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Recently, Messari founder Ryan Selkis mentioned in his 134-page “crypto investment theory report for 2021” that the next 2021 crypto market will usher in a big bull market, and he also predicts that Bitcoin will be before the end of 2021. At least $100,000, and at the highest point of this cycle, the total market value of the entire cryptocurrency market will hit $3 trillion.
This article is the first part of the report: Top 10 crypto investment trends in 2021.
Encryption investment has always pursued a fascinating narrative, not a “fundamental”, and this situation is unlikely to change in the short term.
The good news is that there has never been a better narrative environment than today, and there may even be some eye-catching “fundamentals” to support these narratives. I am very optimistic about the prospects of the crypto market in 2021. The optimism has not exceeded the consensus. I think the next bull market will be a “big bull market”. The price of Bitcoin will reach at least $100,000 before 2021. At the highest point of this cycle, the total market value of the cryptocurrency market will be Impact 3 trillion US dollars.
Here are the top ten narratives that I think will drive this bull market. In fact, I think they are also long-term trends in the next ten years.
1. “Blue Chip Stocks”: True Value and Relative Value
The most frustrating part of the 2017 ICO boom is that so many smart people are fascinated by an idea, and they believe that dozens of cryptocurrencies may eventually become viable investments. So many tokens can earn a huge currency premium. This is utter nonsense. We have argued from the first day that “currency” is a winner-takes-all market. In this market, even losers in competition Need to provide differentiated features to win market share in the long tail. On the other hand, “functional” tokens either find a way to capture network fees, or they gradually disappear with the emergence of cash-generating network assets.
This argument is confirmed, and since we have seen actual usage, it has become easier to consider assets on a relative and fundamental driven basis. The boundaries are blurred, but we usually divide encrypted assets into six categories: 1. Currency (mainly proof of work currencies, such as BTC), 2. Smart contract platform tokens (ETH and its friends), 3. Crypto U.S. dollar (stable currency), 4. DeFi tokens, 5. anchored & synthetic assets, 6. Web3/NFT assets.
If you compare Bitcoin with other PoW currencies, you will find that Bitcoin’s market share is about 90%. If ETH is compared with other smart contract platform tokens, the share of ETH is close to 70%. It is possible that a large group of people will think that “ETH is currency”, but I personally think that pure currency like Bitcoin is different from platform tokens like ETH (I will talk about it later).
For stablecoins, the “dominance” of the market may not affect VC betting, but it can help you monitor systemic risks. Up to now, Tether still occupies 75% of the market share of the dollar-pegged currency market.
DeFi and Web3/NFT, and synthetic assets have more customized value drivers.
This makes sense! The valuation of these assets can be derived from the basic costs incurred in their markets, or the “real” numbers or financial assets they represent. Even though most of the crypto assets are relevant, we have begun to see that assets with real economic models have become separated from other assets over time.
Domain isolation is not just an exercise in relative valuation analysis, it helps us determine the key KPI indicators in a particular domain. We may be concerned about the inflation rate and currency liquidity on the chain, the staking income of platform tokens and network fees, and the adjustment/fee-driven income of DeFi network tokens. We are still figuring out which factors are critical to the entire transaction, and it may take a long time to agree on a new crypto asset pricing model.
2. Spamming currency and digital gold (BTC)
Looking back on 2020, in the new crown epidemic and the subsequent blockade chaos, we saw the true story of Bitcoin: central banks added trillions of dollars to their balance sheets, sovereign debt monetization reached a record level, and Push the actual rate of return down to a record level (permanent impact).
In short, modern monetary theory (which believes that the country’s ability to spend on deficit spending and debt monetization is basically unlimited) has not only been standardized, it has become a policy in 2020. Those in power no longer even pretend to restrict spending, and the divided government of the United States may have a huge impact. If the Democratic Party wins the Georgia runoff in January this year, it will improve the prospects for uncontrolled fiscal stimulus and fuel speculation around Bitcoin and other financial and hard assets. If Congress remains divided, the printing press will continue to print money.
The difference between today and a few years ago is that Bitcoin has become more important in the macro conversation and its narrative as a gold substitute has also become stronger.
- Paul Tudor Jones called Bitcoin “the fastest horse”;
- Stanley Druckenmiller (Stanley Druckenmiller) stated that Bitcoin bets may be more effective than gold;
- Chamath Palihapitiya believes that everyone should use 1% of their assets to invest in Bitcoin;
- Bill Miller strongly recommends that investors have Bitcoin exposure;
- JPMorgan Chase wrote that the family office may see Bitcoin as an alternative to gold;
- Raoul Pal said that Bitcoin is a huge black hole;
This does not only mean the inflow of capital from these specific investors, it also represents a trend.
