC) and Solana (SOL) showing stronger momentum.

Ledger:

Timing the Market and Assessing Strength: Agrees that ETH may test the 200-week moving average again and discusses the difficulty of timing the market, particularly regarding ETH/BTC. He emphasizes Bitcoin's strength and Solana's relative weakness, partly due to the decline of meme coins. He points out that many meme coins have suffered significant losses, leading holders to disperse or capitulate, negatively impacting Solana.

Solana's Potential and Risks: Believes Solana has potential, especially if deeper projects make progress, but also sees the possibility of further weakness. He mentions that if Solana cannot consolidate or rebound from its lows, it may face challenges, particularly until market conditions improve later this year. He suggests that strong market movements typically occur after elections, and 2025 could bring price discovery for crypto assets.

Current Market Priorities: Advises prioritizing Bitcoin over Solana and Ethereum, as Bitcoin appears to be the strongest among the three, even though it is still hovering below the 200-day moving average. He predicts that if Bitcoin drops to $40,000, it could pull Solana below $100 and Ethereum below $2,000, potentially leading to liquidations of leverage and speculation, especially among meme coins.

Strategic Positioning: Suggests positioning oneself to take advantage of potential market downturns before the end of the year. He emphasizes the importance of being ready to seize opportunities as market dynamics change.

Relative Weakness

David Hoffman:

Discussed Solana's relative weakness, Ethereum's apparent downward trend, and Bitcoin's concerning pattern of failing to break through. He pointed out that Bitcoin has been consolidating below its historical high for a long time, which is worrying in the impatient crypto market. He mentioned that in the crypto space, if prices do not rise, there is a risk that prices may start to fall, triggering fears of a cycle's end and potentially leading to sell-offs.

Ledger:

Underperformance Relative to Stock Market: Emphasizes the disappointing performance of the crypto market compared to the stock market, particularly the divergence in performance between stocks and Bitcoin. He adds that other assets like gold have broken through and entered a price discovery phase, performing well in recent months, further highlighting Bitcoin's lagging position. He mentions that a return to mean for the 10-year Treasury yield would be favorable for cryptocurrencies if there is no economic recession, and a soft landing for the economy would be the ideal outcome.

Impact of Interest Rates and Macroeconomics: Discusses the pressure rising interest rates place on the crypto market and the importance of a soft landing for the broader economy to avoid further underperformance in the crypto market. He notes that despite some weaknesses, the NASDAQ has performed relatively strongly compared to cryptocurrencies over the past year, exacerbating the frustration of crypto investors.

David Hoffman:

Impact of ETFs on Traditional Cycles: Agrees that ETFs may have disrupted the traditional four-year cycle, leaving crypto traders and investors expecting more explosive growth patterns feeling disappointed. He points out that while ETFs provide a stable and reliable source of growth, they lack the adrenaline rush that many speculators expect, dampening market enthusiasm.

Ledger:

Stable Growth vs. Quick Gains: Acknowledges the slower growth due to ETFs but emphasizes the importance of demand for these financial products, especially as a younger generation becomes more open to crypto investments. He discusses the importance of long-term thinking, noting that millennials are entering their peak income years, providing a strong impetus for future growth in the crypto market. He advocates for a 10-year investment perspective, emphasizing that major crypto assets have the potential for significant returns.

Valuation and Belief: "I believe Ethereum around $2,000 is undervalued, Solana around $100 is undervalued, and Bitcoin below $100,000 is also undervalued. For me, targets of $250,000 to $500,000 for Bitcoin, $10,000 for Ethereum, and $500 for Solana are completely reasonable, and I don't think these are overly aggressive predictions." He strongly believes that the current prices of Ethereum, Solana, and Bitcoin are undervalued and have significant long-term appreciation potential. He advises investors to avoid being distracted by short-term fluctuations and focus on long-term investments that may offer 10x or greater opportunities, emphasizing the importance of holding spot positions with conviction.

David Hoffman:

Avoiding Long-Term Mistakes: Citing Chris Burniske's perspective, he emphasizes the importance of not being overly aggressive or impatient. He warns against expecting unrealistic timeframes for significant gains, noting that long-term success requires patience and composure.

Ledger:

Low Leverage and Long-Term Strategy: Advocates for low leverage and focusing on holding major crypto assets, noting that most people struggle to handle leverage and often end up losing. He suggests investing a significant portion of net worth in crypto spot positions and gradually buying during consolidation periods or bear markets. He holds a pessimistic view on quickly profiting through leverage and trading, advising against chasing daily hot coins.

Identifying Market Shifts: Reflects on past market cycles, noting that significant shifts, such as the DeFi boom in 2020 or the NFT surge in 2021, were identified by those already in the market. He emphasizes that long-term participation and patience are crucial for recognizing these real-time market shifts in crypto investing.

DeFi Summer Explosion

David Hoffman:

DeFi Summer Explosion: Remembers the exhilarating moment when Ethereum broke from $330 to $425 and then quickly surged to $1,100. He emphasizes the strong consensus and unique energy at that time, which has not been felt since.

Ledger:

DeFi Summer and Market Dynamics: Observes that during the DeFi summer, Ethereum spent most of its time consolidating. The initial breakout temporarily interrupted the DeFi summer, but as Bitcoin rose and Ethereum remained stable, the DeFi summer continued. He points out that such breakouts often accompany market shifts and a gradual accumulation of strength, ultimately leading to strong price movements.

Current Market Sentiment: Shares that he does not feel the same market energy or momentum as at that time. He expects the market to continue in this state and does not foresee a significant breakout occurring immediately. He predicts that if the market declines before the elections, it would not be surprising and would reflect broader macroeconomic factors.

Patience and Market Timing: Advises that patience and market timing are crucial. True momentum and significant market changes are instinctively felt through observing and understanding market dynamics. He acknowledges that while some small trends like meme coins are showing movement, they have not had a transformative impact like major market shifts.

Market Heat and Opportunities: Points out that significant market opportunities arise when the market heats up and begins to act actively. He predicts that as long as there is patience, opportunities can be seized when the market shows this kind of momentum.

Looking Ahead

David Hoffman:

Ledger and the Future of Content Creation: Curious if Ledger will return to podcasts or other forms of content while recognizing the shift in focus. Mentions the prevalent sentiment within his group to find balance and hobbies outside of cryptocurrency.

Ledger:

Current Approach: Plans to continue engaging with the market but with a more cautious approach. He acknowledges the need to slow down and take more strategic actions. Despite reducing high-frequency trading, he remains interested in crypto.

Trading Style and Experience: Shares his trading experience, noting the transition from frequent trading to experiencing long-term capital appreciation. Describes his trading style as oscillating between major ideas, having reduced trading frequency recently while achieving significant gains.

Long-Term Gains: Reflects on the rarity of achieving long-term capital appreciation from liquid crypto assets and cherishes this experience. He states that while he traditionally preferred swing trading, he has recently found value in a more patient approach.

David Hoffman:

Market Dynamics: Notes the slowing pace of the cryptocurrency market and the impact of other factors such as ETFs and Federal Reserve policies on this change. Sees a shift from intense four-year cycles to a more sustainable market rhythm.

Ledger:

Embracing Change: Expresses acceptance of slower, more sustainable market dynamics.