There were quite a few events in the first half of the year. However, looking at it today, there weren’t actually many major events.
Macro Events
First, the collapse of a U.S. digital bank in March had a significant impact, as a very core channel from Crypto to fiat and from fiat to Crypto, which had been established over the past few years, disappeared, and this channel accounted for over 70% of the entire market’s traffic.
In April, Ethereum completed its Shanghai upgrade. This was a major market upgrade that brought a fundamental change, namely, a very secure underlying asset for the entire cryptocurrency. After the upgrade, a large number of Ethereum began to lock up, and now nearly 20% of Ethereum is locked into nodes. At the same time, many traditional enterprises have also begun to build strategies based on this.
For a long time, traditional funds entering the cryptocurrency world could only do one thing, which was to physically mine with mining machines. Now, some traditional institutions are starting to do funds, buying Ethereum, and enhancing returns through Staking, which will become a very important native source of funds for cryptocurrency for a long time to come. Over the past decade, there have been roughly two things in the cryptocurrency circle: the first is the issuance of assets, and the second is the trading of assets. This is a very important way to change the issuance of assets.
- Quick Look at Binance Market Report for June: ETFs Expected to Boost Bitcoin, NFTs Suffer Heavy Blow
- Can a spark start a prairie fire? Analyzing the value proposition and market expectations of $ETHS.
- The internet bubble has ended, and the future belongs to the encrypted era on the blockchain.
In April, changes in cryptocurrency policy in Hong Kong brought a wave of activity and a lot of traffic. However, we are still observing whether Hong Kong can replace the United States as an important channel between the Crypto and fiat worlds. On June 1st, Hong Kong’s new cryptocurrency policy took effect, and we see some movement, but the movement is still very small.
In June, the United States tightened its compliance, and the SEC sued exchanges such as Binance and Coinbase, causing a very extreme mood in the market and a big drop. However, market sentiment quickly reversed, as a large number of traditional financial companies began to apply for cryptocurrency ETFs.
ETF is also a very important narrative logic for cryptocurrency. In 2013, the process of Bitcoin rising from RMB 1,000 to RMB 8,000 had a big driving force, which was the U.S. holding an ETF hearing. Therefore, the ETF story has been hyped for 10 years.
Behind the price increase of cryptocurrencies in 2021-2022 is actually a core driving force of Grayscale. Grayscale is a very interesting innovation that uses a good arbitrage model to lock a lot of coins into the Grayscale Fund, but can only go in and not out, so it brings in a large amount of US dollars, leading to a round of Bitcoin price increases. And ETF may be a large-scale grayscale.
What is worth observing next is when a large number of ETFs will pass. From the perspective of traditional funds from asset allocation or hedging, directly buying ETFs in these securities companies and banks also represents a large amount of funds flowing into large asset categories such as Bitcoin and Ethereum. This will also be a very critical event.
Industry Exploration
At the industry development level, there are several things worth paying attention to.
One is in February and March, due to the launch of Move public chain, it brought a small wave of speculation, but the bubble burst quickly. The second is the Blur airdrop, which brought a liquidity feast for NFTs, causing NFTs to rise in January and February, especially for blue-chip NFTs. However, with the subsequent blue-chip projects such as Ape and Azuki failing to meet expectations and prices plummeting, NFTs are currently in a state of bubble burst and narrative logic reorganization.
Next, NFT needs to find a new narrative logic and landing scenario besides the PFP concept, perhaps combining NFTs with offline scenarios, such as things that are combined with personal fans and membership rights, which should bring a lot of new users. I personally am very optimistic about this.
In late April to early May, there was a wave of MEME coin speculation, which caused many junk coins to rise many times. In addition, BTC chain Ordinals NFT and BRC20, the combination of the two, is also promoting this wave of MEME coins. This also shows that the industry narrative logic has almost reached a stage where there is no narrative logic. Everyone has nothing else to speculate on, so they can only speculate on MEME coins.
The above are the major events in the cryptocurrency industry in the past six months. The basic conclusion drawn from the above analysis is: Currently, it is a stage where the industry lacks narrative logic, and the industry is greatly affected by macro and regulatory factors.
Three Things to Watch in the Second Half of the Year
The entire cryptocurrency industry is still in the process of finding a new narrative logic. However, there are still a few major events worth paying attention to. As for what the final narrative logic of cryptocurrency will be, which applications can be run, and what kind of scenarios will be implemented, we will only be able to see very clearly in the second quarter of next year. These are all the results of trial and error, and everything is decided by the market.
First, Ethereum will undergo an upgrade in the second half of the year to improve performance. Secondly, L2 will go live on the mainnet within the next 6-12 months, most likely within 6 months, and a series of Layer 2 networks such as Scroll and ZKS are competing to become the first and gain a good first-mover advantage. Once Ethereum is upgraded, the performance problems that have plagued the entire blockchain industry for the past decade may gradually be solved. Perhaps there will be about 10 times the performance improvement, from several hundred TPS to around a thousand TPS, and in the future, it can reach tens of thousands of TPS through hardware acceleration and other means, which will bring a wave of significant performance improvements. Finally, high-DAU applications and low-cost transactions will finally be possible on the blockchain.
The second consensus is that unkeyed wallets based on MPC technology and on-chain AA smart wallets may gradually form a unified standard with the launch of L2, bringing large-scale promotion and application. Layer 2 networks were originally designed to provide users with an AA wallet from day 1. This may become the default configuration for users in the future, greatly reducing the user threshold.
Once the blockchain performance is initially resolved and the user threshold is further reduced, there may be a wave of application attempts and explosions, with a large number of users pouring in. This is what we hope to see. I expect this to happen sometime after the second quarter of next year.
The third important issue is the application for traditional institutional ETFs. Starting in June of this year, many traditional financial institutions have applied for cryptocurrency spot ETFs and it looks very likely that they will be approved. A hard timeline is that the SEC must reply whether to approve the ETF by the end of Q1 next year, around the end of March. We expect to see one or two traditional financial institution applications for ETFs with large-scale liquidity go live at the end of Q1 next year, reconnecting compliant funding channels in North America.
This is what I think will be the three most important things driving the industry in the next six months to a year.
Like what you're reading? Subscribe to our top stories.
We will continue to update Gambling Chain; if you have any questions or suggestions, please contact us!
