Torch Essay: Another Hype Cycle for Bitcoin?

薪火

特邀专栏作者

2021-03-10 09:14

This article is about 934 words, reading the full article takes about 2 minutes

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The prices of bitcoin and ethereum, as well as other cryptocurrencies, and on-chain activity have broken past all-time highs. The total market capitalization of cryptocurrencies is now over $1 trillion. So many have been asking, "How real is this rally really?" Is this just another hype cycle? I'm skeptical, but after assessing the drivers of change in each cryptocurrency, I think it's more than just Is another rebound, this should be the arrival of the inflection point.

Why do you say that, let’s first look at the well-known halving event. Given Bitcoin’s fixed supply of 21 million BTC, the halving (the procedural event in which block rewards for miners are cut in half) is believed to be driving demand. While there was little price movement after the most recent halving in May 2020, the market peaked less than a year after the halving. The halving is a predictable event, and only two historical data points are analyzed. The real issue is supply and demand. The supply of Bitcoin is fixed, while the demand is constantly increasing.

There is also the goal of DeFi to create a highly interoperable financial system with greater transparency, equal access rights, and almost no intermediaries, because these roles are assumed by smart contracts. This narrative assumes that DeFi is an open, transparent and automated financial system. The rise of DeFi seems more like a rebound, but there are signs that it will either integrate with the traditional financial system or replace elements of the traditional financial system. This will end up being a huge inflection point. Centralized financial markets prevent fair entry, and long before $GME, DeFi emerged to try to correct these deficiencies, ensuring that the infrastructure supporting the programmable asset market is as decentralized as its underlying technology. Despite being just over two years old, the decentralized exchange recorded a total transaction volume of $60 billion in Q4 2020 and outstanding DeFi loans of $4.5 billion. Nearly $1.6 trillion in stablecoins and ETH traded on the Ethereum network in 2020 is impossible to ignore.

There are various indications that it seems normal for the currency circle to see such an increase. Let’s talk about the market: the current market has reached a relatively critical position, and the current position is not far from the previous high, and it is the second rebound. If This time it can break through the previous high, so it is not impossible to reproduce the 5,000-point pull within a day. If this breakthrough fails, the market will bottom out for the second time, and another 4-5 trading days of negative decline is certain. Personally, Xinhuo is more inclined to be bullish, because bullish investors may return to their original positions in a short period of time, while bearish investors have many positions that cannot be returned.

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