Thread by @KyleSamani

0/ Why the next bear market will not be like the last one

And in fact, we may not have a bear market at all

Or we may have half a bear market, depending on your perspective

A thread

1/ Broadly speaking, there are two cohorts of people in crypto

Money crypto
Tech crypto

The zeitgeist of the space was dominated by money crypto people from 2011-2017

Since 2017, tech crypto has come to dominate the zeitgest

2/ A good bit of the fighting in 2017-2018 was about the money camp grasping for power and relevance

Today it’s fairly clear that tech crypto dominates the zeitgest

3/ There are still lots of people who just think about BTC as an inflation hedge, but they represent an increasingly small % of press, social media, conference speaking, etc.

4/ Money crypto people think primarily about interest rates, the politicization of central banks, etc

Tech people care about building

5/ Inevitably, politicians/CBs will do stuff that is bad for BTC as an inflation hedge. Whether that’s banning it (or trying to), or just raising rates, or whatever

There is a natural ebb and flow to the actions of these institutions, and BTC-USD will naturally respond to it

6/ Tech people by and large don’t care about any of that stuff

They just want to build cool new things

If the price of BTC-USD goes down 50% because of gov actions, there is no real reason why that has to impact what people build, or phase investors who invest in tech crypto

7/ Obviously, there are emotions and such, but directionally this stands

Consider the SaaS bear market of 2018

Did SaaS builders slow down? Did VC investment slow down?

8/ It’s possible that crypto is still a few years too early from truly breaking into the mainstream

But I think at this point, that no longer matters

9/ The train has left the station: all of the tech builders and investors have underwritten tech crypto as having a meaningful probability of reshaping commerce, finance, and the fabric of society at large

And they are comfortable meeting on that and holding for years

10/ There is a huge amount of capital out there that will never believe in BTC because they don’t believe in owning non-productive assets

There isn’t a single investor in the world that doesn’t believe that software isn’t eating the world

11/ Over the next ~5 years, every pool of capital around the world will be buying crypto

100% of them will invest in tech crypto

< 100% of them will invest in money crypto

12/ This is why I expect SOL and ETH to substantially outperform BTC through the next “bear market”

The tech money doesn’t care about macro

They just want to be long the stuff that they think is going to change the world

13/ A small % of capital in the world is non-productive

Fiat cash is ~$100T
Gold is ~$10T

Public and private equity, debt, and real estate are at least 100x larger

14/ The world actually does not care about non-productive assets

They want productive assets

As they learn about crypto, they are gonna buy the productive things in far more size than the non-productive things

15/ It is fair to argue that SOL and ETH are not productive. They certainly have meaningful differences from equities, debt, and real estate

16/ But I think the fact that everyone knows that software is eating the world, will cause them to buy SOL and ETH even if it’s not strictly productive in the way that equities/debt/RE are

17/ The transformation in society has been too large to ignore. Everyone wants to be long the next big tech wave, and crypto is credibly one of those waves

18/ And yes, I do expect BTC will get flipped in the medium term. As the tidal wave of tech money enters the space, it will crowd out the macro money

19/ Once BTC is flipped, it’s pretty much game over for BTC

A large part of the value prop of BTC is that it’s the largest and most liquid

Once those stop being true, it has even less to offer

20/ As people recognize that this is becoming true, a lot of the money in BTC will rotate out and into SOL and ETH and other more productive names

21/ In summary

1) The next bear market will not look like the last
2) More likely that tech crypto goes through more short-lived 2018 SaaS bear markets (eg May-June 2021)
3) The decoupling is real
4) When BTC gets flipped, things get *really* interesting

{fin}