Bankless Ventures starts cashing out like crazy, what stage is the current market in?

This article provides an in-depth look at the driving forces behind rising and falling markets, revealing the impact of leverage, Airdrop and narrative risk on the market, helping readers to understand trends and effectively protect assets and earnings. This article is written by mikeykremer, head of technology at MessariCrypto, and compiled by BLOCKBEATS. (Synopsis: Mastering the Bull Market Pulse: 12 Cycle Tools and Escape Indicators) (Background supplement: Bankless: Inventory of 10 top AI AgentTokens) The following is the original content (the original content has been consolidated for ease of reading and comprehension): Alpha release: BanklessVC's disgusting behavior makes it clear that we have entered the "extractive PvP phase" of the market and must protect your assets and earnings. I suspect that the current market cycle has reached a high, which may just be a natural correction, reflecting that the encryption market is trying to extract value from it, and this will probably continue for some time. Tokens like Virtuals, ai16z, and heyanon may make new highs when the market recovers, but they also face narrative risks. It is recommended to continuously adjust and review your market view. Why is the market rising? The market rises because new money enters the market, which is obvious, and from now on, I will use the concept of "wealth effect" to describe the process of new money entering the market. We all want Cryptocurrency to create real value in the world and facilitate the expansion of coins. Here are a few ways to achieve this: 1. Airdrop has become a powerful redistribution mechanism of value in the encryption market, capable of delivering significant wealth effects that benefit a wide range of participants. For example, Uniswap Airdrop in September 2020 set the industry standard, distributing 400 UNI Tokens (worth about $1,400 at the time of issuance) to more than 250,000 Addresses, with a total value of more than $900 million. Jito Airdrop in December 2023 was an early catalyst for the Solana meme coinBull Market. Jito Airdrop distributed 90 million JTO Tokens, which were worth $165 million at the time of issuance, with some users receiving up to $10,000 in rewards by transferring just $40 worth of JitoSOL. Jito Airdrop drove Solana's total lock-up value rise and increased on-chain activity. This wealth effect has fostered adoption and growth in the broader Solana ecosystem, just as Uniswap's UNI Token catalyzed the rise of Decentralized Finance. Jupiter's token distribution further exemplifies Airdrop's inclusive potential. They plan to distribute 700 million JUP tokens, covering more than 2.3 million eligible wallets, one of the most widely distributed Airdrops in encryption's history. Jupiter's Airdrop strategy aims to grow its ecosystem by incentivizing long-term engagement and governance engagement. These Airdrops are outstanding in terms of expanding market participation. Wealth effects are not limited to direct economic gains, these Airdrops turn users into stakeholders, enabling them to participate in governance and protocol development. This shift creates a virtuous circle where beneficiary participants reinvest wealth in the ecosystem, further driving market expansion and innovation. These strategic allocations have proven to be powerful market catalysts, triggering broader Bull Market cycles in their respective sectors. Uniswap's Airdrop, for example, detonated the 2020 Decentralized Finance summer, driving a wave of innovation in Decentralization Finance. Similarly, Jito Airdrop in December 2023 was a turning point for the Solana ecosystem, driving TVL rise and sparking unprecedented on-chain activity. This surge in liquidity and market confidence laid the groundwork for the subsequent meme coin explosion, and the market achieved a significant rise. These Airdrops effectively act as an ecosystem-wide stimulus, creating a self-reinforcing cycle of investment and innovation that defines the epochs of their respective markets. 2. Wealth accumulation (marginal buyers) When there are positive catalysts such as strategic Airdrop in the market, it attracts participants who were previously on the sidelines to get on board with new capital and enthusiasm, and the influx of these marginal buyers forms a virtuous circle of market expansion and innovation. Airdrop inspires positive fear of missing out, pushing new and existing users to participate more deeply in the market. Investors who had been on the sidelines, after seeing the success of Airdrop and the subsequent market momentum, began to invest capital, from spectators to active participants. This transfer from cash to encryption assets represents a real entry of new money into the ecosystem, not just a simple transfer between existing players. Large financial institutions are increasingly facilitating this shift. Companies like BlackRock, Fidelity and Franklin Templeton have launched products that connect traditional finance with digital assets. The involvement of these institutions helps legitimize the market and provides a more convenient entry point to the Get On Board for wait-and-see funding. These actions create a positive environment where new players contribute to the overall market rise. Unlike a zero-sum trading environment, a market where new entrants are active creates a real wealth effect through the Liquidity expansion suite, increased development activity, and wider adoption. This positive feedback loop attracts more wait-and-see funding, further boosting the rise of the ecosystem. 3. Wealth is created through leverage (multi-fold expansion) In the final phase of the Bull Market, leverage became the main driver of price increases, marking the market's shift from value creation to value multiplication. When the market enters the price discovery phase, more and more traders will use leverage to amplify positions, forming a self-reinforcing upward cycle. When Bitcoin enters the price discovery phase above its all-time highs, the leverage ratio expands significantly and traders try to maximize their position. This will trigger a knock-on effect, with borrowed Stable Coin driving further buying, driving up prices and encouraging more leverage. This multiplier effect accelerates price fluctuations. The growing popularity of leverage has also introduced systemic vulnerabilities into the market, and as more traders adopt leveraged positions, the likelihood of serial liquidation will increase, especially as borrowing Stable Coin becomes harder to obtain and more expensive. The rise of Stable Coin borrowing costs is a key indicator of the market entering its final phase, marking the shift from organic rise to leverage-driven expansion, when the market no longer creates new value, but simply multiplies existing value through debt. At this stage, the high reliance on leverage puts the market in jeopardy, and sudden price fluctuations can trigger large-scale liquidation, leading to rapid price corrections. This vulnerability shows that Bull Market is nearing its end, as the market increasingly relies on borrowing money rather than creating fundamental value. What makes the market fall? When money flows out of the market, the market falls, obviously. This is essentially the Reverse wealth effect of speculators taking advantage of market sentiment, with smart money withdrawn for profit and stupid money being damaged by liquidation. 1. Wealth is withdrawn from the market, and you are going through this phase The encryption ecosystem often goes through cycles of value extraction, with savvy operators devising various strategies to squeeze money out of enthusiastic market participants. Unlike innovations that distribute value, these strategies systematically siphon Liquidity from the market through various predatory mechanisms. The most disgusting thing about Bankless's story is that they only used 2 ...