Source: Talking about Li's External Discussion
At the beginning of this month (July), a partner left a comment asking me: Will ETH still hope to break $3,500 this year? The result is that just under two weeks later, we have already seen Ethereum at $3,600.
Looking back at the past two years of the bull market, it has been quite a torturous process for many ETH holders. They have had to face not only the price that fails to break through historical highs but also the impact of FUD from others.
To be honest, the recent breakthrough rally of Ethereum surprised me a bit because according to my original expectations (speculations), I thought new opportunities might not emerge until the end of Q3 or Q4. However, the current result is still a very good thing for my position, and I am happy to see ETH rise unexpectedly.
Recently, I've noticed that the sentiment in some groups seems to have improved compared to before, and many E-guards seem to be excited again. However, a new question arises: What is driving the current rise of ETH? How long can this momentum last?
When prices rise, people like to find reasons to convince themselves; when prices fall, they also like to find reasons to convince themselves. This seems to be a norm for many. Moreover, some bloggers enjoy catching these trends, such as turning bearish when prices drop and turning bullish when prices rise, as this aligns well with people's reading preferences.
However, summarizing reasons after each rise somewhat feels like hindsight. Let's discuss it in two parts.
First, let's briefly review the viewpoints we've discussed about Ethereum since the beginning of the year; it serves as a witness to the emotional fluctuations.
In the article from January 14, we discussed: From yesterday (January 13) to now, many partners have been more focused on FUD regarding Ethereum. Perhaps ETH's performance so far has indeed disappointed many partners. However, I personally still remain optimistic about Ethereum; not to mention, ETH is currently the only cryptocurrency other than BTC that has passed the spot ETF approval. Perhaps we need to continue to exercise a little patience with Ethereum.
In the article from January 21, we discussed: Recently, ETH has been harshly criticized across the network. Today, I saw a partner in the group share an interesting chart comparing Ethereum to the A-share market, joking about its breakthrough above the 3300 mark. However, despite the banter, we maintain the viewpoints from our previous series of articles on Ethereum, namely, we remain optimistic about Ethereum's performance, and $4000 is likely not the endpoint of this bull market for ETH.
In the article from February 1, we discussed: For some time, many people have continued to FUD Ethereum, as if 'Ethereum' has become 'Ethereum pit.' You may not value ETH, but institutions like WLFI and BlackRock are buying aggressively. You may find BTC too expensive, yet MicroStrategy and other institutions are also buying aggressively. The development of events always goes through phases; we cannot only see the peak and ignore the potential mess that can emerge afterward. For those hoping for long-term development and stable operations, ETH still appears to be the best choice at this point.
In the article from February 5, we discussed: The market is merciless; it has no emotional color. Only people are affected by emotional fluctuations. I remain optimistic because I still believe that cyclical laws exist. I believe that the market can only see new rises after most people have lost money. If you don't believe this rule, then choosing to exit at what you consider an appropriate time is the best choice for you. It's akin to Zhang San being bullish on ETH while Li Si is bearish; it's straightforward: Zhang San stays, Li Si exits, and they each bear the consequences of their choices.
In the article from February 10, we discussed: Over the past week, ETH's price seems to show no signs of recovery. When BTC rebounds, ETH remains stagnant; when BTC drops, ETH follows suit, and many people's patience is gradually wearing thin. As of the writing of this article, ETH's price is still hovering around $2600, which represents a decline of about 46% compared to the peak of the last bull market. Perhaps institutions are playing a bigger game, or perhaps they have long been preparing for a downturn (crash). They will not lift retail investors who stubbornly cling to historical patterns until they accumulate enough chips (voice).
In the article from March 20, we discussed: Many people have anchored the price at $4,100, so they believe that the current $2,000 Ethereum is a bargain. However, if you anchor to the 2022 low of $800 for Ethereum, the conclusion might be completely different. Selling at highs follows a similar logic; if you anchor on the belief that Ethereum will eventually reach $10,000, then holding onto Ethereum at $2,000 or being stuck with a cost basis of $3,000 begs the question: what is there to feel pessimistic about?
