Yesterday, I wrote a piece for CoinDesk where I outlined why I believe there will be two bull markets simultaneously playing out in crypto over the next 12-18 months. They edited my write up a bit, so for my Delphi Daily today – I wanted to share the full version with all of you. Enjoy!

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Let’s address the elephant in the room. Despite an unprecedented global pandemic wreaking havoc on just about every major economy on the planet, investors have made quite a lot of money in recent months. Both: traditional and crypto markets. When it comes to the latter, I believe this is just the beginning for those with the discipline and prowess to seek out underappreciated opportunities in this fast-paced industry.

Even without an influx of new capital or users, there is still far too much money tied up in “ghost” protocols (many of which dominate today’s large-cap names), that is likely to be redistributed to projects with actual usage or product-market fit. And I’m not talking about just reshuffling the deck chairs on the Titanic,; I’m talking about real projects and teams making positive contributions to the crypto ecosystem.

There’s a very important difference between the adoption or “success” of a certain protocol and the potential for value to accrue to its native token. I’m largely referring to the latter as this is the basis for capital redistribution within the crypto market.

Take XRP, for example. Even after the mid-March carnage, it still held a total market value north of $6 billion and currently trades close to $13 billion. Stellar’s native asset (XLM) is still in the top 15 at ~$2 billion. Even NEO is still within striking distance of $1 billion. Do I need to go on?

This is why I foresee not one, but two different bull markets coming for crypto. One, which I predict will happen sooner, will simply involve the rotation of capital from zombie projects to those protocols where the underlying product is actually being used and where the token is designed to accrue value as adoption increases. Crazy right? Funny enough, this already started earlier this year. Two months ago, I sent a Delphi Daily to our clients where I deconstructed why DeFi had started outshining alts (see below).

Delphi Daily Inception?

Like many pundits on your crypto Twitter feeds, I foresee this trend continuing. The speed at which these projects innovate and adapt to new market conditions is what makes this industry so dynamic. Decentralized Finance (“DeFi”) in its current form looks completely different than even a few months ago. This time last year, there were only 4 DeFi projects in the top 100 – (Maker, 0x, Augur, and Ren). Today, there are 11 with the addition of Aave, Synthetix, Compound, Kyber, Kava, Bancor, and Loopring. This time next year, I predict there will be at least 25 in the top 100. That’s a lot of redistribution of capital even without an influx of new money coming in.

The second bull market will be led by the usual suspect, Bitcoin. I won’t waste time here discussing how conducive the macro environment is for BTC right now (scroll through my partner Kevin Kelly’s twitter to get the TL;DR). As policymakers around the world continue to provide even greater monetary relief, bitcoin’s long-term value proposition as a hedge against fiat currency debasement only grows stronger. Sometimes it feels like we’re living in the one simulation where crypto not only works, but thrives. Circumstances around the world are converging to accelerate us towards precisely the kind of world crypto was designed for.

As we all know, this space is very tribal – some days seem like a battle to the death between “maxis” arguing whether Bitcoin or Ethereum will be the one ring to rule us all. But in my opinion, the two are more like complements than competitors. Each has its own grass-roots ideology that’s attracted a broad range of interest and talent to join their fight; never in my life have I seen more loyal or dedicated communities than the ones you’ll find in crypto. How else would you get legendary macro investors and developers building the next generation of decentralized applications and protocols in the same conversation?

I know what many reading this are thinking: it’s obvious if you work in the industry, there’s simply no better place to be than crypto right now. You can feel it in the air. Never has our team at Delphi Digital been so excited (on such little sleep) for what we see ahead of us, and I’ve got a good feeling we’re not alone.

When my partners and I left our jobs in traditional finance to start a crypto research firm, we knew we were early, but we couldn’t help but sense something truly revolutionary was happening here:; a paradigm-defining opportunity on par with the advent of the Internet. Two years later, after spending so much time closely tracking interesting protocols –- and falling down the proverbial crypto rabbit hole –- that hunch has transformed into iron-clad conviction. How can anyone deny the crucial role digital assets will play in the next decade?

Frankly, I’m surprised it’s taken some investors so long. Eventually, I foresee high profile tech investors like Chamath Palihapitiya and Mark Cuban to be champions of a sector like decentralized finance. And DeFi isn’t the only sector our team is bullish on (more to come on this in another piece)! I just believe it’s the most obvious sector to grab a bigger slice of the total crypto market cap. As of this weekend, the top 100 DeFi projects had a market cap of ~$7.3 billion. The total crypto market cap is around $370 billion. It’s crazy to think DeFi deserves less than 2% of this.

I wanted to share a secret with all of you. At the top of the 2017 bubble, a friend of mine gifted me a shirt as a joke which I’ve pictured below. Yes, that’s right…it says “moon: the moment when the crypto market cap reaches a total market cap of $1 trillion USD”. I can’t remember if I’ve ever worn it (hedging myself in case a photo leaks) but, as these two crypto bull markets converge, I think I may be caught wearing it sooner than I initially thought.

Yes…this is a real shirt I have in my closet.