Crypto research and analytics platform Messari has rolled out its report for the year 2021 covering important aspects of the blockchain and cryptocurrency space.
The cryptocurrency space is arguably one of the most innovative and fast-growing techs of the 21st century. Interestingly, cryptocurrency research firm Messari has covered major happenings and events that took place in the crypto space. In its “Crypto Theses for 2021” report, Messari dived into important aspects of the crypto space like NFTs, DeFi, CeFi, crypto exchanges, stablecoins, etc.
This article in particular reviews the important aspects of investing in the crypto space. What compels the major crop of crypto investors? And are they more interested in the fundamentals of a particular project or are they more moved by compelling narratives? Besides, Messari, in its report, is of the opinion that crypto investors have always been about buying into comparing narratives as compared to real fundamental values. Also, adding that this narrative is “[…] unlikely to change any time soon.”
This article covers Messari’s top ten “Compelling Narratives” or trends with huge potentials to fuel the entire crypto space to new heights.
First on the list, according to Messari, is;
Blue Chips – Real | Relative Value
A major pointer to this is the ICO craze of 2017. Where investors were obsessed with the presumed value of a lot of upcoming cryptos. Most of which turned out to be “shitcoins” with zero real value. In general, most cryptos are viewed as one of the following, namely:
- Monies (mostly Proof-of-Work currencies, e.g., Bitcoin)
- Smart contract tokens. A good example of this is Ethereum and a host of other cryptos.
- Crypto dollars (stablecoins, e.g., USDT, USDC)
- DeFi tokens
- Pegged and Synthetic assets, and
- Lastly, Web 3.0 or NFT assets.
A good way to test real versus relative value is to check the market dominance of a token. It could also help interested investors monitor systemic risk. For now, Bitcoin, when compared to other PoW cryptos, has an estimated 90% dominance. The same goes for Ethereum with an estimated 70% dominance when compared to other smart contract tokens. For stablecoins, USDT still holds about 75% of the dollar-pegged market.
Bitcoin or Digital Gold (BTC)
The onslaught of the coronavirus and the subsequent lockdown helped to expose the huge gaps in the global finance sectors. According to reports, the rumored belief of the state having unlimited deficit spending capacity was not only confirmed but also normalized. This policy, to a large extent, still fuels the drive for Bitcoin and other digital assets.
Interestingly, investors are showing more interest in Bitcoin than in gold. Paul Tudor Jones referred to Bitcoin as “the fastest horse.” Chamath Palihapitiya is also of the opinion that “everyone should have 1% of their assets in bitcoin.” JP Morgan also disclosed that it “may be looking at bitcoin as an alternative to gold.”
Simply put, institutional interest in Bitcoin is on the rise.
Ethereum (ETH) – The One Stop Shop
For now, a myriad of financial services and dApps are all based on the Ethereum chain. While Bitcoin might still boast of the best macro positioning in the crypto space, Ethereum is definitely standing as the most important crypto platform available. It has the potential to power a completely new, resilient, and truly decentralized financial system.
Decentralized Finance (DeFi)
2020 was dubbed the year of DeFi. This narrative has, however, shown no sign of slowing down as the DeFi space continues to rise to new heights. Decentralized Finance (DeFi) has laid the building blocks for a completely new and innovative way to carry out financial transactions like lending, payments, insurance, etc. DeFi is definitely here to say. As Messari points out in its report, “DeFi is justifiably hyped.”
Stablecoins are literally eating up the crypto world. Besides, stablecoin usage has grown exponentially in 2021. According to Messari, stablecoins currently have an estimated $20 billion supply. Facilitating transactions worth billions of dollars across the globe. Interestingly, most stablecoins are currently still backed by U.S. dollars.
Next on the List Is Crypto Credit – Locking In Value
The crypto credit space also grew exponentially over the last year. Institutional grade lending platforms like BitGo and DeFi lending platforms like Aave Maker, Compound, etc. have helped to increase liquidity in the crypto space. While also promoting stability and reducing volatility in the crypto space.
Synthetics – Accessibility Is the Goal
Wrapped assets, the Bitcoin ETF, Digital Stonks, DAOs, and all forms of programmable financial assets available today will one day be connected to the crypto space. Synthetic assets showcase how this connection will function. Providing the world with a reliable demo of what the future holds for the financial asset space.
Infrastructure – Crypto Exchanges Versus Unbundling
Centralized crypto exchanges are currently at the helm of affairs in the blockchain and crypto space. This, however, begs the question of how truly “decentralized” the crypto space is.
This narrative is, however, changing as unbundling is beginning to attract the attention of crypto enthusiasts. This is made evident in the movement of funds from centralized exchanges like Binance, BitMEX, etc.
Web3 and NFTs
According to Messari, Web3 is gaining more traction and also attracting global attention. Web3-based platforms have the potential to open up a digitally new world of digital arts, gaming NFTs, etc. from the VR metaverse.
Also, Bitcoin and most smart contract platforms are custom-made for decentralized finance. However, Web3 and NFTs are more equipped to usher in a more open and decentralized internet.
Lastly, Exiting to the Network State
The cryptocurrency space has moved from a state of complete and willful disregard and ignoring by regulators and countries to open dislike. Now, there is a huge interest in the crypto space from countries, huge corporations, regulators, etc. All looking for a way to gain control. According to Messari, most of these corporations, regulators, etc. have begun to work the system from the inside of the U.S. and other major locations of power. While this is ongoing, crypto enthusiasts are already “[…] thinking about the ultimate exit.” That is a move to “[…] a crypto-inspired nation-state.”
Messari, in its report, is convinced that, for now, the crypto space will continually be fueled more by compelling narrative or trends than by its real value.
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