TL;DR Summary of “Crypto Theses 2022 by Messari” by Ryan Selkis
When Bitcoin inaugurated the blockchain industry over a decade ago, no one imagined it would grow into a billion-dollar industry. A once worthless industry hit a value of $5.3 billion in 2021 and is expected to grow at a CAGR of 45% to reach $34 billion by 2026.
The last few years have seen most industry participants focus on DeFi, NFTs, and crypto gaming. We even saw cryptocurrencies go up, and Bitcoin hit an all-time high of $68,000 in November 2021. What should we expect in 2022? Let us have an analysis of what the crypto world HODLs for us:
Top 9 Narratives & Investment Themes
1. Trust in institutions will collapse
How many institutions can you trust today? Research shows that 70% of Americans disapprove of how Congress handles its job. People lose trust in institutions because they spend recklessly and engage in insider trading. Web 3 will seek to replace the decaying institutions. Expect inflation to remain above 5% the whole year while confidence levels will be at 70%.
2. Web 3 is here with us
The user-owned economy is here to stay and something that will dominate 2022. Some of the essential ingredients, such as timing, the right talent, and willing investors, are ready to make this a reality. A typical saver can earn 5% from DeFi protocols, while Wall Street gives them 0.5%. NFTs give creators hundreds of monetization opportunities while at the same time avoiding Hollywood’s 50% cut and rent.
3. The era of DAOs, Nifties, and DAOs
DAO tooling, NFT infrastructure, and inter-protocol bridges will get more attention this year. Expect to see tools such as decentralized identity management systems, financialization primitives, community-oriented business models, creator tools, and marketplaces that focus on NFTs.
4. We will decouple cryptos
Most people couldn’t tell the difference between different cryptos six years ago. However, the situation has changed over the recent past, and we can even see exchanges listing cryptos based on various classifications.
5. More and more funds will come in
2021 was a good year for crypto as a lot of institutional capital trickled in. 2022 will be better, even though we can’t determine the size of private funds at the moment. When new investors enter the space, money trickles in and down. It never seems to move out and mostly stops at ETH, BTC, SOL, or other crypto blue chips.
6. How high can we go in 2022?
Crypto is very volatile. We can already foresee a big crash. This is not the year to expect Bitcoin to hit the $100,000–125,000 range. Ethereum will also not overtake Bitcoin as its scalability issues are still there. Even though Solana, Binance Smart Chain, and Avalanche seem to be Ethereum ‘killers,’ this is not the year that will happen as Layer 2 scaling solutions, such as Polygon and Cosmos, can’t be ignored.
7. Surviving the winter
Some people get depressed, while others get into debt when crypto winter or hard times come in. A cash transfer to professional traders is the way forward if you are not a professional trader and you want to leverage. Surviving the winter also means achieving optimal taxes efficiency so that you don’t end up owing the government more taxes than the crypto reserves you hold.
8. Public options
Will coins outperform the companies that created them? Even though some companies like Digital Currency Group have been on a downward trend, others like Binance have been doing great. $BNB has a market cap of more than $90 billion, while the company is worth four times that value. BITO and COIN are the pioneers of public stocks, and we are likely to see more.
9. Copy-trading: #WAGMI
Analyzing crypto is demanding. Why don’t you copy some trends and get away with it? If BTC is rising, just know that altcoins season is around the corner. You can follow various investors on Twitter or even the FTX guide on trading everything in a bubble.
Top 10 people to follow in 2022
1. WAGMI
WAGMI is just a short form of ‘we are going to make it’. If you believe in crypto and reading this, you are part of the movement. Follow your analysis and instincts.
2. The Big Guys: Su Zhu, CMS, and Samani
With Multicoin Capital, Samani is worthy of mention as they have had a historic year by venture capital and crypto standards. Three Arrows Capital by Su Zhu amassed one of the largest funds in Asia and has one of the best performing portfolios. CMS Holdings has one of the most interesting brand identities with penguins.
Emilie Choi, Coinbase
Coinbase has had an employee overhaul in the recent past. Choi’s BD / M&A background is one of the reasons why she rose to the President & COO position at the company.
Devin Finzer, OpenSea
OpenSea is the leading NFT marketplace, and Devin Finzer is worthy of our list. His two Bankless podcasts in March and October 2021 show the company’s fast growth.
