Cryptocurrency analyst Willy Woo has provided insightful commentary on the nature of the current bull market, suggesting it is unfolding with a distinct dynamic compared to past cycles. He posits that long-term spot investors are the primary force propelling the current market rise.
Woo recalled that the liquidity fueling the previous bull market peak was largely driven by what he terms "paper hands"—short-term derivatives investors. He observed that these investors entered the market primarily for short-term speculative gains, with no intention of long-term commitment, thereby undermining market stability.
Shifting Market Liquidity
The current cycle presents a different picture. Woo indicated that "paper hand" liquidity in derivatives markets is gradually diminishing, while long-term liquidity in the spot market remains robust. However, the analyst cautioned that this situation does not necessarily signal a "super cycle" as some investors might believe.
“If the spot liquidity of long-term investors starts to decline, the market will quickly revert to a bear trend,” Woo warned.
Historical Cycles and Future Outlook
The analyst also highlighted that the crypto market has historically seen an overlap between two key cycles: the Bitcoin halving cycle and the global M2 liquidity cycle. Woo explained that central banks' increases in money supply every four years have historically aligned these two cycles. Nevertheless, he suggested that this alignment may shift in the period ahead.
Woo further stated that Bitcoin's performance will be tested in the event of a potential global economic contraction. He offered the following assessment:
“If we get a business cycle contraction like in 2001 or 2008, we'll see if Bitcoin reacts like tech stocks or like gold.”