The successive growth of crypto marks that it is on the brink of mass adoption. The mass adoption will be caused due to the technologies and exogenous factors crypto has introduced so far. The ‘’supercycle’’ thesis is the bold but vague idea and also is a marketing term for market makers. Now, everyone can join and compete as crypto supercycle is convening. Expressing the view that digital asset will be macro driven in the next few years; Peter Thiel has said that bitcoin is the new FANG.
Crypto has an obscuring reality but who knows when it burst out in light. Some others think crypto to be an abstraction just like AI. Crypto is a mighty meme outsiders treat as this mystical phenomenon insiders try to sell them. Another feature of crypto is that the less people know about it, the more forms and shapes it can take in the future. Crypto is making its space in different ecosystems, technologies, and beliefs in 2021.
DeFi (Decentralized Finance) is the name of another revolution which made dominant movements within crypto. Institutional investors have the same viewpoint towards DeFi they had towards FANG stock a decade ago. How Facebook was going to make money with the user base it had was a centre of thought of the then think tank. At present, you can compare DeFi’s pattern with the then FANG pattern. With DeFi’s revenue nature being self-serving, DeFi is a perfect product market for the economy running on infinite money. DeFi apps generate fees and revenue, and it’s growth can be measured with the internet’s growth phase.
Launching of a number of startups was seen after 2016-2017 crypto bull market. There have been a number of whitepapers of different products since then. Maybe the crypto markets will remain cyclical. Supercycles are now under discussion as a symptom of market euphoria.
Whereas there had only one product in 2017 which was a global permissionless fundraising mechanism, there are now many more permissionless trading and lending in 2021. As people hanker after capital, they have found a way to access it.
There two dimensions in current economy one follows the old economy and another follows permissionless finance. Both have their respective strategies and goals.
Capturing Value in the Market
By creating a new point of integration, Internet has disrupted the distribution of media content. Through bundling or/and unbundling, one can capture value in the market. The internet drives the innovation up and thus encourages building a new value chain. Media distribution cost has descended down to zero because of the blessing of internet.
With a large consumer base, Facebook broke the distribution-based monopoly on customer attention building a new bundle and a new monopoly on attention. Crypto, and DeFi in particular, is a new addition to the same goal. DeFi has applications work as like as banks.
New Form of Leverage
Do you know what the most significant form of leverage is? Definitely, it is the idea of products that have no marginal cost of replication. Internet connection is just more than enough to take you to millions of people within few seconds. If you think from that sense, you will find tech startups as leverage machines. As internet costs no money, it is the modern form of leverage. New forms of leverage are permissionless. They may grow much return but with high volatility and long tail distributions.
The era of internet has both positive and negative effects. The more malleable the world becomes, the less robust it is. Technological and financial leverage can build the world but that development can be fragile. As teenagers are entering DeFi, we can presume that permissionless finance can change the world on a whim.
Nothing special in the world comes with only good sides but also with some bad sides too. The supercycle is not only heightening the opportunities but also the possibilities of losing. So, everything is going to take place unpredictable. That the economy is about to transition is imagined due to the birth of new asset classes. The technological advancement in this field will lead to improvement of agriculture, science, military science, and engineering. Hope the old economy will be replaced by the new one. May supercycle reshape the world with all blessing opportunities.