Dance Card

“Dance Card” – a cartoon illustrating that the hot money the crypto industry expected to underpin this year’s bull market might have shifted to AI instead.

The crypto industry moves in four-year cycles, for example 2012, 2016, 2020 and the anticipated 2024 bull run.

At the beginning of the year, Kelly Ye of Decentral Park Capital, noted that the year ahead was anticipated to be a defining moment for the evolution of the crypto market.

Factors such as the approval of Bitcoin and Ethereum spot were expected to create favorable conditions for cryptocurrencies, setting the stage for a significant resurgence in the market.

Even institutional research firms agreed, for example JP Morgan expected a crypto market rebound in the second half of 2024. However, most of the retail investor action has gone into AI, particularly NVIDIA.

In the last 18 months, NVIDIA’s stock has gone from solely a story of strong earnings growth to one increasingly built on ‘narrative,’ which is that there will be a never-ending demand for the powerful chips it creates to meet the explosion in AI products (e.g. ChatGPT).

While US retail activity has dropped to its lowest level since January 2020, the purchases of leveraged Nvidia ETF’s are hitting record highs, according to Vanda Research.

In a description that many in the crypto might relate to from the 2020 bull cycle, Timothy Arcuri, a senior semiconductor analyst with UBS, mentioned “with every passing quarter, everyone clenches their fist tighter and tighter, and asks, ‘How long can this go on for?’”

For the crypto industry, 2024 has seen the early stages of a bull market driven by one-off events (e.g. recent announcement by the US Federal Reserve Chairman of interest rate cuts), but not the momentum needed to attract new retail investors looking for high yield.

The question is whether the inevitable bursting of the retail AI bubble will lead to a shift towards crypto or mark the end of this cycle’s bubble.