Have you heard of Ghost-chains? Those are projects that were briefly hyped at the late stages of previous bull market cycles, only to then disappear into obscurity shortly thereafter.
You can see the chart of a Ghost-chain above. It temporarily enjoyed some hype back in 2017/18 but never recovered from the bust and failed to gain any sort of adoption over the years.
Why does this matter today? Because to understand the late stage of a cycle you need to understand who would FOMO-buy into future Ghost-chain projects.
TradFi (Traditional Finance) Hedge Funds suffered a terrible 2021 performance. Only a handful managed to even outperform the US Stock Index S&P500. Meanwhile, Crypto Funds on average returned 214% in 2021, compared to about 10% returns for TradFi Hedge Funds.
The consequence is simple: non-crypto-native funds, LPs, and investors desperately demand crypto exposure. Many of them have neither true conviction nor understanding of the industry. Until recently they might have considered crypto a scam entirely, but money talks.
To them, any chain sounds like any other and the bigger the promises made by aspiring new projects, the bigger the investment rounds become. The results are Ghost-chains and capital burned on buzz-word projects.
Remember the hype around ‘Enterprise Blockchain’? As the market cycle turns, this TradFi FOMO will only intensify.
On a more hopeful note, crypto-native funds are accelerating. FTX recently launched a $2bn venture fund, a16z, Paradigm, and other deep-crypto funds that have huge war chests. For now, we might be seeing top signals but watch out for an entirely different type of Flippening happening between the old guard and the new in the years to come.