How long will it take for a strong bull market to come?

At the Bloomberg Investment Conference last June, I discussed the crisis in banking, global macro markets, and blockchain with former SEC Chairman Jay Clayton. At the end of the panel, the moderator asked me what black swans we should expect. My response was:

“People always ignore black swans until one happens. Then all anyone wants to talk about is ‘what’s going to happen next.’ I would say the biggest surprise is that we’ve had all these big things in the last year — and there’s probably not going to be something crazy next.”

"But if you ask me to say something, I would say regulatory clarity is something that no one expected. There are a few ways to achieve that."

Now a very important theme is that nothing bad happens.

Throughout 2022 and most of 2023, all kinds of rare, crazy bad things are happening.

Global macro market volatility has generally surpassed history. According to analysis by Edward McQuarrie, professor emeritus of historical investment returns at Santa Clara University, 2022 was the worst year on record for U.S. bond investors:

"Even if you go back 250 years, you can't find a worse year than 2022."

2022 was the worst year for the traditional 60/40 stock and bond portfolio since the Great Depression.

The impact was even greater in the private markets, which in turn fed into our venture world: IPO proceeds were down 95% from the year before, and the number of deals was down 85%.

The blockchain market has been hit not only by all of the above, but also by Sam Bankman-Fried’s criminal conduct against 5 million people and the ridiculous leverage of several lenders.

The total cryptocurrency market value has fallen by 70%.

These are once in a lifetime oddities in my opinion. No one will ever lend to a leveraged crypto hedge fund uncollateralized or with the same lack of transparency in the next 10-15 years. (Having lived through the 25 year cycle, I know there will always be someone in the next cohort who will do it again!)

Below is a diagram of what many consider to be a catastrophic event in blockchain history.

Since none of these events can destroy a blockchain, the lack of these extremely bad things is a huge positive at the margin .

Another big positive is the removal of some of the regulatory headwinds that have been holding back our industry and institutions wanting to invest in this new asset class.

The past year has seen positive rulings in high-profile cases, such as the ruling that Ripple’s native token XRP is not a security, and Grayscale’s victory in their lawsuit against the SEC regarding their Bitcoin ETF application. In our view, these may be signs that regulatory clarity for blockchain is gradually being achieved, setting the stage for further innovation in the United States.

Institutional adoption appears to be accelerating following the launch of a spot Bitcoin ETF in January.

With the Bitcoin halving expected to occur in late April 2024, we believe the confluence of these positive factors will provide a strong impetus for the next bull run.

Furthermore, blockchain’s “dial-up” to “broadband” moment may be happening . We can see this through the growth of Ethereum Layer 2 and hyperscale blockchains.

Pantera has been managing money in this space longer than anyone else—over a decade of crazy bull and bear cycles. We've been through three full crazy cycles—huge rallies and then, unfortunately, about 85% declines. I think we're at the beginning of the fourth big cycle right now.

The 2022 stock market crash had a huge "denominator effect" on institutions - they were literally pulling out of private markets. As stocks get back to all-time highs, they can invest in private markets again, so I think the next 18 to 24 months could be a strong bull market for crypto .

This is a critical moment where these painful, terrible events that have happened in the capital markets and blockchain space over the past few years have been unwound, coupled with positive things like the halving and regulatory clarity - all of which are unfolding at the same time.