📺 AI-powered Voice here for those who don’t like long readsA world where Bitcoin no longer reigns supreme and Ethereum takes the throne, steering the crypto universe. Welcome to the post-Flippening era, a game-changer in every sense. Dive into this research as we journey through the seismic shifts in market dynamics, entrepreneurial ventures, and investor outlooks post-flip.

New to the 'Flippening' buzz? Get up to speed with this essential read before diving deeper:

INTRO - What drives the industry today

The trading volume of Bitcoin dominates the current Crypto industry. Dominating the market in terms of volume, Bitcoin's movements have become the compass by which other cryptocurrencies set their course. This dominance isn't merely a testament to Bitcoin's pioneering status or its widespread adoption; it's intricately tied to its unique economic model and the strategies employed by market makers. At the heart of Bitcoin's design is the halving mechanism, a pre-programmed reduction in mining rewards that occurs approximately every four years. This event, coupled with the constant push-and-pull of price pumps and dumps (PnD), has shaped the cryptocurrency landscape.

Bitcoin operates on an economic mechanism that halves inflation approximately every four years. This model triggers a constant supply shock, prompting miners to mine as many blocks as possible to recoup their expenses on electricity and hardware. The prevailing market theories about Bitcoin are as follows:

1. The higher the price of BTC in relation to mining costs, the more bullish the price action becomes. This is because miners need to sell fewer BTC to cover their expenses.

2. As fewer Bitcoins are mined per block, the selling pressure in the market from miners decreases.

While these theories technically hold true and drive the macro trends of Bitcoin bull markets, their counter theories also hold weight, contributing to Bitcoin's extreme volatility:

When the price of BTC exceeds mining costs, new, smaller miners, particularly those in regions where energy is less affordable, enter the game. This competition for blocks increases mining costs for larger miners. Consequently, it becomes more profitable for these larger miners to act as a cartel and depress BTC prices to eliminate smaller miners from the game.

This power struggle for BTC rewards leads to bear market pressure. In fact, during the last bull run in 2021, many companies, including the Ethereum Foundation and NON-Labs (where I served as CEO at the time), predicted the bear market and managed to sell their internet coins for USD before BTC miners destabilized the market.

Here you can find deep research for Bitcoin mining: investment cycles led by Coinbase in 2022:

The industry's current status is a 🤡 for three reasons based on $BTC behaviors:

1. Investors’ Mindset: The current industry is heavily influenced by Bitcoin's price fluctuations, causing all cryptocurrencies to follow its cyclical bull and bear movements. This creates a predominantly short-term speculative mindset among investors. During a bull market, long-term investors often face losses if they don't engage in speculative trading, attempting to sell at the peak and buy back at the trough. Holding assets with intrinsic value can lead to significant losses of around 70%-90% of their value, as speculators take advantage of Bitcoin's movements. This dynamic significantly impacts investor psychology, inducing anxiety during bull markets as they rush to make quick profits before the market downturn. Evidence of this trend was apparent in the 2021 bull market, where savvy investors favored short-term investments like meme coins and Ponzi schemes over valuable long-term holdings. Given the current market conditions, their approach seems justified.

2. Entrepreneur Mindset: Many entrepreneurs prefer anonymity and, given the market conditions, often create short-term replicas of existing applications. Building long-term technology is costly and can lead to legal issues during downtrends. Consequently, many entrepreneurs opt not to build technology at all, instead creating meme coins or NFTs without any backing projects. They play into the investor mindset discussed earlier and act as short-term Ponzi schemes. This approach proved to be the most lucrative during the last bull market and continues to be so in the current bear market.

3. Community Mindset: The number of genuine builders in the community is dwindling over time due to the current market PnD. With volatile bull runs and 90% downtrends, building is risky, time-consuming, and not lucrative. Crypto communities are now dominated by gamblers who enjoy the thrill of seeing their portfolio increase a hundredfold. This can turn toxic during a crypto downtrend, as they search for short-term gains and try to recover their substantial losses.

