Original author: Ignas, DeFi researcher
Original translation: Shan Ouba, Golden Finance
I feel like something big is about to happen in the cryptocurrency market, and I am very bullish. While I am not sure exactly what it will happen, the market is going through significant changes.
Interest rates began to fall, ETH ETF was approved, BTC ETF capital inflows increased, Stripe launched stablecoin payments...
Like armies positioning themselves before a decisive battle, major crypto companies and traditional financial institutions are preparing for the coming bull run.
More on this “feeling” below:
Meanwhile, the crypto machine hasn’t stopped turning. Yes, prices are falling… but markets are always changing, and new narratives and trends are emerging and influencing markets as they grow in influence.
Just like MakerDAO was launched before the term “DeFi” was coined, there are new trends emerging in the market that are not yet big enough to form a coherent story.
Here are seven emerging trends that could have a significant impact on the market.
1. Repackaging
Old coins are boring, and gamblers want something new.
If you can change the brand name, create a new token, and start over with a new chart, that sounds more exciting!
Fantom → Sonic
Thats exactly what Fantom has done with the Sonic upgrade.
Sonic is a new L1 with a native L2 bridge to Ethereum. It will have a new Sonic Foundation Labs and a new visual identity.
More importantly, the new $S token “ensures compatibility and migration from $FTM to $S at a 1:1 ratio.”
This is a smart move, as the Sonic migration generates more marketing hype than simply calling it “Fantom 2.0.” This allows Fantom to put aside its multi-chain bridging issues and start over.
Connext → Everclear
Similarly, Connext is rebranding as Everclear.
Rebranding is not new in cryptocurrency, but an emerging trend here is to repackage major upgrades as new products.
This sends a stronger signal to the market than another v2 or v3 upgrade. People are not interested in just another v4 upgrade.
By changing from Connext to Everclear, the team communicated that this was more than just a simple rebranding, but a significant step forward in technological advancement.
Connext moves from simple bridging infrastructure to the first clearing layer. It is like a chain built on the Arbitrum Orbit rollup (via the Gelato RaaS) and connects to other chains using Hyperlane and Eigenlayer ISM.
Connect any chain, any asset, paving the way for a modular cryptocurrency future.
NEXT tokens rose by about 38% after the announcement (but it didn’t last). Fantom’s $FTM is hot again, and its awareness on X has also increased.
I expect more protocols to be renamed to suit market trends and technological advancements in 2024.
For example, IOTA is rebranding as L2 for real assets.
Additionally, mergers may become more common, such as Fetch ai, Ocean protocol, and SingularityNet merging into one $ASI token to become a new crypto super AI project.
The key will be to watch the price performance of the new branded items and new markers (if launched). While it is too early to tell, initial price performance of FTM and NEXT as well as FET, AGIX and OCEAN is positive. If the market starts to rise again…
Are there more repackaging/renaming coming?
2. Pro-crypto regulation
Regulation has been a big issue, especially in the U.S., where the SEC has targeted major players like Coinbase, Kraken, and Uniswap. Despite some wins for Ripple and Grayscale, and the approval of a Bitcoin ETF, the regulatory environment remains hostile, with more focus on legitimate projects than outright scams.
But things have changed: Trump has verbally supported cryptocurrencies, forcing the Democratic Party to change its anti-crypto strategy. Biden has accepted cryptocurrency donations. And now the SEC has dropped its lawsuit against Consensys, effectively recognizing that ETH is a commodity.
Now, the short-term future of cryptocurrencies will depend on the election. I like the analysis by Felix (Hartmann Capital) in the article below.
Here are the main points.
If Gensler is removed or his powers are limited by the courts and Congress, expect crypto assets to surge sharply by more than 30%, followed by a sustained bull run. If he remains in power, expect a prolonged downturn that benefits law firms, hurts cryptocurrencies and taxpayers, and leaves only Bitcoin and memecoins relatively unaffected.
Regulatory clarity could bring about the biggest bull run in history, changing the digital asset market in several ways:
Shift from narrative to product-market fit: Crypto projects will focus on creating valuable products, not just hype, leading to higher quality development.
Clear success metrics: Valuations will rely more on actual product-market fit and revenue, reducing speculation and highlighting fundamentally strong tokens.
Easier funding environment: Stronger fundamentals will make it easier for digital assets to obtain funding, reducing the cyclical rise and fall of altcoins.
· Thriving MA market: Well-funded projects may acquire undercapitalized but valuable DeFi protocols, driving innovation and closer adoption, with some Tier 1 blockchains turning acquisitions into public goods to increase network value.
3. BTC arbitrage trading: BTC ETF + BTC short
Leverage always finds new ways into the system. Whether it’s Grayscale’s “widowmaker trades” or CeFi’s (Celsius, Blockfi, etc.) uncollateralized loans.
The mechanics are different in each cycle. But where is the leverage hiding now?
The obvious goal is a risk-free neutral strategy for Ethena. As long as the funding rate is positive, all is well, but what happens if/when the funding rate goes negative and the USDe position needs to be closed?
Another target is the re-mortgage of LRT.
But another target is our beloved BTC ETF buyers.
Spot Bitcoin ETFs have seen inflows for 19 consecutive days, with 5.2% of BTC in circulation held by ETFs (although this streak has now been broken).
