The Crypto market has been on a roller coaster this year, and many traders are feeling the pressure. As short-term speculators have been removed from the market, there’s increasing speculation that some of the most steadfast long-term investors are looking to bail out.
There are tens of thousands of cryptocurrencies available today with the figure pegged at 10,000 in 2022. This means there are more than enough opportunities for you to invest in the right one and create a digital fortune — as this figure indicates.
Bernstein, a Wall Street investment firm, identifies seven trends that could be key to stabilizing the cryptocurrency market. The Bernstein report analyzed only crypto-specific factors that could lead to its rebirth while omitting the space’s strong correlation with growth investments.
Without a rebirth in growth investments, all of these could help to put wind behind the sails of Bitcoin and Ethereum, but I would say they are more capable of stabilizing the market’s fall than decoupling Bitcoin and Ethereum.
Ethereum Merge is successful in Crypto Market
In any case, the Ethereum Merge is a huge potential windstorm that should at the very least push Ethereum forward in the direction it is heading. It will see Ethereum’s consensus mechanism change from Proof of Work to Proof of Stake. With Proof of Stake, Ethereum’s transaction speed will increase and fees will decrease. As a result of high fees and slow transaction processing, the crypto space has been dampened in terms of usability. At the time of writing, $3 of coffee would cost $3.26 in fees.
Following the Bellatrix upgrade, the Merge is now underway and is scheduled for completion between September 13 and September 16.
Rollups to bring the next wave of crypto market user demand
Transactions are processed on layer two blockchains to boost network capabilities through rollups. Blocks can be added one at a time on a traditional blockchain. A layer two blockchain approves transactions independently from the main chain using rollups. The layer two blockchains will relay one transaction to the main chain after dozens of transactions occur on the layer two blockchains.
Ether flips bitcoin as the top cryptocurrency in the crypto market
The total crypto market is currently dominated by Ethereum with a share of 20.48%, while Bitcoin is in the lead with 37.36%. As Ethereum allows smart contracts, it represents the more techy and innovative side of things, while Bitcoin, a “digital gold,” represents a digital asset class.
Since NFTs, gaming, and much more can now take place on the network, Bernstein argued that cryptos are more impacted by an “innovation-driven, structural trend” than macroeconomic trends. When Ethereum succeeds in pushing Bitcoin out (especially with declining fees), its use cases could skyrocket, making it the digital money Bitcoiners have always desired.
DeFi on rollups brings back the DeFi summer
Cryptocurrencies are automatically priced against each other with the help of automated market makers and liquidity providers. A DeFi exchange or DEX is a layer 2 application that allows direct exchange of cryptos. Bernstein notes that Uniswap gets approximately 10% of its fees from rollups, with rollups helping to reduce fees.
It is important to note that the sole issue with DEXs is not their high transaction costs. Liquidity providers lose roughly half of their money, which comes from fees. Lower fees may disincentivize liquidity providers from providing liquidity, which would lead to a less accurate DEX and more arbitrage opportunities since impermanent losses are possible (nay, probable).
NFTs pivot to gaming and play-to-earn becomes play-to-own
As of now, Web3 games are mostly boring, with the only reason people play them being that they can make money if they are good. The problem with this is that it is unsustainable, since where does the money come from for the few good players? Other players, of course. When you lose hundreds of dollars, you get frustrated and give up.
In spite of this, games will not always be boring and about burning your fellow gamers for the money. Bernstein’s inclusion of Web3 companies is a result of an influx of talent.
Token economic designs start to focus on value accumulation
This is the death of the meme coin, in my opinion. The analysts wrote that more sustainable token designs will restore retail interest in application tokens rather than the latest fast blockchain or retail meme coins.
This issue has two sides. Cryptocurrencies like algorithmic stablecoins and Olympus DAO that have a “floor price” are algorithmic coins that try to create value from thin air. A memecoin can be anything from a joke that somehow caught on (DOGE), to a contrarian take on the same joke (SHIB), to a scam (SQUID).
Fat protocol thesis becomes the fat application thesis
With scalability improving and transactions declining, Bernstein predicts growth in the “long-tail of application tokens.” Contrary to the fat protocol theory, value accumulates at the protocol layer rather than at the second layer, the application layer.
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