Is cryptocurrency a scam? Let's start with the bull market of 2021

Since March and April of this year, many people seem to have slowly fallen into a state of bearishness during a bull market, believing (or hearing from others) that they are still experiencing a bull market, but their mindset is completely that of a bear market.

In previous articles from "Talking About Li," we have also mentioned: the market is unpredictable; no one knows the specific direction the market will take next, but we will continue to remain optimistic and believe that there may still be new opportunities in late 2024 or the first quarter of 2025. Let's first look at the overall performance in September, as there may be new trend changes occurring in that month.

Then, with the start of the school season on September 1, children happily returned to school to learn and live. However, some partners in the crypto space seem to be feeling more downcast because they finally waited for September 1 but did not see any significant changes in the market. If someone views and understands the market this way, it is not advisable to engage in any trading operations. Without proper self-risk management, all trading could lead to direct losses; not trading may be the best operation.

If you experienced the bull market of 2021, many things should still be fresh in your memory. The last bull market lasted from March 2020 to November 2021, with the total market capitalization of the crypto market increasing by over 2,500%. As shown in the figure below.

Technically speaking, the crypto market peaked in November 2021, but the darkest moment for the market was in May 2022, when the LUNA and UST collapse occurred, followed by a series of chain reactions, including the successive bankruptcies of 3AC (then the largest venture capital firm in the crypto market), Celsius, and FTX exchange. Many retail investors who entered the market during the last bull run likely experienced the so-called high risks of the crypto market firsthand during that period. I remember many people online were shouting: cryptocurrencies are scams. Of course, I had heard this claim many times before.

But it cannot be denied that the bull market of 2021 was indeed a large-scale bull market. Another few obvious personal feelings I had were: people who had never talked about crypto before began discussing cryptocurrencies in their social circles (many retail investors who first encountered cryptocurrencies during the last bull run are likely still in the market now), many celebrities (like Elon Musk) began to publicly and intensively discuss cryptocurrencies on social media, and some institutions also started to formally enter the cryptocurrency space (even domestic companies like Meitu Xiuxiu purchased BTC and ETH at that time)……

At that time, I remember many altcoins achieved increases of over 50 to 100 times. Of course, some performed slightly worse; for example, some older coins that performed well in the 2017 bull market did not perform well in the 2021 bull market. Coins like XRP, XLM, BCH, NEO, EOS, and ZEC, which performed very well in 2017, actually did not break their previous highs during the 2021 bull market. Therefore, the saying that "new coins are favored over old ones" has been increasingly accepted by many.

However, there were some exceptions among older coins, such as BNB, ADA, ETC, and DOGE, which performed exceptionally well, not only breaking previous highs during the 2021 bull market but also achieving even greater increases. Especially DOGE, which, under Musk's continuous support, became one of the brightest stars of the 2021 bull market, skyrocketing from around $0.002 to around $0.63. As shown in the figure below.

Looking back at the last bull market, it can be observed that BTC began to rise roughly from its lows in 2020, and at that time, the price performance of most altcoins was not as good as BTC until early 2021 when altcoins suddenly took off. Therefore, there is a popular saying that before each major bull market officially begins, BTC (including ETH) will first have a phase of takeoff, during which BTC.D will rise, and the gains of altcoins will lag behind. Once BTC.D reaches a certain level (in the 65-70% range), altcoins will then explode, and funds will begin to rotate, causing various altcoins to surge. As shown in the figure below.

There is also a very popular saying: history does not repeat itself, but it often rhymes.

Therefore, many people hope that the new bull market will continue to follow the script they envision. However, historical data or experience can only serve as auxiliary references; we must also consider many comprehensive factors (such as the differences between the macroeconomic environment at that time and the current one), and even so, the market's trajectory remains unpredictable.

When it comes to bull markets, if you have experienced the last cycle, you should also know that the cycle of a bull market is actually very short. Especially for altcoins, the main surges may only occur within a few short months. In the last bull market, there were mainly two phases: from January to May 2021, and then from August to November (during which the 519 incident occurred, which can be researched on Google). At that time, the feeling was one of "all coins flying" and "only rising, not falling," as if buying anything on Binance with your eyes closed would yield profits; during this period, the choice of coins seemed less important, as it appeared that one could make quick money by going long on any token.