Dan Robinson & Dave White, Paradigm
Dave Robinson is one of the driving forces for the Uniswap v3 automated market maker. Dave White co-authored the Everlasting Options, an eye-opener on the NFT space.
Jeff Zirlin “The Jiho,” Axie Infinity
He is the head of community and growth at Sky Mavis, Axie’s game studio.
Jay Graber, Bluesky & Tess Rinearson, Twitter
If you want to know how Twitter is getting ready for the Web 3 race, they are the people to follow.
Kristin Smith, The Blockchain Association & Katie Haun, a16z
Kristin Smith leads the most prominent crypto community, the Blockchain Association. Kathryn Haun is a general partner at a16z and a board director at OpenSea and Coinbase.
Commissioner Hester Peirce, SEC
Even though her bio states that her tweets don’t reflect the views of the SEC, she is worth following.
Do Kwon, Terraform Labs
Layer wars are not ending any time soon. Terra is one of the L1s worth mentioning, and Do has most of the information you need.
Top 10 thoughts on Bitcoin
1. Critics will always hope for the worst
As Spencer Schiff says, several years ago, they were saying, “bitcoin will never hit $30,000”. The same people were now laughing when the coin crashed at $60,000.
2. Bitcoin will remain the king
This is not the year that Ethereum will overtake Bitcoin. Even though ETH is known as the ‘world’s computer,’ Bitcoin (digital gold) remains the king.
3. Multichain reserve
We will soon see a world where interoperable blockchains are taking over. People will no longer care where their BTC is held as long as it is safe and efficient. 1.5% of the entire BTC reserves are on the Ethereum network, which is just a start.
4. Bitcoin ETFs will become common
SEC approved Bitcoin ETFs in 2021 after a long period of waiting. We are likely to see about 10% of the entire Bitcoin supply locked in ETFs in the future.
5. We will see the Great Fall of China’s Bitcoin
China has been Bitcoin’s mining powerhouse for years and accounted for a 70% hash rate. The CCP has been on the toes of miners and even outright banned mining last year. We will likely see bitcoin mining moving to areas where it is welcomed and energy is cheap.
6. Bitcoin will become a Clean Energy Stimulus
The following are the reasons why focusing on Bitcoin’s mining energy consumption is skewed:
· It is politically impossible to curb global emissions in a reasonable time.
· The focus should be on curbing the biggest emitters to bend the curve.
· Recycling otherwise stranded or wastage energy by Bitcoin can help reduce emissions.
· Its mining infrastructure can help subsidize new clean energy capacity.
7. Proof-of-stake will work because Proof-of-work works
Even though there have been debates on the two, it should be noted they are fundamentally different.
8. Proof-of-work will protect minority’s rights
The minority will also have their say even if they don’t hold a lot of tokens.
9. The Bitcoin roadmap
The most recent Bitcoin major upgrade was four years ago. Taproot upgrade went live in November 2021, and now we have cheaper transactions and enhanced privacy and fungibility. We are currently looking forward to the next phase of the Bitcoin Lightning Network.
10. El Salvador just opened the doors for others
The recognition of Bitcoin as a legal tender in El Salvador is just a start. Expect more countries to come on board.
Market Infrastructure
1. Bitcoin Futures aren’t that future
The structures of Bitcoin Futures will most likely cost investors 5–10% in hidden costs every year.
2. Lender Reserves
Lending products and stablecoin regulation is something that can benefit the industry. Crypto lenders are likely to face strict regulation this year.
3. CeFi vs. TradFI
We can now see Centralized Finance in the form of crypto firms changing the space. Talent is moving from TradFi to crypto firms, and those who welcome the idea of crypto to their traditional finance setups will win.
4. CEX Ed
Decentralized exchanges have been trending for a while. However, centralized exchanges such as Coinbase, Binance, and FTX have made boss moves. Expect one major player to own an internet-scale exchange when Web 3.0 finally takes over.
5. Crypto Securities
We don’t have many crypto securities firms that we can mention at the moment. We can only hope that new ones will come along this year.
6. Bag holders
Being a crypto custodian seems like a lucrative venture. Some worthy dedicated custodians are Ledger, Anchorage, Fireblocks, and BitGo. We will likely see a 50/50 split where crypto holders keep their investments in multi-sig (non-custodial accounts) and the rest in custodial accounts.
7. DCEP
China has been creating the digital Yuan (DCEP) for years now. DCEP could become a threat to USD’s reserve paradigm and soon become the leading Eurodollar candidate.
