7 Emerging Trends in the Cryptocurrency Industry Explained in One Article

Author: Ignas
Translation: Yangz, Techub News
I have a feeling that something big is about to happen in the cryptocurrency industry. As for what exactly will happen, I don’t know, but it should be some very positive news.
Interest rate cuts, approval of Ethereum spot ETF, increased inflow of funds into Bitcoin spot ETF, Stripe launching stablecoin payments…
Like an army preparing for battle before the decisive moment, major cryptocurrency companies and TradFi are getting ready for the upcoming bull market.
At the same time, the internal machinery of the cryptocurrency world has not stopped running. Despite the market downturn, new narratives and trends will continue to emerge, and the market will continue to evolve. Just as MakerDAO was launched before the term “DeFi” appeared, new trends are emerging in the market, but these trends are still too small to form a narrative.
Here are 7 emerging trends that could have a major impact on the market.
1. Repackaging
Old coins are boring, but new coins always bring a fresh perspective. What if projects could rebrand, change the token code, and start fresh with new charts?
This is exactly what Fantom did with the Sonic upgrade. Sonic is a new L1 that can be cross-chained to Ethereum through native L2. Sonic has a brand new Sonic Foundation, Sonic Labs, and a new visual identity. More importantly, the new S tokens are compatible with FTM and can be exchanged 1:1.
Fantom’s move was wise, as it sparked market speculation more than just calling it “Fantom 2.0”, and it allowed them to leave behind the Multichain past and start fresh.
Similarly, Connext is rebranding as Everclear.
While rebranding is not new in the cryptocurrency field, the new trend is to repackage major upgrades as new products, which can send a stronger signal to the market than just a simple v2 or v3 upgrade. After all, people won’t get too excited for another “V4” upgrade.
By switching from Connext to Everclear, the team wants to say that this isn’t just a simple rebranding, but represents a significant technological advancement.
Both teams saw a price increase in their tokens after the announcements, with NEXT token rising by about 38% (although it didn’t hold), and Fantom’s FTM trading picking up again, also getting mentioned more on CT.
In my opinion, there will be more protocol rebranding to adapt to market trends and technological advancements in 2024. For example, IOTA is building real world assets (RWA) on L2.
In addition to rebranding, protocol mergers will also become more common, with FETCh ai, Ocean Protocol, and SingularityNet completing the merger of the Artificial Superintelligence Alliance (ASI).
2. Clear cryptocurrency regulation
Cryptocurrency regulation has always been a major issue, especially in the United States, where the SEC has targeted major players such as Coinbase, Kraken, and Uniswap. Although Ripple and Grayscale have had some victories, and Bitcoin spot ETF has been approved, the regulatory environment remains tough.
Fortunately, the situation has changed: Trump’s support for cryptocurrency has forced Democrats to change their anti-cryptocurrency strategy. Biden has started accepting cryptocurrency donations, and the SEC has ended its lawsuit against Consensys, stating that “the sale of Ethereum does not fall under securities trading”.
The short-term outlook for the cryptocurrency industry will depend on the election. I strongly agree with the points made in an analysis article by Hartmann Capital. The article points out that if Gensler is ousted, or if his power is balanced by the courts and Congress, cryptocurrency assets are expected to rebound by more than 30%, followed by a sustained bull market. If he continues in power, the market is expected to enter a long-term slump, law firms will benefit, and cryptocurrency and taxpayers will suffer, with only Bitcoin and memecoins relatively unaffected.
Clear regulation could bring the biggest bull market to date and change the digital assets market in the following ways:
Shifting from a narrative to a product market fit: Cryptocurrency projects will focus on creating value-driven products, rather than just speculation, leading to higher-quality development.
Clear success metrics: Valuations will rely more on the market fit and returns of actual products, reducing speculation and highlighting tokens with strong fundamentals.
Easier financing environment: Stronger fundamentals will make it easier for digital assets to obtain financing, reducing the cyclical volatility of meme coins.
Prosperous M&A market: Well-funded projects can acquire undervalued but valuable DeFi protocols, driving innovation and closer adoption. Some Layer1 will transition to public goods to increase network value.
3. Bitcoin arbitrage trading: Bitcoin spot ETF + Bitcoin shorts
Leverage always finds its way into the system in new ways. Whether it’s the “widowmaker trade” from Grayscale (which could lead to huge and potentially destructive losses), or unsecured lending from CeFi (Celsius, Blockfi, etc.).
The mechanism for each cycle is different. But where is the leverage hiding now?
It is obvious that ETHena is using a Delta neutral strategy (as long as the funding rate is positive, everything is fine, but what happens when the funding rate is negative and USDe positions need to be liquidated?), followed by re-collateralization using LRT, and finally buyers in the Bitcoin spot ETF.