For example, SUSHI increased sixfold in a month, AAVE also increased sixfold in a month, HOT increased thirty-fivefold in two months, JOE surged sixtyfold in just two weeks, BNB rose eightfold in twenty days, and DOGE could increase tenfold in a single day……

Additionally, the so-called king project FIL had a fully diluted valuation (FDV) of $400 billion, and ICP's FDV reached $250 billion right after its listing……

However, after a brief peak, the market experienced a downturn following the LUNA collapse, and many people's dreams of getting rich were instantly extinguished. People around me slowly stopped discussing cryptocurrencies, and many chose to leave the space. It was at that time that I began to have the initial idea of becoming a content creator, although I did not take any concrete action at first; I only wrote casually when I had time. It wasn't until July 2022 that I officially registered and launched "Talking About Li." It was also from that stage that I started a new round of dollar-cost averaging plan, allocating funds over 20 months (accounting for 80% of my total position) to invest in Bitcoin monthly, which I have shared in previous articles from "Talking About Li."

In the first six months of starting my content creation journey, due to personal time and energy constraints, my update frequency was quite poor, and I could not guarantee regular updates. It wasn't until early 2023 that "Talking About Li" began to update normally. Looking back now, it was during that period (January 2023) that Bitcoin began to break its bottom line, and the market seemed to have lost much attention.

Just like that, half a year passed, and by June 2023, it seemed that market sentiment had undergone some new changes. In June 2023, news broke that BlackRock (the world's largest asset management company) had applied for a Bitcoin spot ETF. The following is a screenshot of the report at that time.

Although the call for a spot ETF had been made for several years, it seemed that BlackRock's formal entry made this matter different from before. This not only signified a catalyst for the market but also a potential source of new funds, marking the beginning of major institutions publicly entering the space. Moreover, once the spot ETF is approved, it indicates a paradigm shift in how major institutions view and participate in Bitcoin.

Then, as time passed, we quickly welcomed 2024, and on January 10, the Bitcoin spot ETF was officially approved and launched, which many considered a new historical milestone in the crypto space.

What surprised many afterward was that after the ETF approval, there was a huge demand; for instance, IBIT (the BTC ETF launched by BlackRock) surpassed the $10 billion mark in just seven weeks.

With the approval of the ETF, Bitcoin halving, and various other events overlapping, Bitcoin also broke its all-time high (ATH) for the first time in March this year, reaching $73,000. Since only half a year had passed, many people likely remember that at that time, many believed that with Bitcoin's price increase, altcoins would surely experience a new round of surges, just like in the last bull market. Therefore, looking back, we can also see that many people began to buy various altcoins in large quantities during that period, and some even went all-in on altcoins or directly swapped their Bitcoin for altcoins……

In several previous articles from "Talking About Li," we have maintained the same viewpoint: we still believe that a new altcoin season will emerge, but that does not mean all altcoins will have opportunities, as there are simply too many new projects being born this round (one could describe it as an overwhelming amount). Currently, the core issue in the market still revolves around liquidity (too many new projects and insufficient liquidity, leading to greater dispersion among altcoins than in previous cycles).

In addition to this, there are also some other obvious differences between this bull market and the last one, such as:

• The main driving force of this cycle is actually the Bitcoin ETF, which is the most significant difference from the 2021 bull market, where the main driving force was macro conditions (including global monetary easing due to the pandemic).

• The liquidity in this cycle has undergone a fundamental change. The last bull market was a typical sector rotation, where Bitcoin would rise, followed by Ethereum, and then various conceptual altcoin sectors would rotate and rise. However, this pattern seems less effective in this bull market, as most of the new liquidity (note that we are talking about new liquidity here) has flowed into the ETF, seemingly not directly entering altcoins (substitutes), which has greatly altered the market dynamics of this cycle.

• Retail investors in this cycle seem to have become more cautious. In other words, retail investors no longer have as much money to speculate on coins, and the influx of new retail investors is too small (and many new investors have gone directly to the MemeCoin casino to lose money), making many segments of the crypto market seem to have turned into a PVP game among old investors. With the announcement of the end of the COVID-19 pandemic, the economy seems to have fallen into a new stalemate. Without discussing distant matters, just observing the situation around us reveals that, for example, since around 2022, there have been increasingly more offline malls/stores closing and more people becoming unemployed (finding jobs has become increasingly difficult)…… This real-life predicament may cause more people to become cautious and careful about investing (investment mindset or belief).

• This cycle feels lacking in innovation. The last bull market featured DeFi, GameFi, the Metaverse, and NFTs, while this bull market seems dominated by high FDV, VC gatherings, mutual non-support, and MemeCoin discussions. Although the emergence of Bitcoin's ecosystem (such as inscriptions and runes) has created a brief phase of excitement in the market, it has not met people's expectations for a major bull market. The result of this is that the entire market narrative has become more diverse, tokens have increased, gameplay has diversified, choices have multiplied, and scams have proliferated…… This further leads to slower wealth growth for holders, increased risks of frequent trading, and the path to "getting rich by speculating on coins" becoming increasingly difficult.

