2021 has been a wonderful year for crypto as we saw increased participation by institutions. As we embark on a new journey in 2022, here are a couple of trends to look out for this year.
1. DeFi 2.0 & Curve Wars
The total value locked in DeFi has increased substantially in 2021 as new participants and protocols stood up to create history in the crypto space. Although this was the case, looking at the token prices of many of the popular DeFi governance tokens might paint a very different picture. The DeFi blue chips have massively underperformed the overall market over the last year. DeFi investors were crestfallen and in disbelief on the lack of price appreciation that many saw in 2020 during the DeFi season. Taking the additional risk to invest in DeFi and underperforming the far safer ETH had many rethinking their future strategies in DeFi.
2021 also introduced us to DeFi 2.0, a further optimised and evolved version that started building on the drawbacks of DeFi protocols through liquidity incentivisation and provisioning. The movement was started by the now-famous Olympus DAO, a decentralised reserve currency. Using clever pozinomics or tokenomics — whatever you wish to call it, Olympus was able to introduce protocol owned liquidity to the DeFi ecosystem. It was so successful that new protocols created their own spinoffs with minor tweaks. It is safe to say that the DeFi 2.0 trend will be set to continue through this year along with the bluechip DeFi tokens.
Another opportunity that has been brewing over the past 2 months has been the Curve Wars. In short, it involves the bribing of protocols to vote for stakers to vote for their respective protocols for the highest curve rewards in pools. Full-fledged article on curve wars coming soon!
2. NFT’s, GameFi & P2E
NFT’s have been huge in 2021, and I expect the trend to continue through 2022 as well. NFT’s have already hit the mainstream through absurd purchases being covered in the news. However, the total unique users of Opensea, the largest NFT platform, only stacks up to less than 3 million. So there is undoubtedly immense growth opportunities in the NFT sector this upcoming year.
Play-to-earn and GameFi will continue to perform well over the next year as well. Q3 and Q4 of 2021 have seen significant amounts of capital from VC’s infiltrating this sector, with investments in endless blockchain gaming projects. Of those projects, a large majority have their fully operational game releases slated to 2022, and therefore, this should be an exciting year for this sector.
3. L2 Race
L2’s are by far the most significant trend to look out for this year. ETH will be transitioning to ETH 2.0 and, combined with L2 solutions, would resolve its scaling issues. Layer 2’s will become the default layer for making transactions by most individuals, while the base layer will work as the settlement layer.
Major layer 2 solutions like Optimism, Arbitrum and ZKsync should most likely launch their governance tokens — all of which will perform exceptionally over this year. Additionally, Layer 2’s should also be able to pull liquidity from alternative Layer 1 projects through liquidity incentive programs and reach record total value locked.
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