Inventory of recent cryptocurrency hot narratives: ZK, LSD, Chinese Coin.

Written by: Miles Deutscher

Compiled by: Shenchao TechFlow

In this article by crypto researcher Miles Deutscher, the hottest trends at the moment are reviewed, including ZK, LSD, derivatives DEX, real yield, decentralized stablecoins, AI, GambleFi, and Chinese Coin (the following rankings are in no particular order).

1. ZK

Before the launch of zkSync and StarkNet tokens, as well as the upcoming Polygon zkEVM, ZK-related protocols have been performing strongly.

ZK-rollups help alleviate congestion by "rolling" transactions off-chain for execution, and it is undeniable that ZK is the future of Ethereum scaling.

2. LSDs

Liquid staking derivatives allow you to maximize capital efficiency while earning yields on crypto assets like $ETH. This trend is currently driven by two catalysts:

1. The upcoming Shanghai upgrade;

2. The SEC's regulatory crackdown on centralized staking.

With the Shanghai upgrade approaching, LSDs like $LDO, $FXS, and $RPL are gaining attention. The Shanghai upgrade will be a major driver of the total amount of $ETH staked, as it will ultimately allow for the redemption of staked ETH from the Beacon chain.

Additionally, in terms of regulation, it seems to me that the SEC is inclined to crack down on centralized staking services (like Kraken), which is a huge catalyst for adopting decentralized staking.

3. Derivatives DEXs

This has been one of the strongest sectors over the past six months.

$GMX is leading the way, followed by competitors like $GNS, and now newer iterative products like VELA have emerged. However, I believe there are still opportunities in this space.

In the long term, other DEX models, such as AMM and order books, are likely to play a more significant role in this area. But at least in the medium to short term, oracle-based DEXs like $GMX have a clear user experience advantage.

I have been looking for new DEXs because I believe this is the biggest vertical growth point in DeFi over the next few years.

4. Real Yield

There has been a significant and much-needed shift in how developers and investors view DeFi yield models.

Whenever you make a DeFi investment, ask yourself: where does the yield come from? If the answer is "from protocol fees," then you are on the right track. But be cautious, as some projects claiming to offer "real yield" employ unscrupulous mechanisms to manipulate data.

5. Decentralized Stablecoins

We have recently seen the SEC crack down on BUSD, and the regulatory landscape surrounding other centralized stablecoins like USDC and USDT remains unclear. The demand for truly decentralized stablecoins is evident.

There are already some trusted players in this space, including CRV, FXS, and the upcoming GHO from AAVE. Protocols that master decentralized stablecoins and effectively integrate them will emerge as the ultimate winners.

6. AI

After ChatGPT became the fastest application in history to reach 1 million users, companies like Microsoft and Google quickly invested in the AI space. This led to an explosive growth of AI-related altcoins due to rampant speculation.

However, an important point to recognize here is that both AI and cryptocurrency are still very early, and recent price movements have largely been driven by speculation rather than fundamentals.

This is an extremely "rumor"-based narrative. Therefore, despite the bubble, shorting becomes very difficult as news tends to have a short-term positive impact on prices.

It is worth noting that strong trends often perform well during bull markets. Thus, if Bitcoin shows bullish price action, it becomes hard to ignore explosive narratives like AI.

7. GambleFi

The theory behind decentralized casinos is extremely similar to DEXs: people love to gamble and need a place to do so on-chain.

We have not yet seen high-quality gambling projects, but I believe they will come.

8. Chinese Coin

The following factors have recently contributed to the surge of many of these tokens:

• China's monetary stimulus;

• Legalization of crypto in Hong Kong;

• Increase in open contracts in Asia.

Here is a list of "Chinese tokens" that I am keeping an eye on. Note: This is purely from a trading perspective, and any entry/exit will align with technical analysis.

The fundamentals of many of these tokens are questionable, and many do not fit my long-term position framework (screenshot taken on February 18).