One article explains 7 emerging trends in the cryptocurrency industry

Written by: Ignas

Compiled by: Yangz, Techub News

I have a feeling that big things are going to happen in the cryptocurrency industry. As for what will happen specifically, I don't know, but it should be some very good news.

Interest rate cuts begin, Ethereum spot ETF is approved, Bitcoin spot ETF capital inflow increases, Stripe launches stablecoin payment...

Like an army positioning itself before the decisive battle, major cryptocurrency companies and TradFi are gearing up for the coming bull run.

Meanwhile, cryptocurrency’s internal machinery does not stop churning. Although the market has declined, so what, new narratives and trends will continue to emerge, and the market will continue to change accordingly. Just as MakerDAO was launched before the term “DeFi” existed, new trends are currently emerging in the market, but these trends are still too small to form a narrative.

Here are 7 emerging trends that could have a significant impact on the market.

1. Repackaging

Old coins are boring, but new coins are always refreshing. What if the project could rebrand, get a new token code, and start over with a new chart?

That’s exactly what Fantom does with the Sonic upgrade. Sonic is a brand new L1 that can cross-chain to Ethereum through native L2. Sonic features a new Sonic Foundation, Sonic Labs, and a new visual identity. What’s more, the new S tokens are compatible with FTM and can be redeemed 1:1.

This move by Fantom is wise. It will generate more market hype than simply calling it "Fantom 2.0", and it will also allow it to put aside the past of Multichain and start again.

Similarly, Connext is changing its name to Everclear.

Rebranding is nothing new in the cryptocurrency space, but an emerging trend is to repackage major upgrades into new products that can send a stronger signal to the market than a pure v2 or v3 upgrade. After all, people wouldn't be too excited about another "V4" upgrade.

By switching from Connext to Everclear, the team wants to say that this is more than just a simple rebrand, but represents a significant step forward in technological advancement.

Connext transforms from a simple cross-chain infrastructure into a clearing layer. It's like a chain in itself, built as an Arbitrum Orbit Rollup (via Gelato RaaS), and connected to other chains via Eigenlayer ISM and Hyperlane. This move not only aims to connect any chain and any asset, but also enables the future of modular cryptocurrencies.

After the two teams announced the news, the price of the NEXT token increased by about 38% (although it did not maintain it), and Fantom’s FTM transactions became popular again, and the number of mentions on CT also increased.

In my opinion, more protocols will be rebranded in the future to adapt to market trends and technological advancements in 2024. For example, IOTA is building L2 of Real World Assets (RWA).

In addition to rebranding, protocol mergers will also become more common. For example, Fetch ai, Ocean protocol and SingularityNet completed the merger of the Artificial Intelligence Super Intelligence Alliance (ASI).

2. Clear Cryptocurrency Regulation

Cryptocurrency regulation has been a big issue, especially in the United States, where the SEC has targeted major players such as Coinbase, Kraken, and Uniswap. Despite some wins for Ripple and Grayscale and the approval of a Bitcoin spot ETF, the regulatory environment remains grim.

Thankfully, that has changed: Trump’s support for cryptocurrencies has forced Democrats to change their anti-crypto strategy. Biden began accepting cryptocurrency donations, and the SEC also ended its lawsuit against Consensys, saying "it will not allege that the sale of Ethereum constitutes securities trading."

The short-term prospects of the cryptocurrency industry will depend on the election. I strongly agree with the sentiments expressed in an analysis article by Hartmann Capital. The article states that if Gensler is ousted or his power is checked by the courts and Congress, crypto assets are expected to rebound significantly by more than 30%, followed by a sustained bull market. If he remains in power, expect a prolonged market downturn in which law firms will benefit while cryptocurrencies and taxpayers will suffer, with only Bitcoin and memecoins relatively unaffected.

Regulatory clarity could lead to the biggest bull run yet and transform digital asset markets in several ways:

1. Shift from narrative to product-market fit: Cryptocurrency projects will focus on creating value-driven products , rather than just hype, leading to higher quality development.

2. Clear measures of success: Valuations will rely more on market fit and returns of the actual product, reducing speculation and highlighting tokens with strong fundamentals.

3. Easier Financing Environment: Stronger fundamentals will make it easier for digital assets to obtain financing, thereby reducing the cyclical rise and fall of altcoins.

4. Thriving M&A market: Well-funded projects can acquire under-funded but valuable DeFi protocols, driving innovation and closer adoption, with some Layer1 converted into public goods to increase network value.

3. Bitcoin Arbitrage Trade: Bitcoin Spot ETF + Bitcoin Shorts

Leverage can always sneak into the system in new ways. Either "Greyscale's widowmaker trade" (referring to investments that can lead to huge, potentially devastating losses), or CeFi (Celsius, Blockfi, etc.) unsecured lending.

The mechanism of each cycle is different. But where is the leverage hiding now?

The obvious thing is that Ethena adopts a delta neutral strategy (as long as the funding rate is positive, everything is easy to handle, but if the funding rate is negative, what happens when the USDe position needs to be closed?), followed by re-pledge using LRT, and finally Is a Bitcoin spot ETF buyer.

