"This crypto cycle is really different," said a senior executive named Charlide Schwab.

Schwab Head of Cryptocurrency Research: This round of crypto market cycles is very different from the past

Jim Ferraioli, head of cryptocurrency research at Charles Schwab, pointed out that the current cryptocurrency market cycle is significantly different from the past. Ferraoli believes that the fundamental driving force for this change is that Wall Street has begun to use blockchain technology to not only provide investment products, but also directly integrate it into financial infrastructure.

Ferraoli said that the client assets managed by Charles Schwab are approximately US$13 trillion. Although cryptocurrency investment still accounts for a small proportion of total assets, the company's customers hold about 20% of the spot cryptocurrency ETFs, which indicates that institutions 'interest in cryptocurrencies has reached a significant level.

According to Ferraoli, the biggest change in the past few years has been that large financial institutions have begun to explore how to use blockchain technology in their own operations. He recalled that it has been rumored for years that traditional finance and decentralized finance (DeFi) will eventually merge, and the process is now really beginning. A Schwab executive said that even if cryptocurrency prices fall, the entire industry can still be regarded as in a "bull market" and global financial institutions are actively exploring how to integrate blockchain and digital asset technology into their business models.

Why is this cycle different?

Ferraoli believes that the most significant development that distinguishes the current cycle from past crypto cycles is the rapid growth of real-world asset tokenization.

He said that approximately US$50 billion worth of real-world assets have been tokenized on different blockchain networks, and the field is growing rapidly. Although this number is still small compared to traditional financial markets, Ferraoli emphasized that the cryptocurrency industry is no longer just a speculative field, but is beginning to generate real use cases.

Ferraoli pointed out that in previous cycles, blockchain activity has mainly followed Bitcoin prices: when Bitcoin rose, leveraged trading, NFTs, credit markets, liquidity pledges, and decentralized financial activities increased; and when Bitcoin fell, these activities decreased significantly. However, he believes that tokenization of real-world assets may change that relationship. "If you are a large financial institution that tokenizes deposits or other financial assets, then the price movement of Bitcoin is no longer important," he pointed out.

Ferraoli assessed that this situation may make the use of smart contract platforms and the demand for native tokens somewhat independent of the Bitcoin cycle. He believes that as the proportion of real-world assets on the blockchain increases, the correlation between the smart contract network and Bitcoin may also decrease.

Bitcoin is gradually maturing

Ferraoli also said that Bitcoin is gradually becoming a more mature asset class. He pointed out that as Bitcoin's market value reaches about $1.6 trillion, it has become more difficult to grow tenfold as it has in the past, but he also pointed out that Bitcoin's volatility declines with every market cycle.

According to data shared by Ferraoli, in the current cycle, Bitcoin's volatility has dropped to around 40, compared with 50-60 in the previous cycle and 60-70 in the previous cycle. Therefore, he believes that the extreme price peaks and sharp declines in Bitcoin in the past may gradually decrease.

The Schwab executive said that the large amount of speculative capital flowing into areas other than Bitcoin also supports this view. Ferraoli pointed out that products such as decentralized finance, highly leveraged perpetual contracts and forecast markets provide investors with the opportunity to take high-risk positions outside of Bitcoin, which helps Bitcoin become a more mature and more in line with Wall Street acceptance standards.