Seven Emerging Trends in Cryptocurrency

Author: Ignas

Compiled by: Shan Ouba, Golden Finance

I feel that something big is about to happen in the cryptocurrency market, and I'm very bullish. While I'm not sure exactly what will happen, the market is undergoing significant changes.

Interest rates are starting to decline, ETH ETFs have been approved, BTC ETF inflows are increasing, and Stripe has launched stablecoin payments…

Just like an army positioning itself before a decisive battle, major crypto companies and traditional financial institutions are preparing for the upcoming bull market.

More about this "feeling" can be found below:

Meanwhile, the internal machinery of cryptocurrency has not stopped operating. Yes, prices are falling… but the market is always changing, with new narratives and trends constantly emerging, influencing the market as their impact grows.

Just as MakerDAO was launched before the term "DeFi" appeared, there are currently some new trends in the market that are not yet large enough to form a coherent story.

Here are 7 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 label, and restart with a new chart, that sounds much more exciting!

Fantom → Sonic

This is 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 brand new visual identity.

More importantly, the new $S token "ensures compatibility and migration from $FTM to $S at a ratio of 1:1."

This is a clever move because the Sonic migration generates more market hype than simply calling it "Fantom 2.0." It allows Fantom to shed its multichain bridging issues and start anew.

Connext → Everclear

Similarly, Connext is being renamed Everclear.

Rebranding in cryptocurrency is not new, but the emerging trend here is to repackage significant 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 transitioning from Connext to Everclear, the team conveys that this is not just a simple renaming, but a significant advancement in technology.

Connext is transforming from simple bridging infrastructure to the first settlement layer. It acts like a chain built into the Arbitrum Orbit rollup (via Gelato RaaS) and connects to other chains using Hyperlane with Eigenlayer ISM.

Connecting any chain and any asset paves the way for a modular cryptocurrency future.

The NEXT token rose about 38% after this news (though not sustained). Fantom's $FTM is once again booming, and its recognition on X has also increased.

I expect more protocols to rebrand to align with market trends and technological advancements in 2024.

For example, IOTA is rebranding as an L2 for real assets.

Additionally, mergers may become more common, such as Fetch.ai, Ocean Protocol, and SingularityNet merging into a single $ASI token, becoming a new crypto super AI project.

The key is to focus on the price performance of new brand projects and new labels (if launched). While it's still too early to say, the initial price performance of FTM and NEXT, as well as FET, AGIX, and OCEAN, is optimistic. If the market starts to rise again…

Are there more repackaging/renaming efforts on the way?

2. Crypto-Friendly Regulation

Regulation has always been a big issue, especially in the U.S., where the SEC has targeted major players like Coinbase, Kraken, and Uniswap. Although Ripple and Grayscale have achieved some victories and Bitcoin ETFs have been approved, the regulatory environment remains hostile, focusing more on legitimate projects rather than outright scams.

But things are changing: Trump has verbally supported cryptocurrencies, forcing the Democrats to alter their anti-crypto strategy. Biden has accepted cryptocurrency donations. Now the SEC has dropped its lawsuit against Consensys, effectively acknowledging that ETH is a commodity.

Now, the short-term future of cryptocurrency will depend on the elections. I like Felix's analysis in the article below.

Here are the main points.

If Gensler is removed or his power is curtailed by the courts and Congress, crypto assets are expected to surge by over 30%, followed by a sustained bull market. If he remains in power, a prolonged downturn is expected, benefiting law firms while harming cryptocurrencies and taxpayers, with only Bitcoin and meme coins relatively unaffected.

Clear regulation could bring about the largest bull market 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 rather than just hype, leading to higher quality developments.
• Clear success metrics: Valuations will rely more on actual product-market fit and revenue, reducing speculation and highlighting fundamentally strong tokens.
• Easier financing environment: Stronger fundamentals will make it easier for digital assets to secure financing, reducing the cyclical ups and downs of altcoins.
• A thriving M&A market: Well-funded projects may acquire capital-strapped but valuable DeFi protocols, driving innovation and tighter adoption, with some layer-one blockchains transforming acquisitions into public goods to increase network value.

3. BTC Arbitrage: BTC ETF + BTC Shorts

Leverage always finds new ways to enter the system. Whether it's Grayscale's "widowmaker trade" or CeFi (Celsius, Blockfi, etc.) with unsecured loans.

Each cycle has different mechanisms. But where is leverage hiding now?

The obvious target is Ethena's risk-neutral strategy. As long as the funding rate is positive, everything is fine, but what happens if/when the funding rate turns negative and USDe positions need to be closed?

Another target is LRT's remortgaging.

But another target is our beloved BTC ETF buyers.

Spot Bitcoin ETFs have seen inflows for 19 consecutive days, with 5.2% of circulating BTC held by ETFs (though this record has now been broken).