The current market status is a stark contrast to the 2017 bull market when the bull/bear trend was not as apparent, and builders outnumbered gamblers during the bear market. As of 2022, the situation has reversed. Whether we like it or not, the focus has shifted away from technology. The bull/bear cycle has led people to prioritize short-term hyped investments, slowing down the pace of innovation in the industry.

The Industry situation is not sustainable, but soon it’ll happen that will change the game “THE FLIPPENING”

The Flippening is when Ethereum ($ETH) will overtake Bitcoin ($BTC) per Market Cap, becoming the market maker of the industry. If you’re new to this concept, I’ll advise you to read my last article:

Why The Flippening will change everything

Ethereum has a completely different economic model based on four pillars:

1. Staking: To secure the network ethereum didn’t use the Proof Of Waste, which means that it did not require huge expenses in electricity and hardware. Consequently, miners (called validators in the POS) are not incentivized to dump their mined coins to fill operational costs. Also, POS incentive validators to re-stake the earned coins to increase their yield over time. 👉 How ETH POS works

2. Burn: Ethereum has a better monetary policy than Bitcoin. Bitcoin is based on ~4 years of halving events that constantly decrease its inflation by 50%. This is one of the most important why of its PnD scheme that drives bull/bear markets. Ethereum has a mint/burn system, $ETH are minted to pay the POS validator (as $BTC), but instead of an arbitrary halving system, $ETH are burned based on network usage. This gives the ecosystem (Once ETH will e the market maker, tremendous stability against solid price fluctuations). 👉 How ETH Economy works

3. Cartels: Bitcoin mining poses a substantial entry barrier. Mining Bitcoin necessitates advanced computer hardware and strategic agreements with electricity providers. This challenge is intensifying due to Bitcoin's inherent system structure. Large miners are competing to lower electricity costs and build vast mining facilities, rendering Bitcoin mining at home virtually unfeasible. However, with the advent of Proof of Stake (POS) and the removal of these costs, Ethereum mining becomes both accessible and affordable, even with a $100 hardware setup in a standard home. It's crucial to note that in the current context, anonymous Bitcoin mining is impossible. The ability to mine anonymously and the presence of a large number of solo miners reduces the likelihood of cartels or country influences.

Bitcoiners can argue: “Oh but you need 32 $ETH”, yes staked not sold to pay expenses for hourly hardware work. Also, ETH allows you to join shared validators like Rocketpool VIA SMART CONTRACT!

LAST BUT NOT LEAST - UTILITY: Ethereum has an organic market demand, driven by the technology built into it. Ethereum, which requires Ether ($ETH) for usage, is increasingly becoming an unstoppable network state, akin to an offshore entity, powered by the world's first global computer empowered by validators and Proof of Stake (POS) acting as its defense army and governed by mathematical principles. The only requirement to participate is holding some $ETH (a very low amount with Layer 2) to pay for the computation needed to execute your financial operations freely.

In contrast, Bitcoin lacks this utility. Its sole purpose is to be bought in the hope of selling it at a higher USD price later. This lack of constant demand for utility amplifies the pump-and-dump (PnD) core that Bitcoin introduces to the industry as a market maker.

How the flippening will change everything

In my opinion, the 'flippening' could be a game-changer for the cryptocurrency industry. It could establish a framework for financial incentives that promote the development of truly valuable applications capable of transforming people's lives rather than perpetuating Ponzi schemes. Let's explore why this could be the case.

A Stability that the industry deserves

Ethereum, as the market maker of the industry, has the potential to disrupt the volatile bull/bear cycles we're accustomed to seeing. Firstly, its economy is designed to avoid pump-and-dump (PnD) schemes. Ethereum's Ether ($ETH) has real-world utility, which consistently drives demand for the asset. Ethereum doesn't have to grapple with high costs to maintain its security, eliminating the need for miner collusion and price manipulation. Moreover, its supply and inflation are usage-dependent, leading to gradual increases and decreases in supply rather than a drastic 50% reduction every four years.

