GM DOers!

“Same, Same, But Different”

That’s how I sum up today’s eyes onchain report.

History looks to be repeating itself in the crypto markets once again. The next cycle could be upon us. 🔄

📊 We can see it pretty clearly here in the chart above made by Rekt Capital, an OG technical analyst in the space.

But this time, things are different™.

If we are entering the next crypto cycle, then we are doing it from a different place than we ever have before. This could be a REALLY good thing for this industry. 💪

I’m going to share some onchain charts that show what is different about this cycle vs. the others.

But before I do, here’s where my head is at regarding all of this. 🤔

Back in 2020 before the last crypto bull run took off 🚀, I was getting very excited about Bitcoin, Ethereum, and their capabilities. Of course, I was very excited about the potential money to be made too. 💰

This was before crypto was all over the media headlines and your friends and family were asking if they should invest in the next dog coin, just like crypto is today.

The incoming cycle that ensued blew my mind and was bigger and wilder than I had ever imagined. 🎢

Who could have predicted Monkey NFTs worth millions and FTX blowing up? 💥

Thankfully, I invested my capital into the space as well as my time studying it before the market took off.

That allowed me to do quite well financially, but, more importantly, it kept me from losing money and getting caught up in the hype cycle, and helped me start a business in the space to generate revenue streams.

I definitely made some mistakes along the way - it wasn’t perfect. 🤷‍♂️

But I came out of that cycle much farther ahead than before. Many are unable to say the same. It’s about survival just as much as it is about building and investing.

These cycles provide life-changing opportunities for investors and entrepreneurs, however, you need to go into them with a plan. 📝

That’s exactly what we are trying to do with our PRO members.

We want to help you allocate into the right assets early 🎯 as well as differentiate the fads from real innovation, so you can successfully build, invest and capitalize on the opportunities in this space long-term.

Today, I am just as, if not even more excited for what is to come for web3 than I was back in early 2020. I think the opportunities right now are massive. 🤯

That said, I’m one of the few who are extremely bullish on this space right now. Most people are bearish on macro 🐻, bearish on the economy, and bearish on technology in general because of inflation, high interest rates, regulation, and more.

I've explained my thoughts on the macro side in previous PRO Reports. Last week, we also looked at some onchain metrics in terms of market analysis. Today we’re going back onchain.

We’re going to look at the innovation and adoption which has occurred during this bear market.

During previous cycles, innovation and adoption metrics dropped along with the price. 📉

However, this cycle's bear market seems to break that pattern. As we approach the next hype cycle (whenever it arrives), we're entering a whole new era. 🚀📈

Onchain Activity In Bear Markets 🐻

Active addresses

Check out the difference between active wallet addresses across the industry during the last cycle's bear market (red circle) and this cycle's bear market (green circle).

We’ve gone “up only” while prices went down more than 80%. This is the first time we’ve ever seen growth in the user base during a bear market. 🤯

Smart contracts

Even more interesting, in my opinion, is the growth in smart contracts (ie. projects, applications and businesses launching) during this bear market compared to the last bear market.

Once again, we are 📈 only!

Ethereum price

For fun, let’s compare those 2 charts above to the price of $ETH.

The red circles from the onchain charts above look the same as the above price chart, however, the green circles above look very different from the green circle showing the $ETH price.

Does this mean that Ethereum and the crypto markets in general are extremely underpriced right now? Maybe. 🤔

The key takeaway from this, however, is that for the first time, we are potentially entering a price bull market 🐂 in the middle of a sustained adoption and innovation bull market. 🚀

Historically, the onchain metrics follow prices, not the other way around!

Solving The Scalability Problem

If you were with us during the last hype cycle of crypto (2020-2021) then it was quite obvious that we had a scalability problem.

How could the future of the internet cost $50-$100 per transaction? 🤦

It was ludicrous! It was very obvious we weren’t ready to go mainstream. ❌

Most users couldn’t even participate in the space and it was next to impossible to build a profitable business on a blockchain.

Times are changing, my friends! 🔄

Ethereum Layer 2s are here and they are ready for the mainstream. 🚀

Arbitrum alone (most popular Ethereum L2) has handled more transactions per week than Ethereum. Optimism, the second most popular L2, has seen similar behavior.

However, these numbers might be a tad inflated due to people increasing their activity on these chains in hopes of farming token airdrops from the networks. So we need to take these parabolic numbers with a grain of salt, for now at least.

And when it comes to the total value locked (TVL) across the Layer 2 ecosystem, we just surpassed $10 Billion TVL last week.