So why hasn't BTC skyrocketed?

It turns out that hedge funds are shorting Bitcoin through CME futures at record levels.

A possible explanation is that hedge funds are buying spot and shorting BTC, executing a 15%-20% neutral strategy.

The strategy is similar to Ethena.

What happens when the funding rate turns negative (as gamblers stop being bullish and close long positions)?

Will Ethena (retail-led) and spot BTC + shorting CME futures (institution-led) lead to a significant crash when these positions need to be unwound?

Worrisome. But perhaps there's a simpler answer: institutions are arbitraging the positive price between different BTC spot and BTC futures (currently at 2.3%).

In any case, these new dynamics brought by spot ETFs need to be closely monitored, as so-called "risk-free" arbitrage often turns out to be "more risky" than initially imagined.

4. Gamification of Points Farming

Our addiction to points is becoming more severe, but we don't know how to stop.

Protocols need points to attract an initial user base. They help boost adoption statistics and secure financing at higher valuations.

We're tired of points, but we haven't found a better alternative.

Instead, I've noticed a trend of gamifying points, adding extra elements to make the tedious points farming strategies more enjoyable.

Sanctum introduced Wonderland, where you can collect pets and gain experience points (EXP) to level them up. As a community, you need to unite to complete tasks.

This isn't much different from other points programs, as your airdrop largely depends on the SOL deposited, but… the community loves it!

Sanctum's first season activity, lasting only a month, also boosted morale. I hope to see 0 to 1 innovations in points farming, but even with points fatigue, our addiction to them is too strong.

Instead, I expect more gamification attempts to bring some fun to farming.

5. Anti-Trend of Low Circulation, High FDV (Fully Diluted Valuation) Issuances

Everyone hates low circulation, high FDV issuances. Except for VCs and teams, who can sell at higher prices. Oh, and airdrop hunters, who get more tokens in airdrops.

But what about retail investors? No. Of the 31 tokens recently listed on Binance, 26 are in the red.

Binance used to be the place to buy hot new tokens, but it isn't anymore. Listings on centralized exchanges are sell news and cash-out events.

It's no surprise that Binance recently announced it would list tokens at moderate valuations, prioritizing community rewards over internal allocations.

We haven't seen words translate into action yet, but this would be a step in the right direction.

VCs are taking on the responsibilities they should have. Large VC investments, once seen as a positive signal, are now viewed by the crypto community as value extraction. The concern is that VCs aim to profit by selling their large allocations, which they acquired at minimal cost.

Project teams must also take action to avoid perpetually declining price charts.

Protocols are experimenting more. For example, Ekubo on Starknet allocates 1/3 of 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 somewhat like a community token sale, similar to past ICOs.

Similarly, Nostra on Starknet launched NSTR with 100% FDV, with 25% of the allocation distributed via airdrop and 12% sold during liquidity launch pool activities. They call it the fairest release in DeFi, but it raises concerns about leading to low circulation tokens (teams and VCs cashing out early). Nostra states that team and VC tokens will be marked on-chain.

If you see them selling, it’s best for you to sell too.

We also conducted 100% airdrop experiments, such as Friendtech and Bitcoin Runes, most of which were minted for free by the community (though Runes also allowed pre-mining).

What are the results? Uncertain. But there are hopeful areas.

Keep an eye on new token issuance models—a new type of successful issuance could become a new meta trend in this bull market. If you discover one, please share in the comments.

6. McKinsey Enters DeFi

DeFi allows for self-sovereignty, enabling you to own and use your assets regardless of borders.

But DeFi has become very complex! There are many strategies available, and their complexity increases as we try to squeeze every percentage of yield.

Moreover, governing these increasingly complex protocols requires specific knowledge.

As a result, consulting firms similar to traditional finance have emerged to help protocols handle security, governance, and optimization issues. The most notable example is Gauntlet, whose clients pay millions annually.

More importantly, DeFi protocols are adapting, allowing DeFi's McKinsey to manage user assets and/or external risk management.

Morpho Blue's permissionless lending allows DeFi's McKinsey to create markets with any asset and risk parameters without relying on governance.

7. Web2-like DeFi Onboarding

This is something I really like.

While Friendtech may have its issues, it has successfully popularized Privy, allowing users to create and manage wallets using Web2 accounts.

During the NFT craze, I helped a friend buy an NFT on OpenSea. Teaching how to use Metamask was truly a painful experience.

But now, you can create a wallet on Opensea using email and a 2FA code with Privy. Seriously, go try it. It took me a minute.

Fantasy Top is leveraging Privy and other user-friendly 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, supports batch transactions, and allows wallet creation using Web2 tools.

Now, complex user onboarding is no longer an excuse for the lack of cryptocurrency adoption. We just need unique consumer applications.