Prices plummeting, inflation running rampant, regulators cracking down, protocols imploding, scams leveraging other scams, and institutions collapsing… the perfect mixture of pain to signal… a market bottom 👀?!
This is NOT FINANCIAL ADVICE!!!
For many people around the world, 2022 will go down in history as one of the most difficult investment years.
As the dust settles & investors begin to regain confidence, it is extremely important to front-run everybody & capture as much of the upside as possible.
Regardless of the market cycle (bull or bear), new ideas are always popping up & brave investors are always willing to take a chance when they see the opportunity is right.
Well, opportunities are knocking & it is our job to understand which door(s) we must open.
Before we dive in, let's first define a few key points that constitute a “big” opportunity:
TAM (total addressable market)
The actual size of the market. This includes both the number of users & the monetary value.
Growth potential
Will the TAM grow moving forward or will the market stay roughly the same size?
Competition
Competition is a good thing because it means there is demand, however, if there is too much competition, a market becomes saturated & returns are distributed horizontally. (We want vertical returns, baby.)
Desirability
Who wants what & why? What are the most painful, underserved, & necessary ideas?
Most hated by regulators
If they hate it, there must be a good reason. Governments hate things that can put them out of business. Government is a BIG business…
Totally missed by regulators
Government moves very slowly. What are they missing that entrepreneurs can capitalize on?
-Biggest medium-term potential.
-Not facing any regulatory headwinds at the moment.
-Strong steady growth anticipated.
-Modestly competitive landscape, no games/projects on the level of Call of Duty, World of Warcraft, or Runescape.
Gaming is one of the most intuitive sectors to be exploring for benefits from the coming market cycle. Built on tightly knit communities & almost entirely digital in nature, gaming appeals to a broad audience of individuals who are prime to become users of digital assets.
This nascent sector of the regular economy will bring in $365.60 Billion in revenue this year & is expected to grow roughly ~7.17% per year.
One of the most lucrative possibilities in terms of cash flow due to massive margins.
There isn’t much pain here to solve with blockchain tech, but the potential of being disregarded by regulators will bring tons of attention here.
How to address the opportunities in gaming with crypto?
NFTs primarily.
In their current form, I colloquially refer to NFTs as “non-financialized tokens” because of their strong retail appeal; pictures of monkeys are more relatable to regular people than the cold numbers on a trading terminal or spreadsheets.
Gamers are typically not caught up in anything else much outside of their games — it would be best to keep it that way. Trying to financialize their processes with cryptocurrency will likely disincentivize people from playing the games with their complexity.
However, building out online gaming guilds (DAOs) with the use of NFTs will garner stronger communities. Rewarding players with exotic in-game assets that are owned by them & can be transferred between games hold a lot of promise.
* Personal note: Don’t look for promises of fully on-chain games (that is resource intensive & not sustainable or scalable, yet) consider looking for infrastructure providers (ENJ), Guilds (YGG), or possibly in-game objects such as metaverse lands (Otherdeeds).
-Biggest long-term potential.
-In a regulatory gray space (not hated nor loved).
-Always going to grow over time (assuming no cataclysmic events).
-Currently VERY FEW competitors (Maple finance, Centrifuge, GoldFinch).
Nearly impossible to accurately pinpoint the true size of this market, but the sums are calculated in the Trillions. Real World Assets represent the vast majority of the world's wealth. This includes everything from government bonds to real estate to company debt & everything else in between.
This segment has been receiving some flack/pushback from notable people in the industry namely Andre Cronje talking about the “death of RWA”.
His point is valid that this category is NOT TRUE DECENTRALIZATION, however, I cannot help but see the incredible potential as it continues to flourish.
How to capitalize on the opportunities in RWA tokenization?
This sector will obviously be built with a lot of overlap into tradfi. So capturing this opportunity might be most suited for companies/enterprises, more so than individuals. Nonetheless, there are a few interesting ways for people to benefit:
- go to an existing RWA tokenization operator & leverage your business history to take out an on-chain loan
- take advantage of early-stage incentive programs for participating in lending through these operators
- build out a DECENTRALIZED RWA tokenization engine/protocol run by a DAO
* Personal note: I do not own & will not recommend buying the tokens of these platforms, but it might be worthwhile to not completely rule them out. ( CFG - GFI - MPL)
-Largest risk-adjusted opportunity.
-HATED by regulators.
-Strong steady growth is almost certain.
-Difficult competitive landscape, due to extreme technical requirements in knowledge, skill, & funding.
The hottest segment for those looking to stick it to the government.
