Source: OKX

The US federal funds rate remains at its highest level since 2022, between 5.25% and 5.50%. However, the suspension of interest rate hikes by the Federal Reserve and the expected approval of a Bitcoin ETF have boosted both onshore and offshore funds, helping Bitcoin return to an upward trend. In late October of this year, BTC broke through the long-standing resistance level of 30,000 with a monthly increase of over 26%, leading a rebound in the cryptocurrency market.

However, this round of repairs is particularly difficult. Since BTC hit a new high of $69,000 in 2021, the industry has entered a long bear market of more than 2 years. As of early October this year, data from the cryptocurrency industry has fallen to a "freezing point", such as NFT market transactions hitting a new low in two years, ETH/BTC exchange rate hitting a new low in 15 months, total financing of cryptocurrency companies in Q3 hitting a new low since Q4 2020, DEX transaction volume hitting a new low since January 2021, and the bitcoin balance on trading platforms hitting a new low in nearly 5 years. Funds continue to flee, and the market is in a state of despair.

At this "darkest moment", the "spark" represented by Bitcoin Ordinals is gradually gaining momentum, and the on-chain addresses of Bitcoin are reaching a historic high. The long forces in the market are actively taking action, and the market sentiment is reaching a turning point. Subsequently, with the influx of 900 million stablecoins, the cryptocurrency market swept away the haze and ushered in a big reversal. The project parties and institutions that actively laid out in the bear market began to receive "rewards".

This article aims to understand the market from the perspective of industry-leading projects and institutions that have successfully navigated this bear market cycle, such as dappOS, Taiko, Celestia, and OKX Ventures. We will explore their "knowledge" and "actions" during the bear market, and seek out the key factors for future industry development. This article does not constitute any investment advice.

Reviewing the past three bull and bear cycles

After more than a decade of development, the encryption industry has undergone comprehensive evolution through technological innovation, application iteration, and exploration of compliance, and its connection with the traditional financial market and the real world has rapidly strengthened. Looking back at the past three cycles of bull and bear markets in the encryption industry, it is not difficult to find that new funds, new narratives, and resonance of new technologies ultimately determine the arrival of a bull market. Based on the narrative dimension, this article briefly describes the three cycles of bull and bear markets in the encryption industry:

2009-2015: The first bull and bear cycle, innovation experiment, opening up a new world

On January 3, 2009 at 6:15 PM, the genesis block of Bitcoin was generated on a small server in Helsinki, Netherlands, marking the official birth of Bitcoin. At this stage, Bitcoin was still a "niche experiment" limited to professional developers and early explorers, mainly for the dissemination of concepts and the formation of early consensus. Subsequently, the industry's infrastructure began to take shape, and with the launch of early trading platforms such as Mt. Gox, Bitcoin entered the era of trading and ushered in a speculative frenzy. Its early trading price was 0.0008 US dollars, and it soared to the highest point of this bull market at 1202 US dollars in 2013, followed by a downturn and bottoming out in 2015.

2015-2018: The Second Bull Market Cycle, ICO Era, and Infrastructure Formation

The market has completed its repair and reopened a new cycle. With the development of speculative funds, influx of developers, iterative innovation technology, and the halving of Bitcoin, the groundwork has been laid for the arrival of a bull market. At the same time, peripheral industries such as cryptocurrency media, mining farms, data tools, and cryptocurrency funds began to take shape. In 2017, under the joint influence of the ICO model and the blooming of second-generation public chains such as Ethereum, the speculative frenzy erupted, and various wealth creation myths frequently appeared in the news. On December 17th, the price of Bitcoin reached a historic high of 19,800 USD. Subsequently, the cryptocurrency industry entered a new bear market, struggling to develop amidst black swan events and regulatory policies. In 2018, BTC fell to around 3,000 USD, facing doubts and challenges.

2018-2022: The third bull market cycle, mature infrastructure, and explosive growth of on-chain applications

After three years of silence, with the continuous upgrading of the Ethereum network, blockchain technology has moved from a bubble to an application stage. In 2020, various chain applications based on the Ethereum network, such as DeFi, NFT, DAO, GameFi, and IEO, have exploded, attracting a large number of institutional investors and bringing in a large amount of new capital. At the same time, the great imagination constantly demonstrated by the cryptocurrency industry has also attracted a large number of developers to enter. Through the continuous iteration and innovation of underlying technologies, the cryptocurrency industry has further promoted the transition from virtual to reality, and various infrastructure has continued to mature. With the combination of various favorable factors, Bitcoin hit a historical high of $69,000 on November 10, 2021, and then entered a long bear market lasting more than two years.

2022-Present: The fourth bull market cycle, compliance and application landing become the development theme

Despite being hit hard by various black swan events, the industry continues to innovate and develop, and is increasingly rational and value-oriented. With the establishment and improvement of the regulatory framework for encryption, the expected approval of the BlackRock Bitcoin spot ETF, the emergence of Web3+AI and the rise of the Bitcoin ecosystem, a new bull market is brewing.

