In today’s cryptocurrency newsletter, Alex Tapscottexplains the flywheel effect and its impact on the cryptocurrency market.
Then, Natalie Hirsch Answer questions from Polymath about investing in public crypto companies in Ask experts.
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The encrypted flywheel is spinning all the time!
Nowadays, describing how cryptocurrencies can drive the “flywheel effect” in the market becomes fashionable, which is why it is bullish. But, what exactly is the flywheel effect?
The term was popularized by Jim Collins in his 2001 book “From Goodness to Greatness”. Collins asks us to imagine someone pushing a huge wheel. With the first push, the wheels were only slightly slightly, but after pushing hundreds of pushes, it started to boost the power – each new push became easier and accelerated the wheels further.
No one can determine which push has helped it achieve this momentum because it is the product of all small pushes. The lesson for business leaders is: do small things consistently and in the long run, you will get rewards.
Today, the word has evolved into something else. Now, the flywheel effect describes not only the impact of a reasonable operational decision, but how a positive feedback loop affects the market and the industry as a whole.
Here are some ways dynamics work in crypto and public markets:
Digital Asset Treasury Companies As Investors Need to Get Crypto Assets (car Like MicroStrategy, stocks can be issued to its basic net asset value, buying Bitcoin and other assets, and adding NAV per share. This can drive higher underlying assets and induce more people to buy the company’s stock.
The flywheel effect can also be seen in the ETF market. The establishment of ether-focused digital asset finance companies will also help accelerate inflows into ETFs. Since its launch, Ether ETF has inflows of more than $6 billion. eth get As high as 50% in July and ended at around $3,800, the price ratio of Ether to Fiber Bankruptcy Above its 200-day moving average.
Stablecoin issuers also produce flywheel effects. For example, Tether, the issuer of USDT coins, reinvests its huge profits ($4.9 billion last quarter) In Bitcoin, the price is raised, increasing the overall interest in Bitcoin, and increasing the demand for stablecoins purchases like USDT.
Another flywheel effect can be seen in the IPO market. boundary (CRCL) A successful IPO follows several companies that submit public applications, e.g. Grayscale,,,,, Bitgo,,,,, Bullish and Gemini. The successful IPO wave has grown the overall investable universe of investable companies, expanding its appeal and accelerating its inclusion in traditional portfolios and indexes.
Essentially, the flywheel creates a positive feedback loop. What happens when things turn around?
Let’s start with those digital asset finance companies. Some people have taken leverage. If its shares fall or the underlying assets fall, the assets need to be sold to fulfill these liabilities. This will put pressure on their inventory and basic assets such as Bitcoin.
Currently, IPOs are acting as a headwind, but if the cycle lasts long enough, various businesses will try to take advantage of the market. If they fail to meet expectations, investors may write off the entire industry in a time-for-a-time manner, just like during the internet crash. This will have a chilling effect on everything.
Currently, ETH Treasury is buying ETH to make the price higher. However, as prices rise, ETH holders are lined up to sell their fixed ETH. The higher the price, the greater the possibility of free trading. That puts the brakes on the flywheel.
Finally, good times cannot last forever. The market is cyclical and this market will end. But now, (fly)The wheel is running, and institutional investors are stroking the wheel from regulators to public companies to crypto founders. It will take a lot of time to stop their momentum.
– Alex Tapscott, Managing Director, Ninnidian Capital Digital Assets Group
Ask an expert
Q: Is it a good time to invest in crypto IPOs?
one. The short answer is yes. Although Circle’s success exceeded expectations and stood out, overall market sentiment remained very favorable.
In the United States, the launch of spot BTC and ETH ETFs has brought about a large influx of capital. Regulatory clarity in key markets such as the United States and Europe has enhanced investors’ confidence in asset issuers who now follow established listing procedures and operate using a legal governance framework.
In addition, the continuous bull run, investors create a strong opportunity to create long-term value.
Q: What type of crypto IPO should investors focus on?
one. Investors should not only focus on the fundamentals and core propositions of the project. Projects with a strong, foolproof, clearly drafted business model, realistic planning and defined revenue stream will perform better. These may include Stablecoins, custody services and staking platforms at the primary level.
At a secondary level, fintech, infrastructure and analytics-related projects are expected to produce well. Founders and leadership teams play a vital role, which means better fund management and continuous innovation.
As adoption surges, consulting services can help investors identify the most suitable projects in growth.
Q: What is the prospect of an encrypted IPO?
one. The crypto market is mature and institutional adoption is rising. In the near future, crypto asset issuers are expected to become more structured and effective in entering traditional capital markets. If the positive trend continues, investors’ confidence in high-risk climax opportunities will also grow.
The issuer is now more confident to make it public. However, investors should be cautious. Crypto IPOs are best viewed as a high-risk component in a diversified portfolio.
Retail investors must be vigilant about macro events that may affect market sentiment. Asset and fund managers should compare the performance of crypto stocks with traditional technology inventory while monitoring liquidity and volatility.
– Natalie Hirsch, CFO, Polymath
