Why the Crypto Bull Cycle Hasn’t Started Yet

🇺🇸 Crypto’s Big Q4 in Washington, Breaking Down the Crypto Bull, Hyperliquid: An L1 with DeFi Built-In 💧

Author

Internet Capital
September 01, 2024

gm friends —

Crypto prices are down and market sentiment is in the toilet… but is the story really that bleak? Despite the pessimism, there are signs that the next market mania is taking shape.

Today we’re breaking down why the crypto bull cycle might be just getting started.

Today’s topics:

  • 🐂 Why the Crypto Bull Cycle Hasn’t Started Yet

  • 🇺🇸 Crypto’s Big Q4 in Washington

  • 💧 Hyperliquid: An L1 with DeFi Built-In

Check out our interview with ZeroLend founder Deadshot Ryker!

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Why the Crypto Bull Cycle Hasn’t Started Yet

Languishing crypto prices are casting doubt on whether the bull cycle has even started yet.

While Bitcoin has shown signs of life, the broader crypto market's poor performance has investors worried - are we actually in a bull market?

A crypto investor preparing to get a real job

A Different Kind of Bull

If we are indeed in the midst of a crypto bull cycle, it's unlike any we've seen before. Bitcoin is in the neighborhood of all-time highs, while other coins, even the largest market-cap altcoins like Ethereum, are struggling.

Typically, crypto-asset returns are heavily correlated during bull markets, with altcoins acting as “beta” to the price of Bitcoin (aka move in the same direction as BTC with more volatility). But, this has not been the case for the 2024 Bitcoin rally so far.

The Total3 Crypto chart, which tracks the total market capitalization of all cryptocurrencies, excluding Bitcoin and Ethereum, is a great visualization of this pattern break.

As of today, Total3 stands at ~$562 billion, a ways off from its November 2021 peak of $1.12 trillion. From its 2023 bottom, Total3 has only returned ~2x, with Bitcoin returning ~4x over the same period.

This lack of growth across the broader crypto market may be attributed to the nature of the early 2024 rally. The surge was primarily driven by two factors:

  1. Bitcoin ETF Approval: The SEC's green light for spot Bitcoin ETFs in January 2024 brought an influx of institutional capital, primarily benefiting Bitcoin.

  2. Meme Coin Mania: A resurgence in speculative interest around Solana-based meme coins created localized bubbles and boosted SOL prices without lifting the entire altcoin market.

Interestingly, these catalysts have been largely isolated to their direct beneficiaries, rather than sparking an extended market-wide rally, suggesting either a maturing market or that the full-blown crypto mania phase has yet to begin.

Global Liquidity Cycles: A Bull Market Indicator

Global liquidity metrics also indicate that a broader bull market is still ahead of us.

Bitcoin and crypto prices have historically tracked global liquidity cycles, which tend to operate on four-year cycles. According to research by MacroMicro, we are at the very beginning of a new liquidity expansion cycle.

The global liquidity index, which factors in central bank balance sheets and forex reserves and can be used to track global liquidity cycles, bottomed out in Q4 2023 and has been on an upward trajectory since.

This suggests that we’re only in the very early stages of a crypto bull market. If history repeats, Bitcoin has room to run over the coming months, and we can expect altcoin returns to follow.

Finally, we’re also heading into Q4, a period that has historically delivered some of the best returns for Bitcoin. With the combination of rising global liquidity and seasonal strength, there is certainly a case to be made that the stage is set for a true crypto bull market.

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Crypto’s Big Q4 in Washington

As we head into Q4, crypto faces a slew of consequential developments in Washington. While the upcoming U.S. presidential election looms large, it isn’t the only major event with implications for the industry.

Senate Majority Leader Chuck Schumer has committed to passing a crypto bill by the end of the year, a move that could reshape the regulatory landscape.

Schumer's focus is on striking a balance between fostering innovation and implementing “common sense guardrails” to prevent misuse of the technology.

In addition to Schumer's efforts, other significant policy initiatives are underway. Senators Cynthia Lummis and Kirsten Gillibrand have introduced a bill to regulate stablecoins, while Senate Agriculture Committee Chair Debbie Stabenow is also working on comprehensive crypto legislation expected to be revisited this fall.

But of course, the U.S. presidential election will have a signifcant impact on the future of crypto too. Donald Trump’s outreach to crypto voters is already paying off, with polls showing him leading Kamala Harris among those who own cryptocurrencies.

And crypto-support is significant, as evidenced by the over $119 million that the industry has donated to influence federal elections this year, making it the largest corporate political spender category in 2024.

With the election approaching and significant legislative efforts underway, Q4 is shaping up to be a pivotal period for the crypto industry. The political and regulatory outcomes this quarter could set the stage for the industry's future, making it a crucial time for all market participants

Trade Section

We’re working on something new here. Expect an update next week 👀!

Hyperliquid: An L1 with DeFi Built-In

Overview

What is it?

Hyperliquid is a high-performance Layer 1 (L1) blockchain with a native perpetual futures order book exchange. Beyond its flagship exchange, Hyperliquid is built to support an entire ecosystem of permissionless financial applications. It’s designed to allow for the rapid and secure execution of complex financial operations directly on-chain, making it an ideal platform for developers looking to build high-performance decentralized apps.

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How does it work?

🔄 Fully On-Chain Perpetuals DEX: Hyperliquid is centered around its native application—a fully on-chain perpetual futures order book DEX. Unlike traditional exchanges that may rely on off-chain order books, Hyperliquid maintains decentralization by ensuring that all transactions, including margin checks and order matching, are executed on the network.

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💹 Vaults for Advanced Strategies: Hyperliquid includes vaults as a key primitive within its ecosystem. Vaults allow users, DAOs, protocols, and institutions to deposit assets and participate in advanced trading strategies, including market-making and liquidation of overleveraged accounts. Vaults are managed either by individual traders or through automated strategies, offering users a share of the generated profits.

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🔗 EVM Bridge Integration: Hyperliquid features an EVM-compatible bridge that seamlessly connects the Hyperliquid L1 with the Arbitrum Ethereum L2 network. This bridge is secured by the same validator set as the L1, ensuring secure and efficient cross-chain transfers. Users can deposit USDC onto Hyperliquid and trade with minimal gas costs.

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How can you use it?

1. Get Started with Perpetuals Trading: Access the Hyperliquid Perpetuals DEX by connecting your EVM-compatible wallet or logging in with your email. Deposit USDC as collateral, and you’re ready to trade long or short positions on various tokens with high leverage.

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2. Utilize Vaults: Deposit your assets into one of Hyperliquid’s vaults to participate in advanced trading strategies. Earn a share of the profits generated by these strategies, whether managed by experienced traders or automated systems.

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3. Earn Points Through Active Trading: Participate in Hyperliquid’s points program by actively trading on the platform. Points are distributed weekly based on your trading activity and can offer additional rewards or incentives within the Hyperliquid ecosystem

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For additional information, see Hyperliquid’s official documentation

Other News

Check out this week’s Mid-Week Crypto Update for more news stories!

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