October Crypto Market Outlook: Chain Abstraction, Layer 1 Wars, AI, Stablecoin Competition, and DeFi

Author: Sleeping in the Rain

As mentioned in the previous summary, this October outlook will be very concise, focusing on 3-5 tokens that I personally want to participate in. I hope everyone will like this format (previously it was too scattered, and the information efficiency was not high).

TLDR: $UNI $SOL Berachain $TAO $WELL $ENA

Market speculation generally falls into two modes: one is artificial narratives, which typically push a leading token to perform independently, such as $SUI. The other is the brewing, emergence, and explosion of innovation. This innovation could be a fun Ponzi scheme or a narrative that largely meets market demand, such as $AXS (this round's memecoin can be considered an atypical case).

Generally speaking, the first wave of narratives often provides more opportunities for ordinary people. Such major innovations often emerge in scenarios of macro liquidity overflow—where there is a higher demand for the profit effect & capital efficiency, driving the occurrence of innovation.

A significant issue this round is that "there hasn't been a narrative like the last round that can guide liquidity in and out," and liquidity is key to asset pricing. If narratives cannot guide liquidity, asset speculation will be difficult to ignite. Everyone is speculating on memes, and attention is on memes; as soon as there is some wind, related memes will quickly emerge. However, meme narratives can also easily lead to investor fatigue, ultimately resulting in a mess.

So, is there still an opportunity in the crypto space?

I believe there is, at least there are several main narratives developing in parallel.

(My thoughts are also based on the logic of metagame; a detailed explanation can be found in my previous tweet https://x.com/0xSleepinRain/status/1835966233390494162)

Intent Abstraction & Chain Abstraction

The ultimate goal of this narrative is to "allow users and liquidity to enter and participate in Crypto in a low-threshold and seamless manner," which seems to have a bright outlook. However, this is not a Ponzi scheme, and it is unlikely to create mass wealth opportunities.

Essentially, this speculation is still based on the idea that "crypto users believe this narrative can bring them new bag holders." But whether it can ultimately bring a large number of real users and liquidity to the crypto space remains a question mark.

The core catalyst of this narrative lies in the launch of $UNI v4.

The launch of Uniswap v4 serves as a catalyst to direct market attention toward this narrative. In the future, as this narrative develops, the frontend may become the most favored speculation target, while "infrastructure layer tokens" like Uniswap v4 and "liquidity interaction layer tokens" will follow. However, initially, the biggest opportunity should still be $UNI. Similarly, tokens like $COW and $1INCH should also have corresponding opportunities.

Layer1 Competition

In the current market, Layer1 competition is the most mainstream narrative, without exception.

In this cycle, the main line of market speculation is Solana, and occasionally other Layer1s will pop up to compete with Solana.

For example, the previous $AVAX, Avalanche, pushed its token price growth through "meme speculation" and "official announcements and PR with top companies." The current $SUI follows a similar logic; they attract market attention and enhance liquidity stickiness through "OTC trading to get English CTs to shout (doubtful, uncertain) to artificially create a new narrative," "meme speculation (there are some good wealth effects on Sui now)," and "using $SUI tokens to incentivize liquidity (similar to Arbitrum)." It is worth mentioning that the DeFi yields on Sui are still quite good.

Now many Layer1s are starting to try using memecoins to attract market attention and liquidity, but the results have been minimal (like BSC).

Therefore, I believe the Layer1 competition is likely a short-term event. These Layer1s are creating buzz, and short-term participation can definitely yield profits—because your actions align with the project's needs.

Another Layer1 strategy is Fantom's rebranding—creating a better-performing chain for brand upgrades. If a blockchain initially has no users, it can use the expectation of future airdrops as an incentive. Essentially, it is similar to the previous Layer2 strategies, lacking novelty, but effective before the airdrop.

As for Layer1s I am optimistic about, my list includes: Solana $SOL and Berachain.

The reason for being optimistic about Solana is simple; just look at which large-cap memecoins have more on Binance. Memecoins are a trump card for a Layer1.

Berachain's PoL is the only major innovation in the Layer1 consensus mechanism this cycle, introducing dynamic games among users, nodes, and projects. At the same time, they are actively supporting ecological projects in a transparent, decentralized, and fair manner. I am deeply involved in Berachain's ecosystem, so I am bullish on it; DYOR.

In addition to the basic Layer1 competition, I also like the modular narrative, which has been a hot topic this cycle. Just look at the chart below.

However, the modular targets are somewhat complicated. I initially wanted to be bullish on $EIGEN, but unexpectedly, $EIGEN had a hacking incident that caused a significant reaction in the community. Overall, I still have faith in $EIGEN and believe it could siphon off other modular projects, potentially showing price performance at some point in Q4 (for it to really take off, it might need to wait for the next cycle).

