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}
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There is an inverse relationship between surface area of social coordination, and need for hierarchy
1/ Helium and Hivemapper work because surface area for social coordination is limited, and as such, require little hierarchy. Same generally holds for other DePIN / POPW protocols
2/ I think most of the the things that call themselves DAOs have far more surface area for social coordination, but also generally lack hierarchy, and that creates real challenge in many DAOs in getting things done
Outside of the context of legally mandated ID (eg DL/passport), I think the actually important thing about identity is that its a *socially emergent phenomenon*
What does this mean?
2/ To understand this, let’s consider the most common sources of identity across the web: email and FB
When you first setup your email address, that email address means nothing. It has no bearing on your identity. It’s just a series of characters.