So, why didn’t BTC surge?
It turns out that hedge funds are shorting Bitcoin through CME futures at a record level.
“What if massive leverage at low funding rates is leverage for this cycle and already exists?” - Kamizak ETH
A possible explanation is that hedge funds are buying spot and shorting BTC, conducting a 15%-20% neutral strategy.
The strategy is the same as Ethena. What if a lot of leverage with low funding rate is leverage for this cycle and already exists? - Kamizak ETH
What happens when the funding ratio turns negative (because gamblers are no longer bullish and close their long positions)?
Will Ethena (dominated by retail) and spot BTC + short CME futures (dominated by institutions) lead to a major crash when these positions need to be unwound?
But perhaps there is a simpler answer: institutions are arbitrageurizing the positive price (currently 2.3%) between different BTC spot and BTC futures.
Regardless, these new dynamics brought on by spot ETFs require close attention, as so-called “risk-free” arbitrage often ends up being “riskier” than initially imagined.
4. Gamification of Point Farm
Our points addiction is getting worse and worse, but we don’t know how to stop.
Protocols need credits to attract an initial user base. They help boost adoption statistics and raise funds at higher valuations.
We are tired of points, but there is no better alternative yet.
Instead, I’ve noticed a trend towards gamification of points, adding extra elements to make the tedious point farming strategy more interesting.
Sanctum introduces Wonderland, where you can collect pets and earn experience points (EXP) to level them up. As a community, you need to band together to complete quests.
This isn’t too different from other points programs, as your airdrops are largely dependent on deposited SOL, but… the community loves it!
Sanctums one-month-only Season 1 event also boosted sentiment. Id like to see 0 to 1 innovation in point farms, but even with point fatigue, our addiction to them is too strong.
Instead, I foresee more attempts at gamification to bring some fun to the farm.
5. Counter-trend of low float, high FDV (fully diluted valuation) issuance
Everyone hates low circulation, high FDV issuance. Except for VCs and teams, who can sell at a higher price. Oh, and there are airdrop hunters, who get more tokens in airdrops.
But what about retail investors? No. 26 of the 31 tokens recently listed by Binance are in the red.
Binance used to be the place to buy the hot new token, but not anymore. Listings on centralized exchanges are sell-the-news and cash-out events.
Not surprisingly, Binance recently announced the listing of tokens at modest valuations, prioritizing community rewards over internal distribution.
We have yet to see rhetoric translated into action, but it would be a step in the right direction.
VCs are taking their fair share of responsibility. Large VC investments, once seen as a positive sign, are now viewed by the crypto community as extracting value. The concern is that VCs aim to profit by selling large allocations of theirs, which they acquired at minimal cost.
The project team must also take action to avoid a perpetually declining price chart.
There are also more experiments on the protocol side. For example, Ekubo on Starknet distributes 1/3 of the tokens to users, 1/3 to the team, and 1/3 to be sold by the DAO within two months. Not everyone likes a two-month sell-off, but it’s a bit like a token sale for the community, similar to ICOs in the past.
Similarly, Nostra on Starknet launched NSTR at 100% FDV, with 25% of the distribution coming via airdrops and 12% sold during the liquidity launch pool event. They call it the fairest launch in DeFi, but this raises concerns about low circulating tokens (teams, VCs cashing out early and exiting). Nostra says team and VC tokens will be tokenized on-chain.
If you see them selling, its best if you sell too.
We also experimented with 100% airdrops, such as Friendtech and Bitcoin Runes, which were mostly minted by the community for free (although Runes also allowed pre-mining).
What will be the outcome? Uncertain. But there are areas of hope.
Keep an eye out for new token issuance models — a new type of successful issuance could become the new meta trend of this bull run. If you spot one, please share it in the comments.
6. McKinsey enters DeFi
DeFi allows for self-sovereignty, enabling you to own and use your assets regardless of national borders.
But DeFi has gotten really complicated! There are many strategies available, and their complexity increases with every % we want to squeeze out.
Furthermore, governing these increasingly complex protocols requires specific knowledge.
As a result, consulting firms similar to traditional finance have emerged to help protocols deal with security, governance, and optimization issues. The most famous example is Gauntlet, whose clients pay millions in fees each year.
More importantly, DeFi protocols are adapting to allow the McKinsey of DeFi to manage user assets or/and external risk management.
Morpho Blue permissionless lending allows the McKinsey of DeFi to create markets with any assets and risk parameters without relying on governance.
7. Getting started with DeFi similar to Web2
I really like this one.
While Friend tech may have its issues, it has successfully popularized Privy, which makes it possible to create and manage wallets using Web2 accounts.
During the NFT craze, I helped a friend buy NFTs on OpenSea. Teaching how to use Metamask was a real pain.
But now you can create a wallet on Opensea using Privy using your email and 2FA code. Seriously, go try it. It took me a minute.
Fantasy Top is leveraging Privy and other user-facing applications.
This trend extends beyond Privy.
Infinex, developed by Synthetix, allows wallet creation using keys, so you only need to use a password manager for your wallet.
Coinbase has launched a Smart Wallet that can pay gas fees on behalf of users, support batch transactions, and allow wallet creation using Web2 tools.
Now, complex user onboarding is no longer an excuse for lack of cryptocurrency adoption. We just need unique consumer apps.
