Why am I extremely optimistic about the future market? Analyzing the seven emerging trends in the crypto market

24-06-20 12:46
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Original title: Seven Emerging Trends in Crypto
Original author: Ignas, DeFi researcher
Original translation: Shan Ouba, Golden Finance

I feel that something big is about to happen in the cryptocurrency market, and I am very bullish. Although I am not sure what will happen specifically, the market is undergoing significant changes.

Interest rates are starting to fall, ETH ETFs are approved, BTC ETFs have increased inflows, Stripe has launched stablecoin payments...

Like armies lining up before a decisive battle, major crypto companies and traditional financial institutions are preparing for the coming bull market.

See below for more on this "feeling":

Meanwhile, the internal machine of cryptocurrency has not stopped running. Yes, prices are falling…But markets are always changing, and new narratives and trends emerge and impact the market as they grow in influence.

Just like MakerDAO was live before the term “DeFi” was coined, there are new trends emerging in the market right now that aren’t big enough to form a coherent story.

Here are 7 emerging trends that could have a big impact on the market.

1. Repackaging

Old coins are boring, and gamblers want something new.

If you can change the brand name, create a new token, and start over with a new chart, that sounds a lot more exciting!

Fantom → Sonic

That’s exactly what Fantom has done with the Sonic upgrade.

Sonic is a new L1 with a native L2 bridge to Ethereum. It will have a new Sonic Foundation & Labs and a brand new visual identity.

More importantly, the new $S token "ensures compatibility and migration from $FTM to $S at a 1:1 ratio."

This is a smart move because the Sonic migration generates more market hype than simply calling it "Fantom 2.0." This allows Fantom to put aside its multi-chain bridging issues and start over.

Connext → Everclear

Similarly, Connext is rebranding to Everclear.

Rebranding is not new in crypto, but the emerging trend here is repackaging major upgrades as new products.

This sends a stronger signal to the market than just another v2 or v3 upgrade. People are not interested in just another "v4" upgrade.

By moving from Connext to Everclear, the team is communicating that this is not just a simple rebrand, but a major step forward in technological advancement.

Connext moves from simple bridging infrastructure to the first clearing layer. It is like a chain built on the Arbitrum Orbit rollup (via the Gelato RaaS) and uses Hyperlane to connect to other chains with the Eigenlayer ISM.

Connect any chain, any asset, paving the way for a modular crypto future.

NEXT tokens rose by ~38% on the news (but not for long). Fantom’s $FTM is hot again, and its awareness on X has also increased.

I expect more protocols to rebrand to align with market trends and technological advancements in 2024.

For example, IOTA is rebranding to L2 for real assets.

Also, mergers may become more common, such as Fetch ai, Ocean protocol, and SingularityNet merging into one $ASI token to become a new crypto super AI project.

The key will be to watch the price performance of the newly branded projects and new tokens (if launched). While it’s too early to tell, initial price performance from FTM and NEXT, as well as FET, AGIX, and OCEAN, is bullish. If the market starts to rise again…

Are there more repacks/renamings coming?

2. Pro-crypto regulation

Regulation has been a big issue, especially in the US, where the SEC has taken aim at major players like Coinbase, Kraken, and Uniswap. Despite some wins for Ripple and Grayscale, and the approval of a Bitcoin ETF, the regulatory environment remains hostile, with more focus on legitimate projects than outright scams.

But things have changed: Trump verbally supports cryptocurrencies, forcing the Democratic Party to change its anti-crypto strategy. Biden accepts crypto donations. Now the SEC drops its lawsuit against Consensys, effectively recognizing ETH as a commodity.

Now, the short-term future of cryptocurrencies will depend on the election. I like the analysis by Felix (Hartmann Capital) in the article below.

Here are the main points.

If Gensler is removed or his power is limited by the courts and Congress, expect a sharp rise of more than 30% in crypto assets, followed by a sustained bull market. If he remains in power, expect a long downturn, with law firms benefiting and cryptocurrencies and taxpayers suffering, with only Bitcoin and memecoins relatively unaffected.

Regulatory clarity could bring the biggest bull run ever, changing the digital asset market in several ways:

· Shift from narrative to product-market fit: Crypto projects will focus on creating valuable products, not just hype, leading to higher quality development.

· Clear success metrics: Valuations will rely more on actual product-market fit and earnings, reducing speculation and highlighting fundamentally strong tokens.

· Easier funding environment: Stronger fundamentals will make it easier for digital assets to obtain funding, reducing the cyclical rise and fall of altcoins.

· Thriving M&A market: Well-funded projects may acquire undercapitalized but valuable DeFi protocols, driving innovation and tighter adoption, with some Tier 1 blockchains turning acquisitions into public goods to increase network value.

3.BTC Arbitrage Trade: BTC ETF + BTC Short

Leverage always finds new ways into the system. Whether it’s Grayscale’s “widowmaker trade” or CeFi’s (Celsius, Blockfi, etc.) uncollateralized loans.

The mechanics are different for each cycle. But where is the leverage hiding now?

The obvious target is Ethena’s risk-free neutral strategy. As long as the funding rate is positive, everything is fine, but what happens if/when the funding rate goes negative and the USDe position needs to be closed?

Another target is the rehypothecation of LRT.

But another target is our beloved BTC ETF buyers.

