Trends and Narratives for Year 1 of the post-ETF Era
The 11 spot bitcoin ETFs approved by the SEC are massive news for crypto, but they also pose a strong contradiction. It’s hard not to be optimistic when you see financial behemoths tie their incentives to your industry’s goals. But no the other hand, the lifesaver that’s likely to take the industry out of the hole it fell into in late 2022 is coming from the same financial system crypto was born to challenge.
Are we taking the blue pill or the red pill?
If we want to retain some control of the future, though, we must commit to the freedom to come up with technical and financial innovation.
The following are the news and innovations that we will be cheering for during 2024.
Bitcoin
Bitcoin has some of the most outstanding catalysts in the ecosystem, with the likely approval of a spot spot ETF approvals and the halving in April. To top it all, 2023 has been the year when the Bitcoin blockchain evolved beyond its original purpose and became much more than a single-purpose platform. The appearance of Ordinals in January and the subsequent innovations, such as BRC-20 tokens, have given a new life to the idea of blockchain as an ecosystem. Miners rejoice in the new revenue stream, and developers develop. This year we’re bound to see Bitcoin follow Ethereum’s path of blockchain utility.
Ethereum
Ethereum ended up being the clear winner of the spot bitcoin ETF wave. The potential arrival of an ETH ETF, which has a hard deadline for approval or rejection in May, immediately became the “next best thing." Investors ran to buy.
But besides the rise of the beast of speculation, Ethereum has its own reasons to be excited. Dencun, is coming soon: Dencun is the upgrade that will include EIP-4844, an improvement proposal that will drastically reduce rollup transaction costs. Another great leap in infrastructure design for crypto that will mostly affect the emerging galaxy of Layer 2s.
Infra
The infrastructure space (the one that defines the design and capabilities of the blockchains that will host crypto applications) is becoming increasingly broad and complex and is going supersonic.
Layer 1s had taken the back seat during all 2023, with Ethereum’s rollup centric vision being the center of attention. During most of 2023 it was all about optimistic rollups maturing (Optimism and Arbitrum growing in market share), and zero-knowledge rollups making a stellar appearance. But in the last quarter of the year, the L1 narrative returned from the dead on the shoulders of Solana’s resurgence. And when we thought it was all about L1s or L2s, the modular narrative popped up, offering a broader scope of alternatives for increasingly efficient blockchain development.
The infrastructure race seems to be red-hot, but with no signs of cooling down in the short term.
RWA
Real World Assets were one of the trends that brought more hope to crypto during the bear run, approaching crypto to TradFi yields, increased by the interest rate hikes. Projects like Ondo, Maple, and Centrifuge have built institutional-friendly products, while others like MakerDAO or Frax are building bridges between DeFi and TradFi. We expect those products and bridges to be increasingly important in approaching these two worlds.
Stablecoins
Stablecoins are simultaneously one of the most solid applications of blockchain technology and one of the most vibrant spaces. The race between the old contenders (USDT, USDC, DAI…) remains alive while new value propositions emerge, like yield-bearing stablecoins backed by treasury bills, LSDs, or even blockspace.
LSDFi
LSDFi is the latest phase in a trend initiated by Ethereum’s transition to Proof of Stake. After Ethereum allowed staking and unstaking of ETH, staking became one of the most trusted sources of yield. Following up, a whole new vertical was born after Liquid Staking Derivatives allowed users to have the cake and eat it, too. DeFi came up with a myriad of applications where LSDs could be used to increase revenue. LSDFi is that category of projects that give a second life to LSDs. The category includes products and services like staking (Eigen Layer), yield-bearing stablecoins (Lybra), LSD indexes (Index Coop), and even yield-bearing L2s (Blast).
Applications
The whole point of blockchain technology is to provide solutions to real problems. From that perspective, crypto is already offering relevant applications in the finance field, but other sectors are poised for disruption. Some of the most mature ones, with the potential to receive an impulse from the bull run, are:
- DePin (Decentralized Physical Infrastructure), such as decentralized connectivity networks (Helium), decentralized storage (Arweave), and decentralized computing (Render).
- AI. Closely related to DePin, decentralized computing and storage can provide precious services to AI.
- Decentralized social. With the increased blockchain efficiency, the promise of taking control of your data and social graph from the hands of greedy Web 2 social media providers is closer than ever.
- GameFi. The promise of crypto-fueled gaming, with embedded interoperability and incentive mechanisms, is today closer, thanks to the advances in infrastructure.