AI

The AI narrative needs no further elaboration; just look at OpenAI's recent operations. Previously, AI tokens were also correlated with Nvidia stocks. The best-performing token in the Crypto AI space recently is $TAO; if you have to choose a target, pick the strongest. The speculation on AI tokens is unrelated to fundamentals; we should focus on the changes in the AI industry. (Chinese TAO $NMT can also be noted, but its speculation is a follow-up to $TAO.) The keywords are "price performance during market pullbacks" and "timing."

This type of speculation will continue until the AI bubble bursts. Before it bursts, all we can do is enjoy the bubble.

Stablecoin Competition and DeFi

The competition in the stablecoin space is becoming increasingly fierce, with entries from Paypal, Binance turning to support FDUSD, BlackRock actively entering the stablecoin space, and Coinbase with USDC and Euro stablecoins on Base.

In this intense competition, the main tokens available for speculation are currently Sky (formerly MakerDAO), $LQTY, and $ENA.

Sky is the oldest decentralized stablecoin project and is currently advancing its governance token and native stablecoin transformation. Clearly, Sky aims to reduce the impact of interest rate cuts on its project products, transitioning from "using RWA yield incentives for adoption" to "using token incentives for adoption." In the future, Sky will open new avenues through the issuance of SubDAOs to maintain the adoption scale of its stablecoin. Wealth opportunities will definitely arise, but the community is currently not buying into Sky's recent operations. I have also seen some negative comments from the community.

Additionally, as Teacher Shenfish mentioned, interest rate cuts will definitely enhance DeFi's competitiveness. The DeFi space, including Ethereum and Solana's DeFi, has opportunities. In short, whichever Layer1 has higher on-chain activity and TVL, the DeFi project tokens on that chain will be more favored. In the future, the demand for high yields may also spawn new projects. But that is a matter for a bull market; we will take it step by step.

Here, I want to specifically mention Ethereum Layer2 Basechain. Base has performed well recently, with TVL increasing significantly in September, and the growth of fundamentals will bring new wealth opportunities. We need to clarify Coinbase's motivation for developing Basechain: Base can expand Coinbase's influence in the crypto industry and also bring sorting revenue to Coinbase. If Base does well, Coinbase will benefit, so Coinbase will have every incentive to promote the continuous growth of the Base ecosystem (the previous pump of $AERO follows this logic).

What is Coinbase currently promoting?

cbBTC.

Moonwell and Aerodrome will be the main venues for the growth of cbBTC. Currently, Moonwell has already launched cbBTC liquidity mining subsidies. Pumping $WELL could drive more cbBTC adoption (personal opinion).

$LQTY has expectations for v2 (November) and is also a community-recognized decentralized stablecoin. Sky's transformation is inherently beneficial for $LQTY, which is one reason for its recent strong price increase (in my personal view). The impact of industry changes and the impending realization of expectations may affect $LQTY's future price performance.

The competitiveness of $ENA lies in: "the new type of stablecoin emerging this cycle" and "collaborating with BlackRock to launch a new UStb stablecoin." The impact of this collaboration is much greater than those projects participating in BlackRock's Buidl fund; deep cooperation is the best catalyst. The recent airdrop and unlocking of $ENA should provide us with an entry opportunity.

Other tokens I am optimistic about include $PENDLE and $BANANA. $PENDLE has been discussed multiple times before, recently pushing BTCFi and has v3 expectations. $BANANA can refer to @BensonTWN boss's excellent article: https://x.com/BensonTWN/status/1839664439093813397

Regarding games, I will consider $PIXEL, $PRIME, and $PIRATE. I personally believe we cannot view these projects solely from the gaming sector perspective; we need to look at the corresponding catalysts for these projects individually.

The BTC ecosystem still needs further observation (the core demand is still there; details can be found in my metagame article). Currently, we are still in a phase where the market believes miners need on-chain activity to increase income, hoping that new projects will emerge in the BTC ecosystem. However, the problem is that the surge in on-chain transaction fees is likely to be a short-term phenomenon; miners may like it, but the market cannot sustain buying in.

Regarding the memecoin narrative, I personally believe mainstream memecoins will experience a significant surge after liquidity returns, with $WIF and $PEPE having the greatest opportunities. Memecoins are unpredictable; we can only go with the flow. Overall, I am still optimistic about the memecoin sector and believe that at least two memecoins with a market cap of 10B+ will emerge, just like the last round's $DOGE and $SHIB.

Finally, let's take a look at what will happen in October:

• $JEWEL Colosseum PvP on Metis: I don't know what sparks these two projects will create, but $METIS is indeed performing well;

• $XRP ETF and SEC: I think there is a chance for a decent rebound;

• $STX Nakamoto Upgrade: This is a positive for $STX, and there will likely be good wealth opportunities on Stacks;

• $DUSK Mainnet Launch: I won't pay too much attention to this sector for now;

• $AVAX Summit (16-18 Oct)

• $WLD "New World" with Sam Altman: also related to the AI industry;

• $RENDER Migration Rewards End

• $TIA Unlock of $1.05B

• JPY Interest Rate Decision

For details, refer to this article: https://x.com/breadnbutter247/status/1840435197893857689