The world’s top institutional money managers finally got involved. By eliminating the risks associated with crypto investment, they have already invested in crypto ventures like Mark Anderson (a16z) and Fred Wilson (USV) in 2013 As we have done, we will open the floodgates for institutions to deploy encrypted assets in 2021.
If you stop reading here, follow the leader and allocate part of your portfolio to Bitcoin, then you may have a prosperous 2021.
3. Ethereum: The Market of Everything
Thanks to Ethereum, this year there are many novel financial services and applications to find products suitable for the market, which is incredible. Some cynics see new projects as bubbles or toys (or both), but I venture to guess that few of them have actually tested these products.
They are real and very spectacular.
In the field of Ethereum (and smart contracts more broadly), there is too much content to discuss, and you will find that the content of Ethereum applications is almost in every part of this report.
Due to the macro positioning of Bitcoin, Bitcoin may usher in an important year, but Ethereum (Ethereum) has become the most important platform for encryption technology, which is a platform that can promote a new financial system and a more open and more open Flexible Internet platform.
In terms of the economic value of transactions occurring on the network, in 2021, Ethereum will even surpass Bitcoin.
In this year, the Ethereum platform processed more than $1 trillion in actual value transfers, a number that has surpassed PayPal. Ethereum faces challenges, but its vitality is undeniable, and it will continue to be a platform to watch in 2021.
4. DeFi: the future without banks
Suppose you want to create a brand new financial system from scratch: payment, lending, insurance, asset issuance, and exchange. The first thing you have to realize is that from today’s Federal Deposit Insurance Corporation (FDIC) insurance financial system and etrade account to encryption The equivalent requires a lot of work.
However, in the course of this year, such building blocks have appeared in the crypto market.
A parallel financial system first needs a kind of synthetic dollar. The creation and management of assets requires basic lending facilities and reference data infrastructure to maintain the linkage of assets. Expanding scale and making interest rates and spreads compete with centralized solutions requires strong incentives for capital providers. If you figure out how these markets work, you will have to face the lack of circuit breakers and refunds. You must protect your deposits from “bank runs” and hacker attacks. You also need a savvy risk manager to set protocol defaults. Value, defenses against application exhaustion attacks, and low-cost insurance against technical errors.
Does it sound interesting? Well, with Maker (crypto dollar), Uniswap (automatic market maker), Compound (liquidity mining), Balancer (dynamic liquidity pool rebalancing), YFI (intelligent asset management), Aave (lightning loan), With ChainLink (data oracle machine), SushiSwap (defense countermeasures), CVP (agent aggregation) and bZx (decentralized vulnerability reward protocol), we have some building blocks needed to build a fully decentralized and algorithmic financial system example.
It makes sense for DeFi to be hyped, and the only thing I see that can slow down the development of the industry will be the precedent regulatory suppression of top market projects (I am not betting that regulators will do this).
5. Stable coins: devouring the crypto market
Sometimes, numbers can tell a lot. This year, the scale and use of stablecoins have experienced explosive growth. Today, the supply of more than 20 billion U.S. dollars in “crypto-dollar” stablecoins has facilitated hundreds of billions of dollars in transaction flows. The irony is that the U.S. dollar is still the reserve currency of cryptocurrencies. With more and more crypto-dollar applications going online and countries launching their own central bank digital currency plans, the growth trend of stablecoins shows no signs of abating.
Despite concerns that Tether may be subject to regulatory crackdowns, this leading stablecoin continues to grow and dominate its market segment (and settlements on most international cryptocurrency exchanges). In the absence of a surge in stablecoins, the explosive growth of DeFi this year may not happen, and there are 11 billion USDT on the Ethereum platform. In terms of economic value stored on the Ethereum blockchain, Tether is second only to ETH itself.
Bitcoin will remain the most valuable digital currency (whether it is a cryptocurrency or a stable currency) indefinitely, but Ethereum and its similar products may not be so. The US dollar stable currency on the smart contract platform and the central bank digital currency (CBDC) issued by the state will exceed the market value of the platform currency itself within 2-3 years. What this means for the security of the smart contract platform is still unclear.
