Bear market enters seventh month
The crypto market has now been in bear market territory for seven months. Most prices are moving sideways, and investors' patience is being tested. Yet far more is happening beneath the surface than the price charts suggest. Banks, asset managers, and crypto companies are continuing to work on future financial infrastructure. In this edition of Market News, we look at the tension between a market that remains under pressure and a sector that keeps moving forward.
Market update
After two positive months,Ā Bitcoin ended May with a slight decrease of 2.9%, closing at ā¬63,100. The price is still well below the 12-month average, which has historically been a good dividing line between bull and bear markets.
During the 2018 bear market, the price remained below this key moving average for ten months before a breakout above the average confirmed a new bull market. In the bear markets of 2014 and 2022, the price of Bitcoin remained in bear market territory for longer, spending thirteen months below the average.
June marks the seventh month of this bear market. If the current cycle follows the historical average, we may already be past the halfway point. In a milder, shorter bear market, we could even be approaching the end. In that scenario, Bitcoin could post a monthly close above its key moving average as early as this summer, a level that currently sits around ā¬76,000.
As in every bear market, there are some tokens that buck the trend and avoid the downturn, often for clear reasons. For example, HYPE is benefiting from growing interest in stock futures in the lead-up to an IPO, with SpaceX a major highlight. However, these remain exceptions, and the broader market trend continues to point downward.
Featured
Ethereum questions its own direction
What if Ethereum succeeds, but ETH doesn't?
That is the uncomfortable question that has hung over the Ethereum ecosystem during the past week. The debate was sparked by David Hoffman, one of the leading voices of Bankless,Ā who announced that he had sold his ETH. He defended the decision with a paradox: Ethereum itself remains valuable, but ETH is struggling to capture that value sufficiently.
That distinction is important. Ethereum is undoubtedly one of the most important networks in the crypto world. It is the foundational layer for stablecoins, tokenized assets, DeFi, layer 2 networks, and a range of experiments that traditional financial parties are also keenly considering. The network creates value.
The question is where that value ultimately ends up. Is it captured by ETH holders? Stablecoin issuers? With fintechs like Square? Or JP Morgan, Fidelity, or other corporates building on top of this infrastructure?
That is the crux of Hoffman's concern. Ethereum may evolve into a kind of financial internet that is neutral, open, programmable, and always available. But the internet itself was not necessarily the best investment. The biggest winners were the companies that built on it.
Coincidentally, Ethereum founder Vitalik Buterin sharedĀ a similar reflection around the same time. Buterin's thoughts concerned the foundation behind the network, the Ethereum Foundation. His message appears to contradict Hoffman's hopes: the Foundation needs to become smaller, sharper, and more principled. Rather than trying to do everything or obsessively competing on scalability, it should concentrate on safeguarding the properties that are harder to monetize directly.
This is precisely where the interests of the two groups begin to diverge. For Vitalik, Ethereum can only be successful if it becomes a robust public infrastructure. For ETH investors, that alone is not enough. They want to know whether that infrastructure will also lead to increasing demand for ETH itself.
Vitalik argues that focusing on what is commercially interesting today ultimately leads to mediocrity. In his view, Ethereum should become the most credible neutral settlement layer in the world. To achieve that, he believes the network must be guided by five core principles, which he has grouped under the acronym CROPS:Ā censorship resistance, captureĀ resistance,Ā openness,Ā privacy, andĀ security.
If Ethereum can prove that it is capable of becoming that foundational layer, Vitalik believes the value of ETH will ultimately reflect it. āI have staked 90% of my wealth in it,ā says Vitalik, backing up his convictions with action. The market will ultimately decide which vision of Ethereum proves correct: Hoffman's or Vitalik's.
In other news
Hyperliquid is the wonder child of this bear market. According to asset manager Grayscale, the platform is now playing in theĀ Premier League of the financial world. Last year, Hyperliquid processed nearly $3 trillion in trading volume, from which it reportedly earned $800 million. Grayscale notes it is remarkable that the platform is outgrowing its origins: there are now also markets for commodities, stocks, and even positions in private companies. Further growth also depends on developments in U.S. regulations regarding derivatives and decentralized trading platforms.
Bear market sentiment reaches a low point. In May, the Bitcoin price briefly rallied, almost reclaiming the ā¬70,000 level. The hope that arose was dashed in recent weeks with a price declineĀ once more. The contrast with traditional financial markets, many of which continued to reach record highs,Ā only added to investors' frustration. At a time when sentiment is near its lowest point, theĀ first cautious predictions of a new bull market are emerging. āIt is likely to revolve more around real products than animal spirits,ā argues Delphi Ventures founder Tom Shaughnessy.
Citi sees a tokenization market of trillions of dollars emerging, with well-known Wall Street players as key players. According to the bank, the experimentation phase is over, and Wall Street is beginning to seriously integrate tokenizationĀ into existing systems. Parties like Nasdaq, the New York Stock Exchange, and DTCC are working on infrastructure for on-chain stocks and bonds. Stablecoins are expected to play a key role in this, as they enable near-instant settlement of transactions. By 2030, this market is expected to exceed $5 trillion.
JPMorgan CEO Jamie Dimon strongly opposes parts of the U.S. Clarity Act. HisĀ criticism mainly targets the space for rewards around stablecoins, which banks argue could function as disguised interest on deposits. In their view, this would allow crypto companies to compete with banks without adhering to the same rules. Dimon does acknowledge that blockchain and stablecoins are legitimate technologies. At its core, the debate is once again about regulation, consumer protection, and the distribution of income within the financial system. Behind the scenes, there is a strong effort to push the Clarity Act through the Senate.
Satoshi Radio: InĀ the latest episode of Satoshi Radio, the hosts examine the crypto market from a broad perspective. Strategy is discussed, noting that it continues to buy Bitcoin undeterred. Attention is also given to new US plans for a strategic Bitcoin reserve. Additionally, the arduous rise of on-chain stocks is covered, and Ethereumās identity crisis is analyzed. As always, the episode concludes with a market update.
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.