Once Ethereum becomes the market maker, the crypto market will likely transform into a more stable environment. While fluctuations will still occur, they will be legitimate market movements rather than arbitrary PnD schemes, making the market less volatile and more predictable.

A switch into investors and communities mindset

In a stable industry, the current winners may become the losers, and vice versa. Smart investors and communities will no longer be driven by the anxiety of cyclical fluctuations and 80% pump-and-dump schemes triggered merely by Bitcoin movements. In this environment, gamblers stand to lose, while builders emerge as winners. Finally, real blue-chip assets can grow organically based on their utility, without an 80% dump in the middle that renders their utility meaningless for investors. Moreover, investors will become more discerning, avoiding assets without utility as they will no longer pump merely due to market conditions. I recall during the last bull market, many investors shied away from holding valuable assets, aiming instead for a hundredfold return before the inevitable market dump. Sadly, but truly, they were smarter than others. After the 'flippening', this scenario will cease to exist, and these individuals, instead of gambling for quick gains, will participate in accumulating blue-chip assets for long-term gains.

A new way to calculate values

In a stable environment, Total Value Locked (TVL) and adoption will allow robust applications to thrive. Holding their assets will result in consistent gains, without the 80% downturns typical in the current pump-and-dump market. This will direct most of the money flow towards the winners, rather than short-term pump-and-dump schemes, as these assets will finally become genuine blue-chip investments.

Simultaneously, the industry will see less gambling as investors focus on holding long-term, strong assets. This shift will positively impact legitimate applications and negatively affect assets without backing. It will also lead to a redistribution of growth, making it virtually impossible for Ponzi schemes to gain significant traction.

A new industry for entrepreneurship

In a stable industry, the approaches of entrepreneurs and venture capitalists (VCs) will undergo radical changes. Entrepreneurs will prioritize building long-term solutions and driving adoption. It will no longer be possible to secure VC funding solely by capitalizing on the hype of a bull run. VCs, too, will experience a significant shift. They will only succeed by identifying genuine blue-chip assets, without taking advantage of the irrational exuberance during bull runs and investing in any token with the intention of exiting before the bull market ends.

In a stable market, it is worth noting that situations like LUNA of FTX are less likely to occur. Why is that? Let's consider this tweet from 2022: “Everything is working because everything is going well.”

In a stable market, the prevalence of such schemes diminishes as the industry becomes less reliant on the volatile movements of Bitcoin. While it may not completely eliminate these behaviors, it reduces their impact, for sure more helpful than regulators lol.

Decentralization will matter… MORE

In the current pump-and-dump (PnD) industry, individuals who prioritize decentralization often face significant losses. They miss out on numerous opportunities driven by short-term speculators, who unfortunately emerge as the winners. These speculators focus solely on short-term gains and have no intention of holding assets for the long term.

As a result, the industry has lost its purpose, with money flowing from one Ponzi scheme to another, offering no real value to strong decentralized utility. However, after the flippening and a shift in the direction of money flow, decentralization will once again become a driving force for investors. They will place great importance on the health and longevity of their long-term holdings.

Conclusion

The flippening represents the industry's sole chance at redemption after a series of failures.

The pump-and-dump (PnD) aspect of the industry, driven by Bitcoin's fluctuations, has created a dangerous environment that discourages builders and incentivizes Ponzi schemes. This trend has become more pronounced after the 2020 bull run, with narratives focused on getting rich quickly rather than adding real value or utility. If the flippening doesn't occur and my predictions don't come true, we will all suffer significant losses. Unfortunately, we are currently in a bubble within a bubble, with little real value or utility being created since the emergence of projects like Uniswap, OpenSea, ENS, and stablecoins.

The flippening, with Ethereum as the market maker, is the industry's only hope for salvation. Its economy can create the right incentives for a decentralized future based on utility. In my opinion, this change is just around the corner.

Thank you for reading, and don't forget to follow me on X @basedtoschi. You can also support my work by minting this NFT. See you in the next article!

🔮 Follow me at @baseToschi on 𝕏