Key Takeaways

• Bear markets open the opportunity to accumulate, DCA wherever there is an opportunity
• L1 will continue into the future, look at projects with long runways and find various ways to consistently develop their ecosystem.
• Some adoption obstacles crypto still faces are (1)Seed phrase management (2)UI/UX interfaces (3) inflationary token supplies without value accrual as a block for DeFi to grow
• Fully collateral-backed stablecoins will stay dominant, Algo stables could still function in fractionally reserved banks
• Today is the time to be opportunistic and learn, and become your own venture capital.

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[Jack’s views are his own, and do not constitute financial advice or reflect the views of any companies associated with, or mentioned by him]

Introduction

Last week we hosted Twitter spaces with Jack Niewold and talked about what is next for Crypto. Jack is the CEO and founder of the research publication Crypto Pragmatist and has an undergraduate background in traditional finance. His journey in Crypto Pragmatist started after working at a digital marketing agency startup as he wanted to curate crypto content for retail investors through his newsletter and research resources.

Today we delve a little deeper into Jack’s view on the current crypto market and explore areas in crypto which may be relevant to you.

Is the bottom near?

“Anyone who really tries to play macro markets is a bit of a liar”. And I personally agree with Jack, if it was easy to predict, no one would be fearful and price action will likely be undisturbed. I believe actions taken during uncertain times are more crucial in determining how well you do in the next cycle.

“1K Ethereum and 20K Bitcoin is kind of a poetic bottom”. The 2 major assets in crypto, which comprised 61% of the total crypto market cap, reveal certain truths in the correlation with macro conditions of the world.

One thing is for sure, “we are definitely in the accumulation range”, and any opening to deploy capital and dollar cost averaging could reflect immense rewards in the next bull cycle.

Yet, the biggest signal indicating a draught in crypto has not been hit yet. Inactivity and boredom. There are still going to be several million who are going to stick around, perhaps those are the bottom signals we will not need to tick off anymore.

“I am optimistic that we have bottomed, but we’ll see how that prediction plays out”

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First, it was DeFi, then NFTs, what’s next?

If you put DeFi beside TradFi on paper, you’ll realize what an incredible innovation DeFi brings to the world of finance. Bringing permissionless lending along with new primitives is nothing but exciting.

But what is next? As humans, the trend is us chasing the latest and shiniest things, almost like we are trapped in a loop. We’ve seen this with DeFi and NFTs onboard massive new capital into crypto but what lies ahead may be something bigger and (don’t quote me on this) life-changing.

While potential candidate GameFi, faces sustainability roadblocks with its tokenomics and gameplay, the evolving real-world use cases for crypto and NFT lending may also instigate exciting innovation that changes the game for the space.

Taking the approach of a more concentrated portfolio might prove to be a victor instead of chasing short-term narrative pumps. This would mean picking category winners within each sector of crypto who does a good job in accruing value for investors.

“It is silly to be bullish in November and not be bullish now, that is the wrong way to approach the market cycle in general”

We all do not know how these digital assets would do in the short term, but making investments in assets which have a proven record may be the next alpha. Take another step further by investing in assets within the ecosystem which has a higher probability of beating the benchmark.

Adoption has gone slow

There are a lot of issues, and people tend to underestimate how big some of these issues are. Something as simple as seed phrase management is a huge problem to tackle, how many people do you think are both tech-savvy enough and you know competent enough to keep their private keys safe and not click on wrong phishing links?

If crypto is here to create new financial infrastructure, yet people are still getting fished of millions of dollars, how do you think we are going to onboard the mainstream? The backlash of this makes it even harder for DeFi investments with the inflating supplies and no real value accrual.

Layer2 Will Be A Game Changer?

Will layer2s be something to watch out for? Maybe, maybe not. At the beginning of 2022, this narrative was nothing but bullish sentiments but might be falling short midway through the year. ZK roll-ups might be one to look out for but there is still the issue of value accrual.

Optimistic VS. Zero-Knowledge (ZK) Rollups Explained: What Are They And How Do They Work?

Existing on Arbitrium does not necessarily reward the community as much as existing on other layer1s who post a threat as “Ethereum Killers”. A majority of layer2’s value will be accrued back to Ethereum, leaving them a disconnected position were contributing to chains like Avalanche and Solana would be far more beneficial.

Investors go where the value is, and by doing so, they will be “part of the tide which raises all boats” as seen with the light of Avalanche and Solana.

The entire market is down, and it may be a wiser choice to look at L1s which give long-term value compared to the average L1/L2.

Do we need more regulation in crypto?

We need time. As with every industry you heard of in the past, there is the need for time and space to grow in maturity. Every successful industry has been “battle-tested” but emerged into a much more established industry thereafter.

“Time will create a nice symbiosis between regulators and the crypto industry”

It is one thing to be early, but it is also another to emerge from the turmoil with better technology and innovation to spur expansion in the space. But apart from time, some common sense regulations can be enacted for example, in the realm of protection of consumer privacy.

[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]

Featured Image Credit: Chain Debrief

Also Read: All You Need To Know About GMX – A Deep Dive Into The Next Crypto Derivatives Leader