Bitcoin has rebounded several times from the low point of the bear market and set a new historical high, demonstrating tremendous resilience. As of November 3, Bitcoin's market value has surpassed Tesla, ranking 11th in the world with a market value of $726 billion, indicating strong liquidity support and global recognition behind it. However, as the depth and breadth of liquidity in the cryptocurrency industry continue to increase, the market will tend towards rationality and maturity, and Bitcoin's volatility may further decrease. As an emerging financial format, the cryptocurrency industry is constantly extending multiple narratives, no longer relying on the single narrative of Bitcoin halving, exploring future development and creating new imagination. However, this process is full of obstacles and twists and turns, and industry participants with weak willpower will be forced out.

The "Knowledge" and "Action" of the Head Institution

Under the pressure of a bear market lasting for several years, faith can also fail in the face of reality. As a high-quality project and institution that has successfully passed through the bear market cycle, we explore how dappOS, Taiko, Celestia, and OKX Ventures understand the market through discussions on macroeconomics, bear market strategies, and focus areas.

The encryption industry cannot exist independently of the macroeconomic cycle. Daniel Wang, from Layer2 network Taiko, believes that "currently, the correlation between virtual asset prices and the real economy or Wall Street is relatively strong. Therefore, if the real economy is not doing well, it is difficult for virtual assets to have an independent bull market. Unless there are more regional conflicts, or major countries lose confidence in the US dollar and US bonds, or ETF applications are approved, causing the correlation to at least turn negative in some countries, this may cause a small bull market. But I think a big bull market may require more patience. If it is a strategic long-term investment, regular investment is good enough. There is no need to judge the bull and bear market in the short term, and do not invest money that is urgently needed. The mentality is very important."

Daniel Wang is a firm long-term investor, and this mindset is also reflected in Taiko's development strategy, that is, he maintains the unity of "knowledge" and "action". According to Daniel Wang, Taiko has now launched five testnets, testing different layer 2 network protocol designs, economic models, proof systems, multi-hop cross-chain bridges, and other design elements. Currently, they are patiently waiting for the launch of EIP4844, after which they will release one or two more testnets, and the mainnet launch should not be far away. Taiko is an equivalent ZK-Rollup to Ethereum, aimed at expanding Ethereum by supporting all EVM opcodes in a decentralized, permissionless, and secure Layer 2 architecture, and is considered a newcomer in the Layer 2 industry.

The head of the first "modular blockchain" Celestia is even more determined about the field they are deeply cultivating, "We believe in modular blockchain, this category will drive the next decade of cryptographic innovation."

OKX Ventures researcher Kiwi remains optimistic about the development trend of the cryptocurrency industry in the second half of the year. He believes that despite the current unpredictable macroeconomic situation around the world, people may be more willing to hold and use cryptocurrencies when the traditional financial system becomes more turbulent. In addition, the on-chain activity continues to increase, and the number of addresses and users on various chains has been steadily growing. For example, the cumulative number of Bitcoin addresses is about 1.2 billion, and the number of active addresses is about 1 million. The on-chain application ecosystem is booming, and Ethereum has completed the Shanghai upgrade, with the Cancun upgrade coming soon. Various infrastructure constructions are accelerating, which are all positive signs for the industry. Furthermore, if the Bitcoin halving expectation is combined with the expected double explosion of the Bitcoin spot ETF application, it may trigger huge demand from institutions.

Kiwi indicates that on-chain transaction volume, active addresses, and miner fees can reflect the strength of market activity and the behavior of participants. These fundamental data have important value for discovering projects, trends, and making judgments. In addition to on-chain data such as transaction volume, active addresses, miner fees, network hash rate, and token supply, Kiwi is relatively more concerned with developer activity data, including code submissions and new version releases, which demonstrate the project's vitality and future development prospects.

The head of dappOS stated that "as the issue of inflation becomes more apparent, the younger generation will turn to cryptocurrency. In the future, Web3 and blockchain applications will become a part of people's daily lives. dappOS is an intent-based operating protocol designed to make dApps as user-friendly as mobile applications. I always remain optimistic about the cryptocurrency industry. The biggest beneficiaries during the bull market are those who stood firm during the bear market, and patience and discipline are the two key factors in surviving the bear market. In addition, it is important to keep learning. The Web3 industry experiences new developments every day. Asking questions, reading articles, listening to industry professionals and KOLs, continuously monitoring on-chain data, and forming your own opinions will help you stay ahead of market trends."

Through communication with these high-quality projects and institutions, two key words "optimism" and "long-term" can be accurately extracted. They always adhere to deep cultivation, maintain learning, and be friends with time. In the future, young people in the new era will become the key group to launch cryptographic industry applications.

Conclusion

Regardless of what happens, the trend of Bitcoin and the cryptocurrency market is still on the rise, driving endless innovation in the industry, achieving financial democratization, awakening individual sovereignty consciousness, returning data rights, protecting privacy, transforming trust, and even changing the direction of the development of the Internet. This is already cool enough! And what we need to do is to "participate actively and enjoy freedom".

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