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Last month, bitcoin (BTC) did something that almost always marks the end of a bear market.
It closed back above its 200-day moving average.
Bitcoin fell more than half from its October high. Ethereum (ETH) fell 67%. Both are now back above that all-important line.
That means investors have a chance to get in near the ground floor of crypto's next bull market.
First, my two cents on crypto regulations...
The Clarity Act was supposed to answer crypto's biggest open questions.
Which digital assets are securities? Which are commodities? And which regulator is in charge?
On September 15, it failed to pass the Senate and is dead for now. Seems to me the market saw it coming and “looked through” the news.
BTC and ETH are both up more than 12% since then.
This crypto cycle will be different…
Economist Carlota Perez studied every technological revolution since 1771 (canals, railways, steel, cars, computers) and looked at what the money did in each one.
She found they all move in two halves.
The first half she calls "installation." The technology arrives and money floods in. Fortunes are made on paper. It ends in a crash every time because capital always runs ahead of use.
The second half she calls "deployment." The technology stops being exciting and starts being useful. This is the part where almost all the money is made.
Between the two sits the bust and the aftermath.
Nearly everyone who quotes Perez fixates on the crash. I think that's the wrong marker because crashes are common and turning points are rare.
What Perez noticed is that the busts arrive in pairs. First, you get a technology bubble. Then, a few years later, an "echo" credit bubble built out of the money the first one made.
Railway shares peaked in the summer of 1845 and didn't bottom until 1849. The same rhythm ran through the dot-coms in 2000 and housing in 2008. It also ran through crypto in 2018 and again in 2022.
Look at what failed in 2022. Terra. Celsius. Three Arrows. Voyager. BlockFi. And finally, FTX. Everyone was a lending failure, built on leverage. That's a credit bubble.
The second crash is the one you want to buy.
Our research suggests crypto crossed into its “deployment phase” this year.
Users paid $28 billion in fees over the last 12 months. That's the handover.
The promises of 2021 were installation. FTX and the wreckage that followed were the turning point. What's beginning now is deployment.
You can see it in the price, too. Bitcoin's crashes have shrunk every cycle: 84%, then 78%, now 54%. That's what leaving the installation phase looks like. The falls get shallower because the money holding the asset is no longer purely speculative.
And you can see it in places nobody's looking.
In July, a dairy farm in southern Brazil pledged 10 cows as collateral and borrowed about $19,000. The loan was registered on Brazil's main stock exchange. It was the first time cattle had ever been registered there as collateral.
Each cow wears a sensor collar that tracks its health and location, and each animal has its own ID recorded on a blockchain.
The company behind the collars, Cowmed, already tracks about 100,000 cows across more than 1,000 farms.
This is what deployment looks like.
The old crypto playbook won't work this time…
In every previous cycle, the script went something like this: Bitcoin jumps first, then everyone reaches down into smaller coins, and the whole market rises together.
It won't work this time.
For the first time, you can judge large parts of the crypto market on fundamentals like users, fees, and revenue. You can see which protocols are winning customers and making real money.
Those are the businesses moving crypto into its deployment phase. And I believe they'll lead the next move higher. The speculative junk isn't coming back.
This month, I screened the entire crypto market for businesses earning more than $10 million a year that are worth more than $80 million. Real revenue, and liquid enough to buy.
Thirty-three names came back.
Then I split them into two piles: the businesses that hand at least half their revenue back to token holders, and the ones that keep it. Over one recent month, the first pile rose 49%. The second rose 23%.
More than twice the return, for the simple reason that one group pays you and the other doesn't. That’s the market starting to put a price on “value accrual,” something I’ve emphasized from Day 1 in my crypto advisory RiskHedge Venture.
Best of all, most of these businesses are still largely unknown to mainstream investors.
I'll share my playbook on Wednesday.
I'm holding a special live event called the State of Crypto Address. I'll show you where I think we are in this cycle, which kinds of crypto businesses I believe will lead, and how I'm positioning for it.
If you tuned crypto out over the last year, Wednesday is your chance to get up to speed before things really get moving.