Digital assets are rising again, but is the bull run here to stay?

In 2016, British documentarian Adam Curtis released a film titled “HyperNormalisation,” it is his critique on the evolving nature of power in the international system or, more precisely, the lack of power that few want to admit. In 2024, our international system is more complex and less stable than it was only eight years prior. In fact, the war in Europe, geopolitics in the Pacific, and military conflict in the Middle East have placed strategic questions over where the presently globalized world is headed and who, if anyone, will lead it. But what does this have to do with digital assets? Bear with me.

International finance has long superseded the nation-state before often returning to offshore financial centers. Meanwhile, global companies have typically relied on their national identity, e.g., American firms or Italian flag barriers, to form a large part of their reputation, positioning, and, crucially, a level of protection they receive due to national interest—think Ford vs Ferrari. Good or bad aside, let’s accept it just ‘is’ for the moment.

In digital asset markets, many reasons to buy are made: ‘inflation hedge,’ ‘democratized,’ the opportunity for ‘outsized returns’–-with disclaimers to match—and ‘stability’ matched with volatility, a juxtaposition. These reasons are often subjective and interpreted differently depending on economic, geographic, sociological, gender, and even psychological profiles, leading to different trading decisions and approaches at country, gender, and individual wealth levels. While the ideas of hedging, democratized returns, and stability are, at a minimum, complex or, at the other end, questionable, undeniably beneath those are centralized issues of trust, power, and accessibility.

The latter of those is simple. Accessibility to digital assets, whether synthetic, technology-led, asset- or commodities-backed, is global. The barriers to trading have been removed, and the cost of accessibility has fallen. In the absence of economic opportunities at national levels, people around the world have sought returns from assets more speculative than traditional bonds, equities, and real estate, which have largely become unaffordable. This has as much to do with the lack of economic opportunity and trust in financial systems as it does with the belief in what the digital economy to come via web3 could or will be.

Just as trust is an issue—trust in companies, governments, and the world at large is historically low—it is being found in other places. Namely, digital assets are a leading example: a belief that the economic system is against you, that currencies are being systematically devalued, and that national debts are causing structural economic challenges. Result: digital assets are given as a way of mitigating against that for individuals rather than managing assets enjoyed by professional investors and businesses.

Separately, the decision by the Securities and Exchange Commission in the USA to approve Bitcoin ETFs did two historic things. Firstly, it means digital currencies officially became an asset class in the eyes of the regulator of the world’s largest economy and financial markets—others will follow. Secondly, for the traditional financial institutions that fought for the ETFs, altcoins became an official alternative trade and, thus, an official gateway to TradeFi-led digital asset markets.

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At the most basic level, these powerful—and influential—financial firms are looking to meet clients’ needs, make money from trading, or be part of the digital asset economy. It is also a conflict of power dynamics. Power is not for market share but for control over a global phenomenon: the deterioration of centralized power from core power structures to a multi-polar system of which digital asset markets form only a part. True, the value of digital asset markets isn’t nearly as immense as the world’s leading equity markets, developed market GDPs, or the overall levels of global wealth. Yet, two questions therein are often not asked: Do they need to be? and What is to stop them from growing exponentially owing to a singular issue or point in time?

It depends on when you believe it started and the dynamics bringing it. Historians of the future will tell us when the run started, but two moments stick out as potential starting points: the bottom of the BTC price in 2023 and the ETF approval in 2024. 

While all bull runs come to an end—make no mistake about that—-what makes the recent bull market complex is the multitude of factors influencing it, such as power, trust, and accessibility. In addition, the peculiar relationship between digital assets and real-world economics is just as complex (if not more so) and less understood than the relationship between traditional financial markets and the real world. 

For instance, in recessions, you expect prices and demand to decrease and the appetite for risk assets to decline. Yet, just as economies worldwide confront economic challenges, plausible recessions, and structural power vacuums, digital assets have entered a period of expansion that many expect to last well into 2024 and potentially beyond.

One should remember that digital asset markets remain off their peak regarding mark-to-market value. Still, the broader political-economic factors, as well as what makes up the market, are different from the previous peak. Moreover, as utility increases, web3 develops, the deterioration of international systems continues, and traditional financial institutions bring their motivations and intentions, the quiddity of digital assets remains unchanged and mysterious, even if the drivers are more openly viewable.

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