Explanation of the three main arguments why Bitcoin and Ethereum will enter the next bull market.

Explanations for Why Bitcoin and Ethereum Are Set to Enter the Next Bull Market A Breakdown of the Top Three Arguments

Author: Lugui Tillier, Cointelegraph; Translation: Songxue, LianGuai

After 2021, we entered the era of cryptocurrencies, where people are no longer just talking about financial decentralization but are beginning to discuss the tokenization of everything, thanks in part to non-fungible tokens (NFTs).

This shift represents a critical perspective and indicates three themes for the upcoming bull market. To fully understand these arguments, it is essential to understand that everything is data. Money is data, your interaction with brands is data, your credentials are data, and even the tickets to your favorite show are data.

Since 2021, the ecosystem has increasingly started storing most of the data in the form of fungible tokens, NFTs, and timestamps on the blockchain, with the blockchain acting as a data repository.

Although not all data needs to be stored on the blockchain, the ability to place data on the blockchain fundamentally changes the way we store, share, and use data for automated and secure instructions and transactions.

The prospect of tokenizing everything seems to be on its way to Bitcoin. This leads to the first argument.

1. Inscriptions and similar protocols continue to grow, and Bitcoin becomes a network of multiple assets (or multiple data types)

In January 2023, Casey Rodamor publicly released the Ordinals protocol, which, in short, allows any file type to be permanently inserted into the Bitcoin blockchain.

In less than a year, the community has experimented with recording music, artwork, news articles, and even video games on the world’s leading blockchain.

Ordinals is not the first protocol to allow this, but it has received the most attention. And everything indicates that this is a fire that will not go out.

It is not just a technical protocol but a culture and way of thinking. More and more developers see Bitcoin as a canvas for creating other projects and applications, and nothing can stop this mature cultural movement.

But remember: not all content needs to be 100% stored on-chain because it is costly and inefficient for certain applications.

Therefore, protocols like Taproot Assets (which allow the creation of other assets on the Bitcoin network but keep most of the information off-chain) will be crucial.

When it comes to the storage cost of the first-layer blockchain, second-layer blockchains seem to shine.

2. Cryptocurrencies will break through the bubble and eventually reach ordinary people through second-layer blockchains

Those who were active during the bull market period in 2021 will remember that transaction fees on Ethereum reached $50, and that was almost normal, not to mention the peaks, like when users had to pay up to 6 ETH during Yuga Labs’ Otherside NFT minting.

It’s simple: if blockchain isn’t invisible, it won’t become mainstream. Expensive and slow transactions have brought attention to blockchain.

That’s why the second layer blockchain, which aims to scale the first layer blockchain, is crucial for the next bull market.

Although they have been around for years, both layer-2 solutions and the market are not mature enough to build upon them in the previous cycle. On one hand, many companies and developers don’t believe that Layer-2 is stable enough to handle mainstream influx. On the other hand, there is also an issue where people take action without much learning and understanding in the moment of excitement.

There are a large number of unnecessary projects on Ethereum, with different reasons: cultural, because some companies don’t even know what the second layer is, or simply because everyone is building on Ethereum.

Now, with all the lessons learned and the calm of the bear market, it is clear that the mindset of construction is more mature, and the “work to be done” for blockchain has become clearer for those who are building.

Most importantly, the implementation of EIP-4844 is expected to be achieved on the Ethereum network in a few months, which will further reduce the transaction costs for layer-2 networks, making them more invisible and powerful to attract and retain mainstream users.

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Comparison of Gas fees before and after EIP-4844. Source: IntoTheBlock

But if people cannot connect to the infrastructure and companies cannot develop on it, then the infrastructure is useless even if it’s invisible. However, the solution is already here!

Three, abstract solutions will become the main gateway and reservation mechanism for users and large traditional companies on Web3

The biggest problem is that, with the tokenization of everything, in some cases, decentralization is more of a barrier than help.

Abstract solutions are the missing bridge, so the crypto world won’t continue to be a technical environment exclusive to tech-savvy individuals willing to face various challenges and complex journeys. But now, they are ready to play their role!

This is not about ending decentralization, but having a choice. Those who want to remain 100% decentralized can do so, but those who don’t want to remain 100% decentralized now have a choice. This way, it can avoid the extinction of the crypto ecosystem in the infamous innovation chasm. Because if people can’t easily connect and navigate in their daily lives, even the grandest infrastructure is meaningless.

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The use of technology highlights the gap between early adopters and the mainstream market. Source: “Crossing the Chasm” by Geoffrey A. Moore

What is often not discussed is the importance of these abstract solutions for traditional companies to effectively join Web3. How many companies currently have development teams that can program using blockchain languages like Solidity? Making it easier for builders to get started is crucial.

Dividing the journey of blockchain into four phases, we can say that account abstraction solutions will drive Web3 into the second to last phase – as infrastructure improves, fewer technical builders and brands will join the game, while the number of applications, projects, and use cases multiplies, attracting mainstream attention.

As of today, mainstream blockchains seem to increasingly be seen as platforms for multi-asset consensus in the next market cycle rather than just currencies. Most importantly, the pursuit of scalability will make the layers of user navigation and enterprise integration more invisible and complex. Welcome to the second phase of Ethereum and Bitcoin.