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Industry overview and trends
If we look at the market value, we will find that the encrypted digital currency market has developed into a trillion-level market. But how big is it? Let us compare it with other macro assets and financial markets.
Picture 1: Comparison of cryptocurrency and macro-assets on financial markets, picture from: Bloomberg
From a macro perspective, the encrypted digital currency market is still in its infancy and its market share is not large. The picture above makes me feel both frustrated and excited. Although it is small, I think it has great potential. As a veteran of the digital currency industry, I feel that I have an obligation to support and promote the development of digital currency innovation.
Trend 1: Bitcoin's leading role is declining and will continue to decline
Picture 2: Bitcoin and Ethereum's dominancet trends, picture from: coinmarketcap.com
From 2013 to 2016, Bitcoin's dominance dropped slightly from nearly 95% to 80%. Due to the proliferation of digital tokens in 2017, Bitcoin's dominance dropped sharply to 35%. At the same time, the dominance of Ethereum jumped to 30%. At that time, Ethereum had a chance to comeback, but it was a turbulent "forked Bitcoin" period. Since 2018, we have never seen Bitcoin's dominance steadily exceed 70%. If you ask me why, I would say that this is because of the deep development of the public chain ecosystem and the true innovation of DeFi applications.I predict that Bitcoin's dominance will further drop to 20-30% in the future. Bitcoin's low dominance will benefit the industry in many ways.For example, we may say goodbye to the "destined" 4-year bull-bear market cycle, which is mainly driven by Bitcoin's halving mechanism. Reliable applications with unique fundamentals will stand out independently and decouple from the "big pie". If this becomes true, the crypto venture capital industry will enter a golden age.
Trend 2: Stock listing is expected to become the main line of investment in the next few years
Picture 3: Bitcoin chart and Coinbase listing
On April 14, Coinbase was listed on NASDAQ, and Bitcoin reached its peak on the same day. The listing of Coinbase shows that equity investment is feasible in the cryptocurrency market. Not all startups need to issue tokens to raise funds. A16z has raised a $2.2 billion fund, and dozens of cryptocurrency venture capital firms have raised hundreds of millions of dollars. The obstacles that prevented traditional investors from investing in the cryptocurrency market are gone forever. I see a large influx of traditional venture capitalists in the next two years. Another model is also emerging, imagine the "equity + token" portfolio investment model. Chia is accelerating its IPO schedule, which may be a symptom of this new model.
Trend 3: Institutions will continue to be the engine of the bull market
Picture 4: Encryption plan of TradFi organization, picture from: Bloomberg
In fact, the above picture was outdated 2 days after it was released, because Citibank also began to provide digital currency asset services. I have also been following up the application status of the US ETF.
Picture 5: U.S. ETF application status, picture from: open information collected
TradFi institutions and ETFs will provide a more mature infrastructure for large-scale applications. 2020 is just the beginning, and the wave of larger institutions is accelerating.
Trend 4: We will embrace compliance
Picture 6: Regulators in cryptocurrency hotspots
If we want the encryption industry to grow on a larger scale, we must accept compliance. The recent regulatory storm in China has had a rapid impact on the local market’s crypto ecosystem. Regulators around the world have warned some top centralized exchanges and closed the legal currency channel. If the market develops to a larger scale, it will inevitably face regulation directly.
Trend 5: Assets are the core of the market
Picture 7: Exchange incubation, issuance, and circulation ecosystem for reference
The top exchanges are exploring and building independent ecosystems covering the full life cycle of high-quality assets.Crypto investors need to consider what they can provide for high-quality assets. What are your strengths? Incubation, listing or circulation of high-quality assets?
Strategy 1: Blockchain infrastructure
Picture 8: Some infrastructure for reference
As mentioned above, equity investment is becoming a trend in the crypto market. Many start-up companies will become blue chip stocks in the next few years. For stock investors, they need to consider the macro layout of the crypto market. Find the key track, find the key players, and find the best team.
Strategy 2: Encrypt the native ecosystem
Picture 9: Top ecosystem for reference
The public chain provides the infrastructure for innovation. An intermediate layer like an oracle may also evolve into an ecosystem of chains and applications.The circles in the above figure, such as DeFi, NFT, and games, also have their own micro-ecosystems. (Investors need) Broaden their horizons and form an industry puzzle. Look for an ecosystem with "real users".
Picture 10: My prediction on the Uniswap V3 ecosystem
I want to mention Uniswap. In my opinion, Uniswap is more than a single DeFi application. Based on Uniswap, it is possible to form a complete trading ecosystem. Curve V2 still follows the old path, which is to provide users/traders with one-stop service (I do not deny the value of this approach). But Uniswap is purely focused on liquidity construction and self-driving oracles, which is very important for the decentralized trading ecosystem.
Strategy 3: Key Innovation
Picture 11: Some key innovations for reference
The figure above illustrates my basic understanding of key innovations in the crypto market. If you don’t have a blueprint or roadmap in your mind, it’s difficult to find key innovations. The blueprint may not be 100% accurate, and the roadmap may mislead you. Therefore, you must follow the latest trends in real time, analyze and form a new paradigm. Finally, be confident and ready for what will eventually come true.
I would like to quote a famous passage from Charles Dickens’ novel "A Tale of Two Cities":
"That is the best time, that is the worst time; that is the time of wisdom, that is the time of ignorance; that is the time of confidence, that is the time of doubts; that is the season of sunshine, that is The season of darkness; that is the spring of hope, that is the winter of despair."
People who are pessimistic are often right, but people who are optimistic are often successful.
Content from: Winkrypto