6. Crypto credit: lock in value
In the past year, the biggest boon of cryptocurrency is the explosive growth of the cryptocurrency credit market. Centralized service providers for retail investors, such as BlockFi, Genesis, BitGo, and Galaxy for institutional borrowers, and DeFi lending protocols such as Compound, Aave, and Maker, have all gone through many years and have brought high volatility to the cryptocurrency market. Here comes greater liquidity and stability (long-term!).
At the same time, they help promote the use of new applications, which require a stable base currency and lower transaction spreads. More importantly, credit keeps assets locked in the crypto economy and away from tax collectors.
In the past, if you had a major expenditure, such as a down payment for a new house or repayment of a student loan, and you wanted to use cryptographic proceeds to pay for this amount, you would suffer a huge capital gains tax blow and miss the upside opportunity of the underlying portfolio . But today, the situation is different. You can accept an over-mortgage loan to cover one-time expenses like a new house.
In DeFi and centralized services, the availability of on-chain mortgage credit may greatly reduce the selling pressure in the next rising market. This is true for both retail investors and institutional investors. Although the shock that triggered a series of liquidation is a doomsday scenario, it seems more like a risk in the late cycle than in the early stage. The maturity of the crypto-credit market is more likely to create the most liquid bull market.
7. Synthetic assets: accessibility
Grayscale trading, Bitcoin ETF, DeFi wealth frontline, Wrapped Assets, prediction markets, encrypted trading “securities”, chain index funds, DAO, programmable financial assets…
Every financial asset you can think of will one day be associated with crypto, and synthetic technology proves that this transition will happen earlier than we understand. I don’t want to pre-disrupt this part, but if you are in the “blockchain instead of Bitcoin” camp, this is the purple pill part, which will excite millennial readers.
8. Infrastructure: Untied from large crypto exchanges
Exchanges are the gorilla with the largest 800-pound crypto market. They make all the money, they reach all users, and they are also involved in almost all businesses, including trading, custody, lending, staking, research, data, governance, and VC . This seems to make many people wonder whether the crypto economy is decentralized. But users have more power than people think. Withdrawing funds from large exchanges may incur switching costs, but this is still common.
And it’s much easier than changing banks! In recent months, due to regulatory concerns, it is very common for capital to withdraw from large exchanges such as BitMEX, OKEx, and Binance. In 2020, funds will be transferred from centralized exchanges to compliant custodians, fund managers, and mobile wallets, while trading volumes will be transferred from centralized exchanges to major brokers and DeFi markets.
As their spreads and fees tighten, the crypto market has begun (very slowly) to unbind the trading giants. Trusted interfaces related to the broader crypto economy will continue to be more important than deep orders and 100 times leveraged casinos.
For these, just look at Poloniex and Bittrex.
We will pay close attention to the percentage of exchange deposits in the market value of the entire cryptocurrency market to show whether it is rising or waning.
Don’t get me wrong, I am not betting that they will decline, on the contrary, I expect them to become more active in terms of inorganic expansion.
9. Web3 and NFT: Digital Resource Economy
This fall, (despite some problems at the last moment) we finally ushered in the long-awaited release of Filecoin, a decentralized storage network. Since then, other storage solutions (Sia, Storj, Arweave) have also been promoted, such as Orchid (VPN), Livepeer (video transcoding) and Helium (IoT device network) and other decentralized network tools have also appeared. These decentralized hardware markets can be said to be the most important infrastructure network needed to ensure that the network remains open in the next few years.
Blockchain is not just currency and DeFi. The Web3 platform opens the door to new digital native assets, such as game products and digital art in virtual reality, new content and data licenses, and non-censorable DNS.
I agree with the argument: “So far, almost all types of NFTs may eventually be favored,” and the Web3 platform has opened the door to the future of native digital. Bitcoin and smart contract platforms are mainly the locomotives of decentralized financial systems, but The Web3 network and NFT are truly key components of a more open Internet.
10. Final Boss
Due to the volatility of Bitcoin, regulators have been kind to let us be alone for years.
Every peak and trough market cycle is an illusion. The collapse of Bitcoin makes regulators believe that this passing fashion will eventually die and is not worth monitoring.
Now, the crypto market with a market value of 500 billion U.S. dollars and the annual transaction volume of trillions of dollars is hard to ignore. Fortunately, larger investors, lobbying entities, and even regulators (now senators!) have begun to use the system within the United States. I have called it the “Bitcoin Rebellion.” When they do their magic in Washington, DC (and Brussels, Tokyo, and other power centers around the world), some of us will start thinking about the final channel: how to rebuild a crypto-inspired nation-state .
You say this is crazy?
Hush.
