The Block Research Director Larry Cermak: Reasons why we won't see a prolonged bear market

The Block's Research Director Larry Cermak shared his observations on the transition from a bull market to a bear market on Twitter. Will the current bear market repeat the long and dull path after 2017?

I've been asked by a few people what I think about the current market and the honest answer is that I have no fucking clue right now. I think no one knows. CT has just been a lot of noise and not much substance lately. Everyone is still down a lot and coping. My brain dump: pic.twitter.com/koVmjXMSS0

— Larry Cermak 🫡 (@lawmaster) June 16, 2021

Signs of the End of a Bull Market

Larry Cermak stated that many large institutions began viewing Bitcoin as a hedge asset since last year, with MicroStrategy and Tesla being factors that ignited market frenzy. He believes that during the previous bull market, there was a significant influx of retail investors, far exceeding the scene in the 2017 bull market based on community indicators. He mentioned that many meme coins and altcoins began to skyrocket, sparking a craze. This time, institutional funds were not the main driving force.

Larry Cermak reiterated his previous point: "Institutions haven't really entered the market." He mentioned that despite the market actively seeking other major companies willing to allocate Bitcoin, both Coinbase and NYDIG had stated that many companies were waiting to enter, but there was no substantial news later on, and the inflow of institutional funds notably slowed down.

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Subsequently, the hype surrounding Coinbase's listing was overplayed, and the lack of new demand led to its stock price being unable to rise further. Retail investors also began to suffer losses due to meme coins and non-Ethereum DeFi platforms running off with funds. During that time, Ethereum's transaction fees were at a level unaffordable for ordinary users.

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Musk's Change in Attitude, China's Ban, Market Persuasion Wanes

He stated that the market began to weaken, where even obvious rumors of panic could crush Bitcoin, and people were no longer buying the dip as before. Musk's attitude towards Bitcoin also made a 180-degree turn due to environmental concerns.

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Adding fuel to the fire, China issued consecutive mining bans, creating much uncertainty. Bitcoin's hash rate dropped by 30% from its peak, and it seemed like no one really understood what was happening.

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Larry Cermak believed that within a few weeks, there was a drop of over 50%, as Musk's tweets alone could cause a 5% fluctuation in the market, making it difficult to convince the public to allocate substantial investments.

Review: As of Now, the Percentage Drop of Various Cryptocurrencies from their 2021 Highs:

Reasons Why We Won't Repeat the Prolonged Bear Market After 2017

Larry Cermak stated that although retail investors quickly disappeared and market uncertainty remained high, he did not believe that we were entering a prolonged bear market like in 2017, but rather a shorter bull-bear cycle. He focused on several key points:

• El Salvador Leading Developing Countries: Nations willing to adopt Bitcoin are significant events, and if other developing countries follow suit, it will have a major impact. Related reports
• High DeFi Inquiry Rate: Using The Block's research department as an example, he mentioned that many institutions have a high interest in investing in DeFi, and true Layer 2 solutions like Arbitrum and Optimism coming online will truly bring scalability to Ethereum.
• MicroStrategy's Aggressive Buying: He believed that MicroStrategy's CEO, Michael Saylor, has entered a state of blind bullishness and will probably continue to buy until he can't buy anymore. The recent fundraising of over a billion dollars could potentially drive the market up in the current illiquid market.

Finally, he mentioned that while he remains optimistic in the long term, he is clueless in the short term and warned against leveraged trading. He would not be surprised by fluctuations of up to 50%, and overall, from 2017 to the present, we have grown a lot.