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As the Web3 market progresses through another cycle, many voices on social media express disappointment that this bull run isn’t living up to their expectations. They argue that this cycle lacks the exponential excitement of previous runs. But in reality, we’re in a different phase of the cycle—one that’s crucial, though often misunderstood.
Every bull market has distinct phases. The initial phase typically sees slow and steady growth, characterized by skepticism and doubt. This is where we currently find ourselves—what many refer to as the "boring zone." However, this phase is where smart money accumulates, and groundwork is laid for future exponential growth.
Looking back, we see that previous cycles had their own periods of seeming stagnation. For example, during the early phases of the 2017 bull run, the market was dominated by DeFi and ICOs, which eventually gave way to explosive growth. In 2021, the NFT boom captivated the market, but that too had its initial growing pains before reaching mass adoption.
One of the critical new dynamics in this cycle is the introduction of Ethereum Exchange-Traded Funds (ETFs). These investment vehicles have attracted more sophisticated investors who might not have previously considered direct crypto investments. Interestingly, the inflows into these ETFs have been better than expected, and their reactions to market volatility have been more stable than initially anticipated. This stability is a promising sign, suggesting that as more traditional financial products enter the crypto space, they could provide a buffer against the wild price swings that have characterized previous cycles.
In this cycle, we’ve seen liquidity gravitate towards memecoins. Memecoins have thrived in this environment, primarily because they offer the potential for rapid, outsized gains. However, this trend often dominates during periods of market boredom or bearish sentiment, attracting the most degenerate of traders looking for quick returns. This isn't new, but the scale at which it's happening this cycle is unprecedented.
The current fixation on memecoins is a double-edged sword. On one hand, it demonstrates the market’s appetite for risk. On the other, it siphons liquidity away from projects with long-term potential, delaying the broader market's move to a more sustainable growth phase.
Another noticeable trend is the concentration of capital into blue-chip cryptocurrencies like Bitcoin, Ethereum, and Solana. This gravitation towards large-cap assets can be attributed to a perceived safety aspect. As the market matures, investors—many of whom have accumulated significant wealth through earlier phases of Web3—are shifting from speculation to preservation. As Jerry Seinfeld might paraphrase, "Noobs hunt, OGs nest."
This shift is also indicative of the growing sophistication in the market. Crypto is no longer the wild west it once was. With the influx of institutional capital and more experienced investors, there’s a natural movement towards assets that are seen as safer and more stable in the long term.
While memecoins hog the spotlight, projects focused on AI, RWA (Real-World Assets), and DePIN (Decentralized Physical Infrastructure Networks) struggle to capture the same level of attention. These projects lack the flashy marketing that memecoins offer, but they represent the future of Web3. As these sectors mature, they will eventually attract the liquidity necessary to fuel the next leg of the bull market.
Earlier this year, we saw a rapid surge of interest in quality projects that had been building throughout the bear market. These projects were quickly snapped up by venture capital firms, leading to strong initial performances. However, the long vesting schedules and stagnant market conditions led to sharp declines in these tokens’ prices. This scenario isn’t uncommon in the early stages of a bull run, where the market is still digesting the influx of new projects.
Many argue that this bull market isn't as explosive as previous ones. However, it’s essential to remember that moving a $2 trillion market is far more challenging than moving a $320 billion market, as was the case during the 2020/2021 cycle. Also, remember that in the 2020 cycle, altcoins didn’t break above their previous all-time highs until February 2021, months after the initial Bitcoin surge.
As Bitcoin approaches its previous all-time high and the total market cap inches closer to new highs, we can anticipate the exponential phase of the bull run to kick in. At this point, as investors shift from memecoins and large caps to smaller altcoins, we’ll likely see a frenzied market, similar to past cycles. The crowd, chasing the next big opportunity, will eventually realize that the real value lies in projects they’ve been overlooking, and this is when the market will truly explode.
This bull market may seem "boring" to some, but it’s laying the foundation for what could be the most significant growth phase yet. With the introduction of ETFs, the influx of more sophisticated investors, and the gradual shift in market focus, we’re setting the stage for a powerful and sustained market run. As history shows, patience and strategic positioning during these early phases often pay off handsomely in the end.