To give you some context, the first general-purpose Layer 2s (Arbiturm and Optimism) didn’t launch until September 2021, a few months before the top of the last bull market.

This next cycle will be the first time we have live, robust, and scalable Layer 2s with flourishing ecosystems built on them ready to service the masses.

Currently, these L2s are about 10-20x cheaper than the fees on Ethereum.

However, with the next big Ethereum upgrade, EIP-4844, already underway, these L2s will be another 10x cheaper and more scalable than they are today (100x that of Ethereum).

This will give us the first cycle where 99% of people aren’t going to be priced out of participating in this fun, speculative, innovation mania we call web3! 🥳

It’s also important to add that outside of the Ethereum Ecosystem, we also have other newer but potentially meaningful ecosystems ready for scale on Solana, Cosmos, and other blockchains.

I’m not going to get into specifics here, but the key thing to understand is that there is plenty of quality blockspace available for the next big adoption phase of web3.

A Digital Asset Ready For Financial Mainstream

For years, the idea of what $ETH could become has left finance bros who are “in-the-know” with wide eyes and drooling mouths: a digital asset with a fundamentally sound and profitable business model that is deflationary and provides a risk-free rate of return (yield) of > 4% APY. 💎

Are YOU drooling yet? 🤤

An asset of this nature has never existed. Many thought that $ETH would never achieve this feat either.

Yet here we are…

Since successfully merging from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) network in September 2022, $ETH has reached its goal of becoming Ultrasound Money (aka a deflationary asset). 🦇 🔊💰

And it’s done all that while offering an eye-popping yield of 6.8%/year to those who stake their $ETH! 🤯

And, finally, just last week, Ethereum completed its final Merge upgrade by enabling withdrawals and effectively “de-risking” $ETH staking.

It’s been only days since the upgrade took place and we are already seeing more deposits than withdrawals for $ETH staking. It’s also likely that $ETH staking will be “up-only” for years to come. 📈

This sets up $ETH, the asset, to be primed for the financial mainstream (traditional finance) and become one of the most important financial assets of our time.

If you’re reading this report right now, then you understand something that 99% of the world does not. The opportunity here is incredible.

Same, Same, But Different

We already know that crypto goes through cycles.

The question right now is: have we just started the next one? 🤔

As explained in the last week's PRO Report, when determining direction of markets, we need to look at it from different perspectives: Macro, Technical, Sentiment, and, specific to web3, Onchain.

In my opinion:

• Macro = ✅

• Technical Analysis = ✅

• Onchain = ✅✅

• Sentiment = ❌

There is no better time to enter the markets than when everyone else is bearish while all the signals suggest otherwise. 📈

I believe we are in the early stages of the next cycle. To get a better idea of why, listen to our latest podcast debate “Are We In a Crypto Bull Run?” 🎧

I’m particularly excited about this cycle for a few reasons, as mentioned earlier, and summarized below:

👉 We finally have real use cases and real users building on and interacting with blockchains without speculative intentions.

👉 We have scalable technologies that are operational and ready to handle the masses, enabling the next phase of businesses to be built on the blockchain and providing access to anyone, regardless of their net worth.

👉 We have financial assets on blockchains with sustainable tokenomics that are even more favorable than any traditional financial asset.

👉 Bonus point: Blockchains and NFTs offer a straightforward solution to the growing issue of AI-generated fake content. By enabling transparent verification and ownership, they can help media stay relevant and, possibly, propel web3 into the mainstream sooner than later. Stay tuned for a more in-depth PRO Report on this topic…

Of course, there's still much work needed to enhance web3 technologies and user experience for the masses, but perfection isn't necessary to bring millions of new users on board.

“Same, Same, But Different”

All of this sounds exciting, as it genuinely appears that compared to the previous cycles, this time IS different.

However, it's also important to understand that every cycle has appeared this way. With every cycle, we have more adoption, more innovation, better tech, and so on.

This is why I say it’s the same, yet different, as usual. 🙃

Exciting times lie ahead, and if you're already engaged in web3, participating, investing, and creating, you're ahead of the majority of the world. Hats off to you! 🫡

And in order to help you get ahead of the curve even more, I am currently working on some additional resources to help you all navigate building and investing in the upcoming hype cycle. Stay tuned!

Don’t forget, this is a cycle that unfolds over a few years. This will not be a straight line up. Build a plan and stick to it.

And, hopefully, we can all come out the other side much farther ahead. That is the goal.

Thanks, friends, and I’ll see you in the next one! 🙌

ABOUT THE AUTHOR

Kyle Reidhead

• Founder of Web3 Academy and Impact3

• Find him on Twitter

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Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.