In the article from April 24, we discussed: If I remember correctly, we hadn't specifically talked about ETH for over a month because previously, any mention of ETH (expressing optimism about Ethereum) would usually attract negative comments. However, this is understandable. But with the changes in regulatory policies, the recovery of DeFi to some extent, the deep involvement of traditional financial institutions, and the continued construction of the Ethereum network and ecosystem... we believe that Ethereum still deserves attention and importance in the future.
In the article from June 10, we discussed: Remember in April when Ethereum dipped to around $1300? The criticism of Ethereum online seemed never-ending at that time. However, with a few large bullish candles last month (early May) 'saving' it, the price of ETH doubled in less than a month, and the criticism seems to have diminished. Today (June 10), the price of ETH has returned to around $2700, and recent news about Ethereum seems to be continuously positive.
In the article from June 15, we discussed: If we simply look back at the past, we can find that whenever the market encounters some unexpected events, people are always swayed by panic emotions. Conversely, some institutions and whales often use these black swan events to operate in the opposite direction from retail investors. For instance, as we mentioned in the previous article, BlackRock has accumulated around 220,000 ETH in just the past 30 days. On one hand, retail investors are relinquishing their holdings due to various news, while on the other hand, some institutions or whales are continuously buying and accumulating in large quantities. Doesn't that seem interesting?
Next, let's continue to think about the previous question: What is driving the current rise of ETH? How long can this momentum last?
From the perspective of market price factors, the rigorous statement is that the price increase of ETH results from a combination of various factors leading to a surge in demand. However, this vague statement may not sound meaningful to many.
Therefore, we need to be more specific. In terms of the current rise, a direct statement can summarize that institutional interest in ETH is soaring because BTC's past performance has astonished many (institutions) who missed the opportunity. Recently, with the passage of some regulations regarding cryptocurrencies in the U.S., ETH, as the only cryptocurrency other than Bitcoin that has passed the ETF approval, seems to be gaining new popularity.
For example, regarding ETH ETF capital inflow/outflow, the daily inflow on July 16 set a historical record, reaching $727 million, as shown in the figure below.
Additionally, regarding the ETH balance on exchanges, on-chain data shows that the ETH balance on exchanges has sharply declined over the past 30 days, reaching a new low level. As shown in the figure below, a reduction in exchange supply is typically seen as a bullish signal, as it theoretically means that the number of tokens available for sale has decreased.
In short, as some institutions have started actively buying ETH recently, resulting in changes in the phase demand of the market, this seems to have become the main driving factor for ETH's rapid rise during this phase.
So, how long can this upward momentum for ETH currently last?
As mentioned above, prices are often determined by various factors. Regarding Ethereum, it is currently the only project, aside from Bitcoin, that has passed the ETF approval. It is also the largest foundational ecosystem in crypto and remains the king of altcoins while being the best choice for the current RWA narrative. These are all factors influencing ETH price changes.
Here, let's set aside other price influencing factors and simply consider the situation of MicroStrategy with Bitcoin.
In terms of mimicking the strategies of MicroStrategy, the Nasdaq-listed company SharpLink Gaming has recently become one of the star institutions attracting attention. Since they announced ETH as their primary treasury asset in May, their stock (SBET) has seen a maximum increase of over 25 times, rising from $3 to as high as $79.
As of the writing of this article, SharpLink Gaming has accumulated ETH worth over $990 million (the institution purchased approximately $213 million worth of ETH just between July 7 and July 13). This does not include other TradFi investors who have purchased ETH through the spot ETF. Moreover, according to this institution, they do not intend to stop this behavior anytime soon and will continue to buy more ETH.
It is foreseeable that as more institutions like SharpLink Gaming continue to buy ETH, it seems more buying pressure will continue to build.
As for whether institutions will run into problems with this approach, what problems might arise? When could problems occur? We have explored specific methods regarding MicroStrategy in our previous articles (e.g., the articles from February 10 and February 28). Interested parties can search back and draw their own conclusions.
