Where Are We Now? A Dive into the Business, Financial and Crypto Cycle Phases

It’s always the same thing with the markets. We anticipate something and when it starts materialising as expected, we load up, we see people doing the same, we get excited, things start becoming fun and then at some point, the excitement slows, the doubts start rising and we start doubting ourselves and pondering if everything is going to be over.

We have advocated that it made sense to position yourself long on crypto since early 2023. We were early and saw things finally materialising in Q4 of 2023 and Q1 of 2024. There was confirmation of our anticipation and we thought we had it right and that the bull market had started and Bitcoin would go parabolic. We believed the SwissBorg token (BORG) would go to an all-time high (ATH) before summer and that retail would rush back into the space, understanding that it’s not too late to buy and ride the wave this time. Unfortunately, like often in life and especially in markets, things have not unfolded that way and we have been taught a new lesson of humility.

But are things over then? The answer is no and that's great. 

Let’s dig it out. This is a little reminder about what is happening in the crypto space and where we are at as we just experienced a nasty bear trap and a long boring sideways market. Once again let’s remember : 

A) The secular (long-term) trend we are in for crypto:

1. It’s a tech stack
2. It sits above the internet
3. It enables us to create digital scarcity
4. As everything in the digital world goes to 0 in value as it gets commoditised
5. It's also the distributed ledger that allows the settlement of all sorts of things
6. It’s a new layer of the internet and we can own a part of it
7. You can’t own the entire space, but you can own parts.
8. The magic here is the token
9. The token is the behavioural incentive that makes it go around and allows people to participate in this space
10. And anyone can own them as it’s fractionable and anyone with an internet connection can have it
11. This means that the secular trend of adoption is yet to continue and accelerate
12. This means that the beta of the market is going to create a lot of wealth and many opportunities - just being exposed to it is already a win

B) For the cycle phase (learn more about cyclical trends here ):

We know that many liquidity events will continue to arrive. We need to look for global liquidity. Global liquidity is the necessary component to be able to overcome the debt in the system and avoid defaulting and getting into a debt refinancing crisis. 

There’s 72% of total debt that is coming to maturity by 2026. This is 250 trillion worldwide to be refinanced between public and private. There’s no way the world can refinance without having sufficient liquidity in the system to roll over these amounts. What are the global events likely to increase liquidity? Among others here as some of them : 

1. The Chinese will have to add liquidity to support their banking, real estate market and general economy and to push down the Yuan. They usually start easing seasonally in H2 every year (as illustrated on the graph below) 

1. Everybody is cutting rates around the world and the Fed should finally make a move 
2. The continuation of the depletion of the TGA (the Treasury General Account i.e the bank account of the US government) and the RRF (Reverse Repot Facility). The RRF is like a secure savings account for banks, offered by the central bank to adjust the money in circulation. The TGA is “the bank account” of the US government
3. The slowing or even stopping of the Fed's quantitative tightening (QT)
4. Basel 4 happening in 2025 will eventually lead to banks holding more bonds, which will be a back-door stimulus

All this is starting to materialise as we speak with the DXY (The US Dollar Index), an index representing the value of the US Dollar against a basket of currencies (EUR, CHF, JPY etc). The index decline is very positive for equities and crypto (as illustrated below on the chart for Bitcoin). 

Indeed, a weaker dollar (usually following a looser monetary policy) allows emerging economies to be able to ease as they can start stimulating without putting their currency rate at risk. This creates the perfect environment for new liquidity to be added to the system and a stimulus on economic growth that triggers earning revisions, that push valuation ups in the market etc.. 

Closing thoughts

In the same way that we got caught up in the anticipation of the bull market euphoria, we easily forget how previous cycles unfolded and that these had boring, sideways, indecisive zones. Bitcoin on average has a sideways sequence during 170 days and peaks 418 days after the halving. We are sitting at 124 days when writing this article.

As illustrated in the charts below and citing Winston Churchill, we can maybe rightfully say that now is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning. Remember that in today’s economic and financial reality, there’s no other option than being invested. Each of us has to determine our goals, and risk tolerance and adjust the strategy accordingly. We have repeated this many times in various articles like, The Bull Market has started, so what’s in front of us? or “Why interest rates count (and don’t anymore) , staying on the sidelines is not an option. The longer you wait, the wider the gap becomes. If you're still in the habit of saying "I'll do it tomorrow," it's time to break that cycle.