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Some fundamental differences, and their surprising implications for the unfolding 2024 & 2025 bull run.
As we near the 4th or 5th inning of this bull market, I have begun to notice some fundamental differences from the 2021 bull run. These changes are constructing a very different underlying structure upon which the bull market will be built, and they are altering the market trajectory.
This time will indeed be different, and there are some unexpected conclusions to be made from theses differences. The way this bull market is unfolding is setting up for a very unique journey with a destination most do not expect … in no way a mirror of previous cycles.
#1 — Its a Seller’s (Project’s) Market, and the VC ecosystem has lost its marbles.
This is perhaps one of the most fundamental changes. In the 2021 bull run, projects were initially raising funds at very favourable terms for investors. Vestings were typically less than 3–4 months and fully diluted values (FDVs) were miniscule. There was also much less access for retail investors, which resulted in larger secondary market demand. (prices ran harder initially). In early 2021, it was a buyer’s (investor’s) market.
As the 2021 bull run matured, vesting and terms began to lengthen as everyone scrambled for access to pre-sales, and the market shifted to a seller’s market. Terms began to get absurd, with bloated FDVs and vestings extending well into the bear market as talks of a supercycle intensified.
In this bull run, terms have been heavily skewed to sellers (projects) since very early on. Pre-sale terms in 2024 are in the realm of 3–4X worse than in 2021 and worsening, with many projects raising funds at multi hundred million dollar FDV’s and vestings regularly north of 18 months, and often as long as 4 years. Worse still, roughly 1 in 5 projects will retroactively change their terms or refund investors many months after having raised funds, with zero recourse for investors.
Despite this, VC firms are throwing money at projects with reckless abandon, with little care for terms as they battle one another for allocations. Many are simply flipping the investments to retailers for a fee and are therefore incentivized to get more volume irrespective of terms. Exchanges are demanding projects extend their vestings and reduce their TGE unlocks, market makers are syphoning ever larger portions of the tokens. In short, though still very profitable, pre-sales are no longer the same money printers they once were.
What does it mean?
- The velocity of capital rotation will slow dramatically. There will be a much larger portion of paper gains that are locked and never realized versus liquid tokens ready to rotate into the newest narrative. Much of this will probably be offset by passive inflows via BTC & ETH ETFs.
- The bull run will likely extend a fair ways past the commonly expected end date in early 2025 as locked tokens cannot be dumped, and many investors become forced diamond hands. My expectation is still fall of 2025 for the start of the bear market.
- Late bull market prices for Altcoins may moon quite a bit harder as circulating tokens remain stubbornly low despite bloated FDVs (as a result of long cliffs and long vesting schedules).
- Altcoins will face a dilutive effect as the number of projects explodes, with more options for all the capital looking to invest. Owning solid projects with legitimate teams and strong fundamentals will become increasingly important to maintain outsized gains.
- VC firms will, unsurprisingly, be forced to go out the risk curve and use leverage and margin to maintain active involvement in the markets as liquidity becomes increasingly locked in illiquid presale investments. This will yield a more explosive popping of the bubble than would otherwise have been likely, particularly when the bear market begins to destroy the underlying investment value backstopping their margin and leverage.
TLDR:
- Extended cycle
- Altcoin performance will concentrate in solid projects
- Pre-sales are still profitable, but less than previous cycle (to date)
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