Is the era of knockoffs dead? How far is the road to crypto compliance?

Source: Talking Outside the Lines

With the recent Israeli attack on Iran, the market has entered a new round of panic, with Bitcoin dropping back to around $105,000 and Ethereum falling from the critical level of around $2,800 to about $2,500…

In fact, if we simply review the past, we can find that every time the market encounters some unexpected events, people are always swayed by panic. In contrast, some institutions and whales often take advantage of these black swan events to operate in the opposite direction of retail investors. For example, as mentioned in our previous article, BlackRock has accumulated about 220,000 ETH in just the past 30 days.

On one hand, retail investors are handing over their chips due to various news, while on the other hand, some institutions or whales are continuously buying and accumulating in large quantities. Doesn’t this seem quite interesting?

To be honest, although I pay attention to macro factors, I generally do not change my decisions or plans due to short-term events. Regarding the recent conflict between Israel and Iran, I have seen some people online saying it could lead to a full-scale war or even a nuclear conflict. I think these views are somewhat alarmist (or they are just trying to attract attention or traffic).

Last year (2024), there were already two significant military conflicts between Israel and Iran:

One was in April last year when Israel airstriked the Iranian consulate in Damascus, Syria, killing several senior Iranian generals. Iran responded by launching about 170 drones and 150 missiles. The final outcome was that both sides chose to maintain “tactical calm.”

The other was in October last year when Iran launched about 200 ballistic missiles at Israel, which subsequently retaliated with airstrikes on about 20 targets in Iran. The final outcome was that both sides announced they had “achieved their goals” and ceased hostilities.

Then there was the attack a few days ago (June 13), where Israel conducted large-scale airstrikes on over 100 nuclear facilities, military bases, and residences of senior generals in Iran. Iran subsequently launched over 200 missiles in a polite response.

1. Is the Altcoin Season Dead?

As for whether Israel and Iran will continue their large-scale mutual attacks or take a few months to regroup, we will continue to observe the situation. However, if the situation spirals out of control, it is not ruled out that the market may experience significant volatility in the short term.

This shows that the occurrence of some macro events can indeed directly impact the market. It feels like every time other countries go to war, the ones who get hurt, besides the citizens of the respective countries, also include our wallet balances. Just a few days ago, it seemed like ETH was about to rally, but then Israel struck first, causing ETH to drop again, and the hope everyone had just seen seemed to be dashed.

Theoretically, if ETH cannot achieve a real breakthrough in price, then the so-called new altcoin season that people are looking forward to may not come for a while. Here, saying it may not come temporarily does not mean the altcoin season is dead. We were previously quite optimistic about the altcoin season, but now we will be relatively conservative and will try not to provide specific timing predictions (guesses).

As for what to do next, it can be summarized based on three considerations: keep the system (personal strategy) simple, avoid any emotions, and pay attention to changes in data (such as the ETH/BTC ratio, ETF fund flows, etc., mentioned in our previous articles).

If altcoins really want to rise, it often happens quickly; to double, perhaps 1-2 weeks is enough. Continuing with the Altcoin Season Index we shared in previous articles, historically, when the altcoin season index is around 15-20, it often receives strong support, and this level usually indicates a significant rise in altcoins in the following period. As shown in the figure below.

Of course, just because it reaches a support level does not mean it will quickly reverse, nor does it mean that all altcoins will rise after a reversal. This is merely a potential cyclical signal. To put it more clearly, as long as Bitcoin can continue to stay above $100,000, then for a period of time, as long as no serious new black swan events occur, we are very likely to see some altcoins outperform Bitcoin.

Additionally, when altcoins really start to rise, it can easily trigger FOMO, but when they drop, they often do so harshly. Many altcoins in a bear market may drop by 90% or even go to zero. If you must play, then focus on those altcoins with good ecosystems and buy projects that you can truly understand. Do not blindly trust others’ recommendations, and do not engage in long-term relationships with altcoins. This round of the altcoin market (especially the on-chain market) seems more like a “slaughterhouse” for retail investors.

Regardless of which aspect we consider, the goal of all operations in the second half of this year should be to protect profits. The further we go, the less worth it is to take risks, unless your personal risk tolerance is quite high or you are a gambler.