The Bitcoin spot ETF has experienced net inflows for 19 consecutive days, and the Bitcoin held in the ETF accounts for 5.2% of the total Bitcoin circulation (although the current rising trend has been broken). But why hasn’t Bitcoin soared yet? The reason is that hedge funds are shorting Bitcoin via CME futures at a record rate. A possible explanation for this behavior is that hedge funds are buying spot ETFs and shorting Bitcoin to achieve a 15%-20% delta neutral strategy.

This strategy is the same as Ethena. But as Kamikaz ETH points out, “What if low-funding massive leverage is the leverage of this cycle and already exists?” What happens when funding goes negative (investors stop being bullish and close long positions) ? Will Ethena (led by retail investors) and spot BTC + CME futures shorts (led by institutions) cause a big crash when these positions need to be unwound?

This is scary. But perhaps the easier answer is that institutions are arbitraging through Bitcoin spot and futures.

In any case, we need to pay close attention to these new developments brought by Bitcoin spot ETFs, because "risk-free" arbitrage often ends up being "riskier" than initially thought.

4. Points Gamification

The protocol can use points to attract the initial user base. Points also help increase adoption and thus valuations. However, the phenomenon of points addiction is getting worse. Considering that there is no better alternative at present, points gamification may add an extra element to the boring points strategy.

For example, Sanctum launched the Wonderland game, which allows users to level up by collecting pets and earning experience points (EXP). Then form a team through the community to complete the task.

This is not much different from other points projects, because the airdrop still depends on the accumulated SOL, but... the community loves this mechanism! In reality, Sanctum completed its first season campaign in just one month.

I hope to see 0 to 1 innovation in the airdrop mechanism. We are tired of points. I hope more projects will try to gamify points and bring some fun to airdrops.

5. Resist low circulation and high FDV issuance

Except for venture investors, teams and airdrop hunters, almost everyone hates the token issuance mechanism with low circulation and high FDV.

Binance, which used to buy popular new tokens, has recently adjusted its listing strategy due to user resistance to the issuance of low-circulation, high-FDV tokens, decided to list tokens with moderate valuations, and prioritized community rewards rather than internal allocations. .

At this point, we still need to take practical actions, but at least we have taken a step in the right direction.

For the token issuance mechanism with low circulation and high FDV, venture capital companies are also to blame. Venture capital was once viewed as a positive sign, but the cryptocurrency community now views it as a form of value extraction. The concern is that venture capital firms aim to profit from selling large token allocations they obtain at minimal cost.

In addition, the project team must also take action to avoid a situation where the currency keeps falling.

The project side can also try more. For example, Ekubo on Starknet distributes tokens equally among users, teams, and DAOs over a two-month period. Nostra (also on Starknet) launched NSTR at 100% FDV, with 25% distributed via airdrop and 12% sold in liquidity bootstrap pool events. There are also FriendTech’s experiments with 100% airdrops, and the community minting Bitcoin runes for free (although runes also allow for pre-mining), among others.

The impact of these token issuance methods is uncertain, but please pay attention to the new token issuance model. A new and successful issuance method may become the new primitive of this bull market.

6. "McKinsey" in DeFi

The emergence of DeFi helps realize self-sovereignty, and people can own and effectively utilize their own assets without being restricted by national borders. However, as we look to squeeze out every ounce of profit, DeFi strategies are becoming increasingly complex. As a result, consulting firms like TradFi have emerged to help protocols deal with security, governance, and optimization issues. Gauntlet, for example, charges customers millions of dollars a year.

More importantly, DeFi protocols are also being adjusted to allow the “McKinsey” in DeFi to manage user assets and externalize risk management. For example, Morpho Blue’s permissionless lending allows the “McKinsey” of DeFi to create markets with any asset and risk parameters without relying on governance. Among them, the most popular treasuries are managed by Gauntlet, Steakhouse, RE7 Labs, and others.

Similarly, Mellow protocol launched LRT managed by "curators" to allow "depositors more flexibility to handle the risk exposure they wish while benefiting from the liquidity of pledged assets."

I believe that as the complexity of DeFi increases, this trend will become more and more obvious, and further push "DeFi" to "on-chain finance", transferring power from token holders to Professional firms. As for whether this will make the token more popular, I don't know yet.

7. Web2-like DeFi barrier to entry

While Friend Tech may have had its issues, it successfully popularized Privy, enabling people to create and manage wallets using Web2 accounts.

To be honest, during the NFT craze, I would rather buy NFTs for my friends directly on OpenSea than teach them how to use MetaMask, because it is really troublesome. Now, with Privy, we can literally create a wallet with an email and 2FA code on OpenSea, and the entire process only takes a minute.

And this trend isn’t just limited to Privy. Infinex, developed by Synthetix, allows the creation of wallets using Passkeys, so users only need to use a password manager for the wallet. Coinbase also launched Smart Wallet, which pays gas fees on behalf of users, supports batch transactions, and allows wallet creation using Web2 tools.

Complex user login is no longer an excuse for cryptocurrency’s lack of adoption. What we need are unique consumer applications.

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