Market Outlook From Two Views
Welcome Crypto Canuck to the Crypto Crier newsletter!
I would like everyone to welcome CryptoCanuck to the newsletter! He is joining us from Canada with a different viewpoint on multiple crypto-focused topics and I am looking forward to his knowledge to help give varying opinions.
We decided to co-author this new segment… our first crack at collaboration! I believe that an overview of our stances will help welcome Canuck into the newsletter and let readers get a feel for his style. We have a similar view of crypto and the market in general but come from different angles so let’s get this show on the road! Here are some of our thoughts as to what 2022 is going to look like.
Opening thoughts:
Canuck: Let me begin by saying that I am excited to be doing this. Crier and I have similar objectives and approaches when it comes to crypto along with our healthy disagreements. I love the strategy and psychology that goes into investing as well as trying to predict market behavior by looking for clues as to what may be next or how people will react. I am also a firm believer in the notion that if everyone thinks the same way, then someone just isn’t thinking. Hopefully, by comparing and contrasting our views, you can find some nuggets of wisdom that align with you as you read this.
Crier: I Love this idea and I’m excited to have our first collaboration. On my side, I like to focus on some analysis of the long term, swing trade timeframes, and learn as much as possible about blockchain. This collaboration aims to gather other input and opinions about crypto and NFT markets to enable our readers to be even more informed.
NFTs
Canuck- We saw our first big wave of public adoption in 2021. We haven’t yet seen an easy on-ramp for Joe Public to get on board. With rumour abound of a Mastercard powered on-ramp, NFTs for the masses is coming; it is just a matter of when. I believe we will begin to see a shift in the NFT market from the current dominance of PFP to a more utility-driven model. A few years ago I was listening to a futurist speak (yes, apparently that is a profession). He stated that for most children entering elementary school, the career they will ultimately work in does not currently exist. I believe this concept is the case with NFTs. I would bet that even by the middle of 2022, the space will look significantly different than it does today. I would recommend you start thinking differently about your NFT portfolio and seek out innovators in the space. I suspect it will move very quickly.
Crier- I agree with Canuck here. With the amount of interest coming into the NFT space, we will see a surge of users this year. For the first time, the Google trend for searches on NFTs, Crypto, and Ethereum has shown NFTs overtaking crypto by a substantial amount. The use of NFTs as a hedge against falling crypto prices has proven effective, so if you are big into crypto, I recommend learning the trends and diving deep into the space.
Eth 2.0 and its impact on the market
Canuck: I think we are going to see a letdown. The amount of hype leading into this will leave many people wanting more as they seemingly expect it to cure cancer and simultaneously create peace in the Middle East. Don’t get me wrong, I think Eth as a dominant market leader is here to stay. However, I anticipate a mud storm of FUD as soon as they flip the switch to Proof of Stake. Too many people have outsized expectations and there will be disappointment abound. That said, if it does play out this way, I will definitely be looking to buy the dip myself.
Crier: Here, I am in disagreement. The start of the PoS chain will run in tandem with the current PoW chain and will not instantly fix the gas issues. However, once we finally move fully to PoS, a lot of growing pains will be mollified and growth can then happen at a much faster pace. I agree that the launch of ETH 2.0 will be a sell-the-news event, as these things usually are. The hype and mania that Canuck mentioned will be in full force, but the gradual increase over time stops the “Ethereum killer” narrative if they can execute well. The development of Ethereum ingrains itself too deep. Most of the layer one competitors are EVM (Ethereum virtual machine) compatible and are successful from the bridge to Ethereum.
Blockchain wars:
Canuck: Competition is great for innovation. When you look at historic economic cycles, we go through periods of malaise where seemingly no innovation happens for a decade, then something changes and we get a decade’s worth of innovation in a matter of months. I believe we are entering another innovation super-cycle. High gas fees are one barrier to entry that must be addressed to enable large-scale adoption as they make smaller transactions unworkable. 2021 saw a wide variety of smart contract blockchains start going live and begin fighting for market share to be dubbed “the Eth killer”. I think in 2022 we will begin to see a clearer picture of who the winners and losers will be. A few chains to watch, in no particular order are: AVAX, Harmony, BSC, Cardano, Polkadot, Solana & Terra.
Crier: Here is a huge talking point. The layer one battle has been raging over the past few years. Everyone is speculating on the growth of the space and the different abilities of these layer one competitors and I feel that competition is always healthy for technology development. While Ethereum cannot produce the PoS chain promptly, we are seeing a ton of growth from the competitors. I feel like this is excellent for the ecosystem and in the future, multiple layer 1’s will bridge together and work in unison. Pools functioning as a middle bridge between all layer 1 competitors will do well in the long run.
DeFi
Canuck: A few things will really make DeFi take off; approval in the USA of BTC ETF, clarity on Stablecoin regulation, and/or the emergence of CBDCs. Trillions of investment dollars are currently on the sidelines, with investors chomping at the bit to gain access to crypto returns. Fear of being on the wrong side of regulation will keep it on the sidelines until clarity is achieved. In the short term, projects will continue to offer crazy high yields to entice investor capital in this high-risk space. As regulation is adopted, I think we will see yields fall significantly, but values of core assets such as Eth and the tokens of the blockchains above that emerge from the fray will become less volatile moving forward.
Crier: I agree wholeheartedly about mainstream adoption not happening until regulation. In the United States, lobbying from large banking institutions will delay this as long as possible. The nice thing about that for current DeFi users is demand for borrowing is high and yields are fantastic. So, do yourself a favor and learn as much about DeFi as you can. Yearn Finance and Alchemix are two great platforms with numerous lending options on Ethereum.
BTC-
Canuck: I think we will move closer to a decoupling of BTC and the market as a whole. I fully expect if and when spot BTC ETFs get approved in the USA, we will see a huge spike in the market cap for BTC. More supply will leave exchanges so we will experience a supply crunch. I simultaneously expect the continued emergence of NFTs will make ETH essentially its own commodities market. I have long viewed BTC as its own asset class, completely separate from crypto. Yes, I am aware this is an oversimplification, but to me, ETH and BTC are apples and oranges and shouldn’t be compared. One will be able to move without the other.
Crier: Absolutely. BTC has its use case, but Ethereum has a much greater use case. The number of fees collected and demand for Ethereum blockspace is 99% of bitcoin now.
I believe that Bitcoin will be useful, but the largest value for Bitcoin currently is to wrap it and use it for collateral on Ethereum for lending. Many of these top-tier tokens have a solid and long-term use case and diversifying these positions will be beneficial in the long run.
Closing thoughts
Canuck: The world is changing, and it’s happening quickly. Entering 2021 many were assuming we would be following the same BTC 4 year cycle as we did from 2016-2020. I believe the rise of NFTs, institutional adoption of DeFi, and wide-scale mass retail adoption means anyone comparing 2022 to 2018 will be out to lunch. The best advice I can offer, be nimble. Stubbornly clinging to old beliefs will get you wrecked in a hurry this year.
Crier: Overall, the future of blockchain and its overarching technology will revolutionize the world in a manner similar to what the internet and email did for data transfer. Value transfer of the future will expedite many facets of our society. Over the next 10 years, we will see this happening and I can’t wait to see how this changes the global landscape and distribution of power from the few to the collective many.