In a recent letter from Pantera Capital, a leading blockchain investment firm, a bold prediction about the imminent rise in the cryptocurrency market marked the beginning of what they consider to be the fourth largest cycle in history.
Forecasts predict a rally in the cryptocurrency market lasting 18 to 24 months, supported by several key factors as highlighted below –
Absence of bad things
Pantera's message emphasizes the positive impact of the absence of negative events, citing the turbulent years of 2022 and 2023, which were characterized by unprecedented volatility in the global market.
Despite the challenges, the cryptocurrency space, including blockchain markets, has withstood a 70% decline in total market cap.
“Since none of these can kill blockchain, the absence of those very bad things is, at the margin, a huge positive,” the letter states.
The letter emphasizes positive legal developments, including rulings that favor blockchain clarity, such as Ripple's XRP and Grayscale's lawsuit victories. With institutional adoption gaining momentum following the launch of a Bitcoin exchange-traded fund, Pantera sees these developments converging with the upcoming Bitcoin halving, creating a favorable environment for a more distinct crypto bull market.
“Whether it's the SEC or the CFTC, they don't have a lot of tools at their disposal,” believes Christine Smith, CEO of the Blockchain Association. “And so using enforcement actions to try to find the line is one of the current tools they have.”
Bitcoin's programmability and DeFi potential
Pantera Capital's Franklin Bee highlights Bitcoin's untapped potential, describing it as the world's most neglected asset. He explains the evolution of Bitcoin as an asset and technology in detail, exploring its programming challenges.
Pei suggests Bitcoin's recent development path, referring to upgrades such as Taproot and BRC-20 tokens, indicating a potential decentralized finance (DeFi) breakthrough on the Bitcoin network.
The letter addresses the potential of decentralized finance with Bitcoin as a “half a trillion dollar opportunity.” The potential value of DeFi applications on Bitcoin is $225 billion if it mirrors the dimensions of Ethereum. The pioneering DeFi take on Bitcoin could eventually be worth $20 billion, representing a large untapped market within the cryptocurrency ecosystem.
“I think globally you will see some serious attempts to put forward a regulatory framework for DeFi,” comments Neil Maitra, partner at Wilson Sonsini.
Impact of Bitcoin halving
Pantera reconsiders the impact of the Bitcoin halving, and predicts a price rise based on historical analysis. Although efficient markets theory suggests predicting prices, Pantera asserts that “even if we think everyone knows something, that doesn't mean there isn't a lot of money to be made.”
Furthermore, Pantera's letter showcases its efforts to explore tokenized US Treasuries within the growing field of real assets on the blockchain. The joint letter emphasizes the benefits, including enhanced liquidity and global accessibility. Discussion of regulatory developments includes insights from Pantera's Chief Legal Officer, Caterina Paglia, and key players in Washington, D.C.
all in all …
Pantera Capital's comprehensive analysis has given us a detailed picture of what is shaping up to be a strong bull market for cryptocurrencies over the next 18 to 24 months. The study highlights powerful factors such as legal developments, institutional adoption, Bitcoin's programmability, and the untapped potential of decentralized finance.