2. The Compliance Path of Cryptocurrencies

In recent articles, we have focused on the development of stablecoins. It is not an exaggeration to say that stablecoins have been the most prominent narrative in this cycle. As of the writing of this article, the market capitalization of stablecoins has exceeded $250 billion, growing by $89 billion in just the past 12 months. As shown in the figure below.

If this growth rate continues, the scale of stablecoins may reach a market capitalization of $1 trillion within the next 4-5 years.

Although stablecoins are continuously increasing, the overall market capitalization of cryptocurrencies has not performed as well as people initially expected. On one hand, institutions or investors are converting more and more fiat currency into stablecoins, and on the other hand, many stablecoins do not seem to be in a hurry to convert into other cryptocurrencies.

However, with the upcoming legislation in the U.S. regarding cryptocurrencies, there may be new changes in this situation. Currently, two important bills worth our attention are the GENIUS Act and the CLARITY Act. The former is an important bill to regulate and legalize the stablecoin industry, while the latter will establish clear rules to classify digital assets as commodities or securities.

From the current progress, the likelihood of these two bills passing during Trump’s presidency is quite high. From a longer-term perspective, the passage of these bills will greatly benefit the DeFi sector, which is one of the reasons we have been advising everyone to pay close attention to this field since the beginning of the year.

Additionally, last week, Circle (the company behind USDC) went public on the New York Stock Exchange, with its stock (CRCL) starting trading at $31 (the IPO price was $31 per share), and by the end of the first day, it had increased by about three times. The current price has risen to $133, as shown in the figure below.

During the last bull market, Coinbase’s IPO was a historic moment for the crypto industry, marking the transition of cryptocurrencies from “fringe finance” to mainstream capital markets. Institutional investors could indirectly invest in the crypto industry by purchasing stocks to avoid regulatory and custody risks. Now, Circle’s IPO seems to have a deeper institutional milestone significance than Coinbase’s, further marking the legalization of the cryptocurrency industry, setting the tone for stablecoin regulatory bills, and continuing to push forward the legislative process for cryptocurrencies in the U.S., accelerating the integration of traditional finance and the crypto world.

However, with the process of legalization and the continued deep participation of institutions, it often means that some reckless opportunities for making money will become fewer and fewer, making it increasingly difficult for retail investors. I remember in an article we wrote in December of the previous year (December 1, 2023), we discussed the topic of regulation, mentioning that the strictest regulations are likely to occur at some ATH stage in the next bull market (i.e., this bull market). The next bull market may be the last opportunity for large-scale rapid growth in the crypto market. As shown in the figure below.

In addition, we also need to continue to pay attention to the progress of ETFs, which is another aspect of the crypto industry moving towards compliance/regulation. Based on some current news online, it is likely that two important ETFs will be approved in the third (or fourth) quarter of this year: one is the ETH ETF with added staking, and the other is the SOL ETF that is officially approved.

Because last month (May 29), the SEC issued a statement (Statement on Certain Protocol Staking Activities) clarifying that staking transactions do not fall under securities transactions, which seems to significantly increase the probability of passing the ETH ETF with added staking functionality.

As for the SOL ETF, according to Bloomberg analysts’ predictions, the probability of the SOL ETF being approved this year has risen to 90%. If preliminary approval can be received in July, then according to the process, it may be implemented by the end of the third quarter or the beginning of the fourth quarter.

In the past, you could say that Bitcoin is a scam, stablecoins are illegal, and cryptocurrencies are unlawful.

But now, if you still think that way, it seems a bit self-deceptive, because Bitcoin has begun to rise to the status of national reserves, stablecoins are on the path to legality, and more altcoin ETFs will be approved (here we mainly discuss the U.S., and individual countries are not included in this scope)…

In short, people (retail investors) currently seem to remain pessimistic or watchful, and many crypto circles do not appear to be as active as before, with only scammers left eager to help you get rich… However, if you are already in this market, then you should consider yourself fortunate, as you are ahead of many others. We not only need to seize the possible opportunities in the coming months (while managing the corresponding risks), but we should also broaden our vision for the long term.

This is the worst of times, and it is also the best of times. We will continue to witness a new era of cryptocurrency.