The Bitcoin spot ETF has seen net inflows for 19 consecutive days, with the BTC held in the ETF accounting for 5.2% of the total circulating supply (although the current upward trend has been broken). But why hasn’t Bitcoin surged yet? The reason is that hedge funds are rapidly shorting Bitcoin through CME futures at a record pace. And the likely 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’s. But as Kamikaz ETH points out, “If low funding and large-scale leverage are the leverage of this cycle and already exist, what should we do?” What happens when the funding becomes negative (investors no longer bullish and close long positions)? When these positions need to be liquidated, will Ethena (dominated by retail investors) and Bitcoin spot + CME futures shorts (dominated by institutions) cause a major collapse?
This is terrifying. But perhaps the easier answer is that institutions are arbitraging through Bitcoin spot and futures.
In any case, we need to closely monitor these new dynamics brought about by the Bitcoin spot ETF, as “risk-free” arbitrage often turns out to be “riskier” than initially thought.
4. Gamification of points
Protocols can use points to attract initial user groups. Points also help increase adoption, thereby increasing valuation. However, the addiction to points has become more and more serious, and given that there are no better alternatives at the moment, gamifying points may add an additional element to the boring point strategy.
For example, Sanctum has launched the Wonderland game, allowing users to level up by collecting pets and earning experience points (EXP). Then they can team up with the community to complete tasks.
This is no different from other point projects, as airdrops still depend on accumulated SOL, but… the community loves this mechanism! The fact is that Sanctum completed the first season of its promotional activities in just one month.
I hope to see innovation from 0 to 1 in airdrop mechanisms. We’re tired of points. I hope more projects will try to gamify points to bring some fun to airdrops.
5. Resistance to low circulating supply, high FDV issuances
Almost everyone dislikes the token issuance mechanism of low circulating supply and high FDV, except for investors, teams, and airdrop hunters.
As a result, Binance, which once bought popular new tokens, has adjusted its listing strategy due to user resistance to low circulating supply and high FDV token issuances, deciding to list tokens with moderate valuations and prioritize community rewards over internal distribution.
At this point, we still need to take practical action, but at least we have taken a step in the right direction.
Venture capital firms are also to blame for the low circulating supply and high FDV token issuance mechanism. Venture capital used to be seen as a positive signal, but the cryptocurrency community now sees it as a form of value extraction. People are concerned that the purpose of venture capital firms is to profit from selling a large amount of tokens acquired at the lowest cost.
In addition, project teams must take action to avoid a situation where the token keeps falling.
Projects can also make more attempts. For example, Ekubo on Starknet distributed tokens evenly to users, teams, and DAO within two months. Nostra (also on Starknet) launched NSTR with 100% FDV, with 25% distributed through airdrops and 12% sold in liquidity bootstrapping pool activities. In addition, there are experiments like FriendTech’s 100% airdrop and community free minting of Bitcoin runes (although runes also allow for pre-mining).
The impact of these token issuance methods is still uncertain, but keep an eye on new token issuance models. A new successful issuance method may become the new element of this bull market.
6. “McKinsey” in DeFi
The emergence of DeFi has helped achieve self-sovereignty, allowing people to own and effectively utilize their assets without being restricted by borders. However, as we hope to squeeze every penny of profit, DeFi strategies are becoming increasingly complex. Therefore, consulting companies similar to TradFi have emerged, aiming to help protocols handle security, governance, and optimization issues. For example, Gauntlet can charge clients millions of dollars annually.
More importantly, DeFi protocols are also adjusting, allowing the “McKinseys” in DeFi to manage user assets and externalize risk management. For example, the permissionless lending from Morpho Blue allows “McKinseys” in DeFi to create markets with any asset and risk parameters without relying on governance. The most popular treasury is managed by Gauntlet, Steakhouse, RE7 Labs, and others.
Similarly, Mellow protocol has introduced LRT managed by “curators”, allowing “depositors to handle their desired risk exposure more flexibly while benefiting from the liquidity of collateral assets”.
I believe that as the complexity of DeFi increases, this trend will become more and more obvious, further pushing “DeFi” towards “on-chain finance” and transferring power from token holders to professional companies. Whether this will make tokens more popular, I don’t know yet.
7. Web2-like entry barriers in DeFi
Although Friend Tech may have problems, it has successfully popularized Privy, allowing people to create and manage wallets using Web2 accounts.
To be honest, during the NFT craze, I would rather buy NFT for friends directly on OpenSea than teach them how to use MetaMask, because it’s really a hassle. Now, with Privy, we can create a wallet with an email and 2FA code on OpenSea in just a minute.
And this trend is not limited to Privy. Infinex developed by Synthetix allows the creation of wallets using Passkeys, allowing users to use password managers for their wallets. Coinbase has also introduced Smart Wallet, which can pay gas fees on behalf of users, supports batch transactions, and allows wallets to be created using Web2 tools.
Complex user logins are no longer an excuse for the lack of cryptocurrency adoption. What we need are unique consumer applications.