To put it simply, it can be summarized in one sentence: As long as the stock trading price of companies like SharpLink Gaming can consistently remain above the value of their ETH holdings, they can continue to play this strategy.
As for the long-term future, I cannot say for certain. However, in the medium to short term, the strategies of MicroStrategy with Bitcoin and SharpLink Gaming with Ethereum are likely to benefit the prices of BTC and ETH overall because the highest level of price play is to form bubbles, and a bull market requires more bubbles. MicroStrategy has accumulated over $71 billion in Bitcoin value through this ingenious strategy, and we have witnessed Bitcoin prices continuously breaking historical highs. If no new black swan events occur in the macro environment, ETH and some altcoins are likely to continue to rise.
Of course, since it is a bubble, there will ultimately be a day of rupture. Moreover, the process from formation to final rupture of a bubble is often accompanied by a repeated script. It's not as simple as buying today and becoming rich tomorrow. For instance, Bitcoin has surged from $15,000 to $120,000 in this cycle, but this upward process has not been smooth. Therefore, we must always strictly adhere to our position management plan, just as we discussed in the previous article (July 15): a bull market is a grand retreat.
Investment/speculation essentially boils down to capturing the cycle of bubbles: embracing bubbles, enjoying bubbles, distancing from bubbles, and continuing to anticipate the formation of the next bubble.
According to our previous articles' expectations, there may be another larger opportunity to enjoy a bubble before the end of this year. Before formally distancing from the bubble, we need to focus on two major aspects overall:
1) Macroeconomic aspects
This year, our main focus is on the Federal Reserve's rate cuts and changes in the U.S. Dollar Index (DXY), both of which will significantly impact risk assets.
According to current market expectations, the Federal Reserve may cut rates twice this year, and the timing of these cuts has become a key catalyst. If the Fed cuts rates in September, based on past experience, the market (smart money) typically starts to digest rate cut expectations 3–6 months in advance. Thus, the rise since April seems to be within a reasonable range, and starting in July could mean that some altcoins will either re-enter or are already in an acceleration mode.
2) Regulations and institutions
In this regard, we mainly focus on two aspects: first, regulations and legislation regarding cryptocurrencies/crypto markets; second, ETFs and institutional capital.
For instance, we have mentioned the GENIUS Act in previous articles. Its passage will undoubtedly promote the adoption of mainstream stablecoins in the long term. Not only will major institutions launch stablecoin-related businesses in the future, but an increasing number of users (in dollars) will also find it easier to participate in services like DeFi.
For example, regarding ETFs, with the approval of Bitcoin and Ethereum spot ETFs, the paths for other major altcoin ETFs seem to have become increasingly clear. Based on past situations, the fourth quarter of this year (around October) could become a historical turning point for crypto ETFs. As we mentioned in previous articles, more altcoin ETFs may be approved by then, which will inevitably bring more external liquidity.
Although this round of crypto bull market has followed some historical rules and cyclical patterns, it has also undergone many different structural changes. For instance, the speculative attributes of retail investors are different, the driving forces of the market have changed (with deeper institutional participation), liquidity risks differ (with external liquidity brought by ETFs), and the sustainability of narratives has changed (with more narratives and shorter sector rotations)... and so on.
In the past, it felt like becoming wealthy in the crypto space was a simple matter. Sometimes, you could close your eyes and buy to make money. Now, however, it feels like making money is becoming increasingly difficult. We not only need to study various changes within the crypto space but also pay attention to macroeconomic, political, and U.S. stock market changes.
Although many crypto indicators still hold significance and value, we also need to start changing some existing notions. For instance, regarding the 'altcoin season' issue, many people often regard BTC.D (Bitcoin dominance) as an important reference indicator, but we now need to understand that the decline in BTC.D is just a result, not a cause.
The narrative of the future crypto market will increasingly be driven by institutional adoption, the development of stablecoins, and the progress of tokenization (such as RWA), among other external liquidity capital. This indicates that the demand for the crypto market is undergoing some fundamental changes, especially for those who have always completely adhered to historical experiences. Many of the so-called current issues may actually signify that crypto is moving towards new maturity, and we need to recognize this early.