The key word in this is “decentralized”. Centralized stablecoin issuers will be faced with the same regulatory issues as banks & other traditional money service businesses. Those issues will trickle down to consumers & ultimately serve no real benefit to the end users.
The task is enormous & many brilliant people have attempted to solve this problem. Of those attempts, out came a graveyard filled with ≥ 23 failed ambitious projects. It would be softly said that nearly every one of the failures in this space has resulted in catastrophe for its participants.
There are a tiny handful of projects that can serve as a “successful” case study in the space that comes to mind:
- MakerDAO - with their DAI stablecoin.
- Frax Finance - with the FRAX stablecoin.
- Reserve Rights - with the RSV stablecoin.
- Decentralized USD - with the USDD stablecoin.
How to capitalize on the opportunities in Stablecoins?
Stablecoins are the most nuanced segment in terms of capturing value because there is no real direct growth here. Growth in stablecoins represents an increase in supply/underlying collateral. Capturing the upside here depends on creativity & which side of the fence you want to be on; creator or consumer.
- Leverage new expanded collateral models,
- explore/test new algorithms,
- expand cashflow opportunities of stablecoin protocols to sustain market shocks & unprecedented failures (i.e., have a protocol BUY its own stable assets to serve as an emergency form of insurance pool ← still not financial advice),
- lend/borrow, with cross-collateralization, to maximize yield (still NFA)
- and have exposure to the protocols overseeing the minting of decentralized stablecoins (MKR/RSR).
-Uncapped & untapped market.
-Can’t be/won't be stopped by regulators.
-Growth potential is directly tied to human population & development 😲
-Modest competitive landscape with no clear leader or solution available.
Decentralized Identity is still in its infancy & by the looks of it will require a multitude of separate solutions/issuers.
This is the wild west for innovators in the space.
As it stands, there are ~103 different methods that are recognized by the Web3 alliance for building decentralized identity.
One of the most counterintuitive, but potentially exciting ideas that was brought to the surface by Vitalik Buterin is the concept of non-transferable tokens called (SBT) Soul-Bound Tokens.
How to capitalize on the opportunities in decentralized identity (D.ID)?
There is actually a multitude of creative ways to take advantage of & capture this opportunity; mostly through the use of NFTs.
- Join early-stage projects building some form of decentralized social media & capture the namespace.
- Leverage your existing web2 reputation to become a thought leader on early-stage platforms
- Leverage as many web3 platforms as possible & farm the incentive tokens.
- Launch a project in this space & look for funding (if you have an actual solution).
*Some projects to gain inspiration from: Civic (CVC), Serto, Nametag, Fractal
** Great primers on D.ID. → Dock.io → Consensys → Ethereum.org
-Largest Short-term opportunity.
-HATED by regulators.
-Growth is always going to fluctuate as old projects die & new ones arrive.
-EXTREMELY competitive.
Decentralized finance is the future of all finance; it is simply a matter of time until we drop the first half of the term & just call it finance.
This segment of the crypto economy is always ripe with opportunity (even in bear markets).
Primarily because it is the most competitive segment of all the others (in terms of the total number of projects & the rate at which new projects pop up).
The interesting thing here is the reason for so much competition… It is super easy to spin up a “DEFI” project… Innovation is/has been basically non-existent.
Most of the projects that you will find are going to be copy-pasta clones of one another with some minor adjustments.
Nevertheless, the space is flush with attention & incredible metrics:
- Floating a market cap of ~$100B (source)
- Over ~$90B TVL (total value locked)
- Exists across >130 different blockchain ecosystems
How to address the opportunities in DEFI?
Simple. Dive into everything without doing any research & hope for the best… THIS IS A JOKE! DO NOT DO THIS!
As, in the case with any other trade/investment, there is one golden rule to guarantee profits: GET IN EARLY while Marketcap is LOW & ride or die, baby.
Some other things that might be worth trying:
- Participating in protocols before they have a token & hope for an airdrop.
- Provide liquidity to promising crypto pairs on DEXs (before price skyrockets).
- NFA: leverage yield & build compounding systems across chains (advanced).
- Research strong incentive programs & farm their token.
* leading projects: AAVE, dydx, Synthetix, 1inch, Balancer, SushiSwap
These are the 5 sectors of opportunity that I am currently watching; there certainly are a few other very promising segments with massive potential that I will be writing about in the near future:
- Privacy (ZKsnarks/rollups, etc..)
- AI meets blockchain
- Oracles & data verification
- Multi-chain bridges
But, as I have learned the hard way,
It is better to stay focused & catch some gains
rather than
getting lost in the chaos & missing everything.
Thank you for reading.
I hope this information serves you well on your crypto journey!
See you all on the other side! 🥂
Also published here