Why So Bearish?

Liquidity Raises All Boats

There’s an undeniable correlation between global liquidity and the cryptocurrency market, throughout previous cycles, M2 expansion (broad money supply) and its velocity have been key drivers of digital asset prices. 

The crypto market has historically tracked global liquidity, with asset prices surging when central banks expand the money supply. In 2021, rapid M2 growth fueled a record-breaking bull run. Today, liquidity continues to rise but at a slower pace. Although it may not rise to 2021’s levels, this may potentially lead to a longer-lasting, more sustainable cycle.

Short-term factors have been delaying liquidity expansion: New US regime shift and geo-politics/macroeconomic factors have strengthened the dollar, and a rising dollar tightens liquidity making debt harder to service, inflation data, and fewer expected rate cuts this year. However, liquidity is steadily increasing but in a more gradual fashion than in 2021, suggesting a longer-lasting growth trajectory.

Money Velocity and Sustainable Growth

It's not just about M2 growth but also its velocity. Currently, money velocity is at half the levels seen during the 2021 bull run which indicates we’re in a less speculative growth phase. Blockchain adoption and activity tell a different story of perhaps more active users focusing on utility rather than mere speculation.

Is This Time Really Different? 

Current crypto market sentiment is at an all-time low, asset prices and on-chain activity confirm. However, LTF sentiment can be disregarded as noise and what we are looking at is the preamble of a whole new game, one with a new set of rules and teams that will be marking a shift from predominantly financial nihilism (extreme risk-taking with no regard for fundamentals) into an era of neo-optimism with a more mature ecosystem and market participants. If all new plans and hopes for this industry materialize in the mid-term, then we’re possibly in the waiting room for a new long-lasting golden era of digital assets.

Trump's return to the Oval Office signals a pivotal shift for digital assets, positioning the U.S. as the most crypto-friendly nation. His administration's pro-crypto stance could drive this transformation by establishing clearer regulations and new financial instruments, fostering projects with real utility, such as Bitcoin ETFs, stablecoin regulation, DeFi protocols, and RWAs, especially when aligned with the "Made in America" tag. This approach could promote sustainable growth and deeper integration of crypto assets into the traditional economy and daily life.

The next leg of the cycle is moving beyond speculative hype toward a maturing ecosystem with solid fundamentals, increased liquidity, and stronger regulatory frameworks. Decentralized infrastructure like DePIN and DeFAI is gaining traction, while larger market players demand deeper capitalization.

Previously, the average KOL was likely a young anarcho-capitalist tech enthusiast, now we have multi-billion sovereign funds, Larry Fink, and even the President of the United States driving the agenda. The future of digital assets has never looked more promising.

So… Why so bearish?

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-DWI

Disclaimer: This content is for information and education purposes only and it is not intended to serve as investment, financial, tax or legal advice. Do your own research before investing.