In summary, each cycle will have different changes; some things may be the same, which belong to the specific patterns of history repeating itself. However, some things may not be the same, which represent the uncertainties of the market.

Currently, it seems that more and more people are beginning to lose their basic belief in investing. I remember in 2021, many people adhered to long-term investment principles, filled with confidence and excitement that blockchain (including the crypto space) technology could change the world. Now, many have grown weary of this notion, and I have recently heard more voices stating: blockchain is a scam, cryptocurrencies are scams.

So, is blockchain (including the crypto space) really a scam?

What others think is their freedom; at least I do not think so, otherwise, I would not have persisted from 2017 until now. If you also believe blockchain is a scam, then feel free to exit now; I certainly won't say anything, as I respect everyone's choices and freedoms.

In this field, many people are connected by coins; if the connection is shallow, they drift apart, and if deep, they accompany each other. It's really that simple; the complexity lies not in this world, nor in any specific field, but in human hearts.

Everyone's existence is actually participating in a grand game of life, which is composed of different mini-games, and different games naturally have different play styles, rules, etc. A small number of people come online equipped with armor and advanced gear, while some only have the most basic time (lifespan). For most ordinary people, the opportunity to participate in the game has never been fair, but the ability to seize opportunities relies on oneself.

Returning to the crypto market, from an overall perspective, the main narratives of the last bull market included DeFi (representative projects like AAVE, SNX, SUSHI, etc.), Layer 1 (representative projects like LUNA, SOL, AVAX, FTM, ADA, BNB, etc.), the Metaverse (representative projects like SAND, MANA, GALA, etc.), MemeCoin (representative projects like DOGE, SAFEMOON, AKITA, FLOKI, SHIB, etc.), and NFTs (representative projects like CryptoPunks, Bored Apes, etc.).

It is no exaggeration to say that the crypto market is essentially a game of narratives, where people (funds) rotate from one narrative to another. In this process, perhaps only a very small number of people can seize all the rotation opportunities or new narrative opportunities.

However, based on historical experience, we can divide bull markets into the first half and the second half, and there are some basic rules that can be summarized. For example, in the first half of a bull market, projects with good fundamentals often perform well in terms of price, but in the second half, the rotation becomes increasingly unpredictable. In a market characterized by extreme FOMO, those with higher risks and higher potential returns, or even those with no value (i.e., those that do not show actual value in the short term, such as the Metaverse and NFT images from the last cycle), tend to be welcomed (speculated upon) by people (funds). The speculative nature of the market reaches a peak, followed by a significant downturn, leading to a new bear market cycle.

Returning to the present, at least from my personal perspective, I do not see the kind of fervent phase characteristic of the second half of a bull market. Therefore, we still believe that the bull market is ongoing. If I had to make a guess (note that this is just a guess, not investment advice), I would propose this hypothesis: if BTC continues to break previous highs, the market will officially enter the fervent phase of the second half, and some altcoins (we are unlikely to see a scenario where all coins rise together, which has been analyzed in previous articles on altcoins) will have opportunities for explosive growth, but this process will also be relatively short.

In other words, if you are still focusing on altcoins now, it is best to continue paying attention to Bitcoin's trajectory, as whether Bitcoin can break previous highs is crucial for the overall direction of altcoins. If Bitcoin can break $73,000 in the near future (for example, by the end of the year or the first quarter of next year), it will undoubtedly reignite people's interest and hope in this market, and we may still see new opportunities and welcome a brief bull market. The market is often a reflection of emotions; the reasoning is that simple because human nature is like that. Market trends often arise in despair, explode in divergence, and end in madness.

From a temporal perspective, over 80% of the gains often occur in the last 20% of a cycle. Whether one can endure this 80% of the time depends on the individual, and whether one can manage their emotions and exit effectively in the last 20% also depends on the individual.

In recent days, I have noticed that many analysts online believe Bitcoin will drop to $40,000 or even lower. So what? For me personally, I will definitely continue to wait patiently, just as I wrote in a previous article from "Talking About Li": at worst, I will hold for a few more years until the next bull market; this basically has no impact on me. As shown in the figure below.

A person's position management determines their mindset, and mindset determines whether they can last in this field. Learn to befriend time; do not flounder aimlessly in the river of time. Often, those who drown in the end are the ones who can swim.

We will conclude this content here. More articles can be viewed on the homepage of "Talking About Li."

Disclaimer: The above content is merely personal opinions and analyses, intended for learning records and communication purposes only, and does not constitute any investment advice. The crypto space is a highly risky market; in addition to various forms of phishing attacks and scams, many projects also carry the risk of going to zero at any time. Please view this rationally, do not engage if you do not understand, and take responsibility for yourself.