Markets are boring as sin and covered to the death, so I don’t really talk about it publicly. I’m intrigued by one thing though - when crypto goes through a secular bear market. Before we begin, let me just say that markets are dynamic, and anything can happen and probably will. I have less than 10% confidence in anything I say here, so please just see it as pure speculation and conjecture. None of this is meant to be prediction.

Now, I’m not going to talk about secular bear markets here, there’s plenty of resources and data points accessible online. They also come in various forms, shapes and sizes, but the one that’s relevant and interests me is how emerging markets grow and very often end up in secular bears. The most popular recent example is the dotcom bubble, of course, and crypto seems to be following a similar trend thus far.

How emerging markets work - you have cyclical bull markets and bear markets, each bull market a new wave of investors and speculators join the fray, and each bear market most of them give up; only for them to rejoin with even more the next. Like this, crypto has gone through 3 or 4 cyclical bull markets, and each time there’s a new wave of people and institutions that buy it. The question then becomes - who is left to invest in crypto?

For all previous bear markets, the answer was always, “a whole lot are left, but exponentially less than last time”. The answer is also different depending on the asset. For example, BTC hit $20K in 2017, and at that point in time the entire world knew about it. Yet, in the 2018-19 bear market, you could easily answer the question by saying “yes, everyone knows about BTC, but the big institutions and corporations are still not interested”. That reveals two things - exponential growth for BTC ended in 2017, and this was confirmed by forecasts of $150K-$300K made by extrapolating previous cyclical bull markets missing the mark by a lot. The other thing was, yes, while exponential growth was over, there was still the laggard who would buy BTC. Of course, this wasn’t true of DeFi or NFTs, for example - very few knew about them, and they went through exponential growth in 2020/21.

Today, you can look at BTC and see ample reason for why we are not yet in a secular bear market - the big institutions and their wealthy family office clients are yet to adopt it. At the same time, for the first time in BTC’s history, the stage is set to hit a secular bull market peak and enter into a secular bear market. This is clear from all the ETF submissions, literally the largest asset manager in the world shilling it, and regulatory clarity on the horizon. Consider the scenario where regulatory clarity is achieved, ETFs are approved, and the largest asset managers and their wealthy family office clients diversify into BTC. Who is left to buy BTC? For the first time in BTC’s history, the answer will be, “not that many”. It’s not zero, of course, and there’ll still be new entrants, but the supply pressure will be too great for a long time to come. The net result would be BTC would stagnate and not hit a sustained new high for 5-10 years, assuming it remains compelling as an alternative store-of-value for that duration.

Of course, different assets react differently. It’s possible that BTC achieves saturation, but ETH lags behind. Only later do the BlackRocks the of the world pile into ETH staking, and perhaps that’s how ETH’s secular bear market starts. So, it could be that BTC hits its secular bull peak earlier than ETH, or it could be around the same time anyway as the overall crypto narrative overwhelms. It could also take 2 or 3 cyclical bull markets to get to that point. There are many possible outcomes.

Perhaps the most curious secular bear market to look at is within the crypto market itself - ETH/BTC. In June 2017, everyone was talking about the flippening - including people like Anthony Pompliano. They priced in the flippening 5-10 years ahead, assuming it happens. 6 years later, it’s pretty clear ETH/BTC has been going through its own secular bear market. But also, it shows how a successful asset or sector can escape these doldrums and grow eventually. At the same time, 99.9% of crypto assets have only bled against BTC, so it’s not an inevitability - most assets will fail. Indeed, most tech stocks from the dotcom era never achieved their ATH, yet the successful ones like Apple or Microsoft have surpassed, even if they took a decade or more.

I’m writing this now because we are still far from a mania phase, and when that happens, posts like this are going to be mocked and trashed. Indeed, even now I anticipate that reaction for the large part, but maybe some will find it interesting. The long-term holders and “OGs” being entitled to cyclical bull makets is the necessary condition for a secular bear market. When the big institutions have entered the space, the bear market comes around, and everyone is still entitled to “new highs in 2-4 years because it happened the last 4 times” - that’s when you know you’re in a secular bear market, and the new highs will take a whole lot longer than 2-4 years. Another common narrative will be “but there’s so much adoption for crypto ahead of us” - it doesn’t matter, because the markets are forward looking, all of that has been priced in, and there are few big players left to enter. Indeed, we can see this from the dotcom bubble, once again. Most of the world was yet to use the internet and computers in general in 2000 - the potential was only achieved in the 2010s - yet the market frontrun that a decade ahead of time.

Lastly, despite what my clickbait title suggests, a secular bear market is not inevitable. It’s possible that following ETF approvals, institutions enter the fray very gradually and cautiously, so there’s more of an even adoption and there’s no big secular bull peak and corresponding long-term secular bear market. The odds are against this though, given centuries of data in how market psychology works. Still, I’ll go back to how I started this post - markets are dynamic and things can go in very many different ways. This is just one possible outcome worth thinking about and is by no means whatsoever a prediction or anything of the sort.