NFTs and Web 3 Plumbing
NFTs represent a portable, verifiably scarce, and programmable piece of digital art. A non-fungible token could be a virtual sword in an MMPORG, a share of stock, a piece of land in the metaverse, a data record on social media, or even a unique profile picture on Facebook. Even though there are some NFTs that have no value or are as useless as some of the tokens launched during the 2017 ICO craze, we foresee NFTs going to the moon, as evidenced by some recent happenings:
The $69 Million Mona Lisa JPEG
Mona Lisa, created by Da Vinci, is the world’s most famous piece of art. The digital representation of the Mona Lisa created by Beeple and sold through Christie’s’ auction has all the characteristics that define a good NFT.
PFPs: Punks vs. Apes
Community-owned collections of profile pictures (PFPs) derive value from early communities and their memes. In Q3 2021, PFPs recorded $5 billion in sales. Crypto Punks, Pudgy Penguins, and Bored Apes could in the future represent someone’s pseudonymous reputation and digital identity.
Fan tokens
These can be defined as collectibles with member rights. The rights can be non-financial (experiential access, social signal as a super fan), financial (shared royalties, tickets), or a combination of both. Whether they are fungible social tokens or NFTs, fan tokens could be the driving force to make crypto go mainstream as tribes become owners.
DeFi 2.0
The $USDT Bridge
The fact that USDT is backed by USD reserves and even published 2 transparency reports last year is why people believe in the project. Even though USDT’s share of the stablecoin market cap dropped from 80% to 50% in 2021, Tether’s structural role in crypto exchange settlement remains undiluted.
$DAI vs. $UST
$DAI has been the dominant decentralized stablecoin for many years. $UST from Terra has had top-tier integrations and is already the fastest-growing decentralized stablecoin. The Columbus-5 upgrade enabled Terra to support dozens of applications and cross-chain through the Inter-Blockchain Communication Protocol from Cosmos. $DAI primarily serves as an Ethereum reserve, while $UST focuses on creating its ecosystem and expanding multi-chain.
ETH, Layers, and Bridges
The NFT mania that started last year pushed Ethereum near its breaking point. According to a report generated by Bankless, there is more value locked in decentralized finance than the market cap of most traditional banks.
The Merge & Liquid Staking
Ethereum will soon be shifting to a proof-of-stake consensus algorithm through the “Merge.” A report generated by JPMorgan projects that staking will grow to a $40 billion/year industry by 2025. We are now seeing protocols such as Anchor and Lido allowing users to stake tokens while maintaining liquid collateral.
EVM or non-EVM?
Ethereum Virtual Machine’s legacy will carry on for decades to come in the decentralized world. Although, we cannot ignore Ethereum’s competitors and their alternative approaches to solve the scalability issue. Solana is a perfect example of a non-EVM, it is good at things that Ethereum doesn’t even put an effort at being good at.
The DAO of DAOs
DAOs are fluid online communities whose resources are managed by community contributors.
Enabling Tools: Wallets and Staking
Personal wallets are the backbone of DAOs and the Web 3 economy. We are moving in a direction where these wallets will double as data managers and universal identifiers.
Learning and Earning
It is a win-win situation as users test new products and earn something in return. Learn to earn is likely to invert, largely gamify and replace credentials in the education funding model.
Working in the Web 3
People are now interested in being contributors and not only users. Web 3 provides positions in research, governance, data science, and DevOps. The beauty of Web 3 gigs is their universal accessibility.
DAO Treasury Management
DeFi protocols have grown a lot in the last two years. Two of the most active DAOs, Compound ($1B) and Uniswap ($4B) sit on huge reserves. You may tend to believe that most of these DeFi protocols have all figured when it comes to treasury management. Most of them don’t practice treasury management best practices, and we are likely to see real financial managers joining various DAOs.
DAO Investor Relations
Typical organizations generate quarterly reports, which means transparent financial disclosures are limited to several times per year. DAOs and blockchain offer a significant improvement to financial reporting as data is available all the time. Even though building blocks need to be put in place, we will see blockchain-backed financial statements improving how organizations operate.
Wrapping up
The crypto world is very diverse, and you can’t analyze it all in a single article. Expect to see new products, some legal frameworks redefined, and much more this year. Ensure that you research different projects, understand market dynamics, and become part of the ‘creators’ and not just a user.
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