Authors: 0xSheldon@TPTrade, Jerry@TPDAO
Introduction
Looking at the rise and fall of Athens in the context of the origins of world financial history, we tend to be pessimistic – finance only serves money, allowing money to generate more money; and the prosperity and diversification of finance rely on wars, which are bloody and brutal.
However, the tumultuous history of New York gives us confidence. The crisis of Wall Street’s impending demise has occurred more than once, but it has never been defeated, instead flourishing because the gene of “optimizing capital allocation” was injected into New York finance from the start. It is worth mentioning that in the modern financial development process of New York, funds play an indispensable and unique role.
What about the crypto market?
Rise and Fall of Athens
Taking Athens as a representative of the world’s financial origins, it is easier for us to see through the essence of finance as exploitation. Look at Athens’ “Sixty-First” – how cruel it was: borrowers had to give five-sixths of their harvest as interest, leaving only one-sixth for themselves; if the five-sixths of the harvest was not enough to pay the interest, the creditor had the right to sell the debtor and their children as slaves.
With its unique geographical position among Mediterranean civilizations, Athens flourished in commerce but was destroyed by finance.
The vibrant and colorful civilization of Athens once represented the light of human civilization. In times of war, heavily reliant on commercial economy, Athens had to seek financial support – maritime loans emerged, rudimentary banking practices appeared, temples began to engage in lending businesses… Finance brought economic prosperity to Athens, but under the impact of money, once defeated in war, the sense of civic duty disappeared. Even more serious was the loss of citizens’ moral values. Moral decline follows an irreversible ratchet effect – once consumption habits are formed, they become irreversible, easier to adjust upwards, and difficult to adjust downwards.
It can be said that the destruction of Athens began with internal collapse.
Tumultuous New York
Understanding the typical representatives of modern financial history, the tumultuous Wall Street is undoubtedly the first choice, with one of the most exciting elements being hedge funds. As the financial market developed, individual investors became less important on Wall Street, and more funds were entrusted to institutional investors for management. In 1961, individual investors’ trading volume accounted for 51.4% of the total trading volume on the New York Stock Exchange, while institutional investors accounted for 26.2%; by 1969, the share held by institutional investors had increased to 42.4%, while that of individual investors had dropped to 33.4%.
The subsequent bull market was mainly driven by the significant increase in turnover of institutional investors’ portfolios, which steadily increased trading volume. In 1955, the annual turnover rate of mutual funds was about 1/6; by 1960, a turnover rate of 50% was already quite normal; institutional investors were also engaged in block trading (buying or selling securities in quantities of 10,000 shares or more).
By the late 1960s, people blamed Wall Street for the bear market. Similar to the “Wall Street is about to perish” rhetoric during the Great Depression of the 1930s, it resurfaced.
However, Wall Street not only did not perish but instead welcomed a new round of triumph. Thanks to the timely push from the Securities and Exchange Commission, technology came to the rescue of Wall Street. This was possible because New York finance, born out of the wave of the Industrial Revolution, had excellent genes for “financial empowerment of industry,” with Wall Street playing a role in “capital optimization allocation.”
This is enough for countries around the world to learn from and will also apply to the crypto ecosystem.
New Opportunities in Crypto
Benefitting from the boost from Wall Street brought by Bitcoin ETFs, this bull market so far has only been a Bitcoin bull market. Therefore, we believe that the reason for this “lackluster bull market” lies in the lack of momentum from “native crypto funds” in the crypto market.
There are many analyses of the reasons behind the lackluster bull market, with the most mainstream being the complementarity between VC coins and meme coins. We believe that behind this, it is still the lack of “native crypto funds” in the crypto market.
VC organizations that are capable of discovering high-quality projects are extremely rare. Many VC organizations engage in behavior of following investments, leading to overvaluation before listing, resulting in a peak situation as soon as they are listed; and having experienced hundredfold gains, retail investors are still immersed in it, hence being enthusiastic about meme coins. However, their fate is even more tragic than risking their lives, as most meme coins are destined to plummet, with hundredfold meme coins being a rare occurrence.
Analogous to the tumultuous history of New York finance, in the development of the crypto market, this bull market is a moment for “native crypto funds” to shine (here, the concept of crypto funds must exclude venture capital funds and specifically refer to quantitative hedge funds and value investment funds dedicated to the secondary market).
Compared to crypto funds in traditional financial markets, they must have the ability to invest in currencies other than Bitcoin and Ethereum, whether through quantitative investment or value investment, they have their own logic and sharp intuition.
Clearly, whether in traditional financial markets or “native crypto funds,” they are passionate about money, but for “native crypto funds,” faith is more important. In 2021, a large number of traditional financial funds and excellent traders from traditional institutions who were passionate about money flocked in, but after the baptism of 2023, those who remained were still passionate about this industry.
The vibrancy of the secondary market will bring prosperity to the primary market. It is because the market has not withstood the baptism that the expected development of “crypto applications” in the crypto world has also been stifled. With significant improvements in public chain performance, substantial progress in cross-chain interoperability, and continuous enhancement of fundamental elements like NFTs and DIDs, concepts such as “AI+Web3,” “DePin,” and gamefi/chain games, which had a foundation in the previous cycle, are just starting to gain traction, but are hindered by the fact that the role of “financial empowerment of industry” and the role of “financial promotion of capital optimization allocation” in the crypto market have not yet been fully realized.
The starting point for all these changes should be in the disruption of this “lackluster bull market.” The key factor in this disruption is “native crypto funds.” We believe that the role, position, and value opportunities brought by “native crypto funds” will gradually become apparent in this cycle. Will you be a part of it?