Spot Bitcoin ETFs have seen inflows for 19 consecutive days, with 5.2% of BTC in circulation held by ETFs (although this streak has now been broken).

So why hasn’t BTC surged?

Turns out hedge funds are shorting Bitcoin via CME futures at a record pace.

“What if massive leverage at low funding rates is leverage for this cycle and already exists” - Kamizak ETH

A possible explanation is that hedge funds are buying spot and shorting BTC, with a 15%-20% neutral strategy.

Same strategy as Ethena. “What if massive leverage with low funding rates is leverage for this cycle and already exists” - Kamizak ETH

What happens when funding rates go negative (because gamblers stop being bullish and close long positions)?

Will Ethena (dominated by retail) and spot BTC + short CME futures (dominated by institutions) cause a major crash when these positions need to be unwound?

Worrying. But maybe there’s a simpler answer: institutions are arbitrageuring the positive price (currently 2.3%) between different BTC spot and BTC futures.

In any case, these new dynamics brought about by spot ETFs need to be closely watched, as so-called "risk-free" arbitrage often ends up being "riskier" than initially thought.

4. Gamification of Points Farming

Our addiction to points is getting worse, but we don't know how to stop.

Protocols need points to attract an initial user base. They help boost adoption statistics and raise funds at higher valuations.

We are tired of points, but there is no better alternative yet.

Instead, I've noticed a trend towards gamification of points, adding extra elements to make the boring point farming strategy more interesting.

Sanctum introduces Wonderland, where you can collect pets and earn experience points (EXP) to level them up. As a community, you need to band together to complete missions.

This isn’t much different than other points programs, as your airdrops are heavily dependent on deposited SOL, but… the community loves it!

Sanctum’s first season event, which ran for only a month, also boosted sentiment. I’d like to see 0 to 1 innovation in point farms, but even with point fatigue, our addiction to them is too strong.

Instead, I expect more attempts at gamification to bring some fun to the farm.

5. Counter-trend of low float, high FDV (fully diluted valuation) offerings

Everyone hates low float, high FDV offerings. Except for the VCs and the team, who can sell at a higher price. Oh, and there are the airdrop hunters, who get more tokens in airdrops.

But what about retail investors? No. 26 of the 31 tokens Binance recently listed are in the red.

Binance used to be the place to buy the hot new token, but not anymore. Listings on centralized exchanges are sell-the-news and cash-out events.

Not surprisingly, Binance recently announced listing tokens at modest valuations, prioritizing community rewards over internal allocations.

We haven’t seen the rhetoric translate into action yet, but it would be a step in the right direction.

VCs are taking their fair share of responsibility. Large VC investments, once seen as positive signals, are now seen by the crypto community as extracting value. The concern is that VCs aim to profit by selling off their large allocations, which they acquired at minimal cost.

Project teams must also take action to avoid a forever falling price chart.

There is also more experimentation on the protocol side. For example, Ekubo on Starknet, distributes 1/3 of tokens to users, 1/3 to the team, and 1/3 to be sold by the DAO over a two-month period. Not everyone likes a two-month selloff, but this is a bit like a token sale for the community, similar to ICOs in the past.

Similarly, Nostra on Starknet launched NSTR at 100% FDV, with 25% of the distribution coming via airdrops and 12% sold during the liquidity launch pool event. They call it the fairest launch in DeFi, but this raises concerns of leading to low circulating tokens (teams, VCs cashing out early and exiting). Nostra says team and VC tokens will be tokenized on-chain.

If you see them selling, it’s best if you sell too.

We’ve also experimented with 100% airdrops, such as Friendtech and Bitcoin Runes, which were mostly minted by the community for free (although Runes also allows pre-mining).

What were the results? Uncertain. But promising areas.

Watch out for new token issuance models — a new type of successful issuance could become the new meta trend of this bull market. Share in the comments if you find one.

6. McKinsey Enters DeFi

DeFi allows self-sovereignty, enabling you to own and use your assets regardless of borders.

But DeFi is getting very complex! There are many strategies available, whose complexity increases with every % we want to squeeze out.

In addition, governance of these increasingly complex protocols requires specific knowledge.

As a result, consulting firms similar to traditional finance have emerged to help protocols deal with security, governance, and optimization issues. The most famous example is Gauntlet, whose clients pay millions in fees each year.

What’s more, DeFi protocols are adapting to allow the McKinseys of DeFi to manage user assets or/and external risk management.

Morpho Blue Permissionless lending allows the McKinsey of DeFi to create markets with any asset and risk parameters without relying on governance.

7. Getting started with Web2-like DeFi

I really like this one.

While Friend tech may have issues, it has successfully popularized Privy, which makes it possible to create and manage wallets using Web2 accounts.

During the NFT craze, I helped a friend buy NFTs on OpenSea. It was a real pain to teach how to use Metamask.

But now, you can create a wallet on Opensea using Privy using an email and 2FA code. Seriously, go try it. It took me a minute.

Fantasy Top is leveraging Privy and other user-facing apps.

This trend extends beyond Privy.

Infinex, developed by Synthetix, allows wallets to be created using keys, so you can just use a password manager for your wallet.

Coinbase launched Smart Wallet, which pays gas fees on behalf of users, supports batched transactions, and allows wallets to be created using Web2 tools.

Now, complex user onboarding is no longer an excuse for lack of cryptocurrency adoption. We just need unique consumer applications.

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