Written By: GaryMa
Market TLDR
After a series of crash in crypto, there may be no more big negatives within the crypto industry, and all kinds of cycle indicators have entered the bottom interval; However, on the macro level, the Federal Reserve maintained a high interest rate and the market’s high recession expectation became the potential negative external factors. Combined with both internal and external factors, the market generally believed that there would have a high probability of the last fall to complete the bottoming. In terms of positioning, staying middle of the road may be the best practice for now.
Crypto Sector & Narrative
Ethereum: This year, with the completion of PoS transition in Ethereum and the rapid advancement of L2 networks, it is foreseeable that the ETH ecosystem will further become the focus of the industry, leaving little time for alt L1s.
● $ETH: The narrative of ETH as the ultimate sound money to achieve deflation is expected to unfold further in the next year.
● Liquid Staking ETH Derivatives: with the two big cakes of staking and MEV, especially after the completion of Shanghai upgrade next year, can realize free withdrawal, ETH staking will be more attractive.
● L2: For DApps, it seems that there is no shining protocol product on mainnet for a long time, and more attention of the community is attracted by L2, or Arb/Poygon, which is in line with a trend of ecological development. For L2, Arb/Matic is one of the brighter ones at the moment:
○ Arb is currently the most active, although most new projects are also built on GLP.
○ And Matic, with the strongest BD, all kinds of WEB2 giants are attracted to, and recently even let Trump issued NFT on it; in addition, Ploygon’s ZK road, is also worth watching. Of course, the current market value has entered the Top10 perhaps also has completed part of the expected pricing.
○ In the future, when other ace L2 majors go online, L2 competition may enter a fever pitch, so we need to closely observe the TVL flow.
Alt L1
● Cosmos AppChain Narrative: Atom 2.0 narrative is off for now, keep watching the follow-up and the narrative hotspots of the appchain.
● Solana: A bet on whether it can be reborn from the ground up?
Crypto Sector
● GameFi: The current X To Earn model seems to have been proven unsustainable, and the GameFi sector needs to explore other sustainable models. New models that have emerged include Free to Own (Limit break), PlayFi (Nor), etc. The former is to first airdrop NFT to precise target users for free in the early stage and gradually expand the community group by using this as an entry point, and the latter is to build a game economic ecosystem. The game focuses on playability, and then establishes an economic ecosystem of NFT+Token governance outside the game circle. At the same time, we can continue to observe the L2 network focusing on GameFi and its ecological development, such as IMX, Flow, etc.
● NFTfi: Can be further subdivided into trading market, lending market, etc.This sector incremental space is large enough, while most of them integrate Real Yield revenue sharing narrative, keep watching.
● Decentralized derivatives: At present, perpetuals have almost proven PMF and entered the mainstream. It will take time for options and other niche complex derivatives to mature, but the perpetual protocol narrative are now well known, and need attention to market anticipation pricing. In addition, pay close attention to the composability of derivatives, which can create innovative products.
Others
● Privacy: Messari said in it New Year outlook that in the context of public chains being open and transparent, there will be opportunities for privacy networks, including privacy-focused Layer2, such as Aztec and Polygon’s Nightfall, in the upcoming privacy wars, Messari is most bullish on Zcash and Monero, with Zcash in particular.
● cross-chain communication bridge: Axelar & LayerZero, the primary market valuation is already high.
● Web3 concept:
○ DePIN TIPIN，such as Render, FileCoin, AR, etc.
○ DeSoc, such as Seed Club, Lens, Mirror, CyberConnect, etc.
Author: @0xMavWisdom
Macro: The game of recession
As the Fed’s rate hike cycle potentially comes to an end, betting on a recession in 2023 has become a dominant view. While economic indicators such as labor, retail, and manufacturing are currently in the realm of operational normalcy, the game of recession has been played early on in the market. As a macro indicator for crypto users, the long-term structure and trend of U.S. stocks may be more meaningful than a particular data indicator landing at a particular meeting, at least on the NASDAQ K-line chart, which I think is still not too optimistic and has yet to see a bottoming trend. Back to the crypto market, most of the on-chain indicators have been consolidating at the bottom for several months, which may also indicate failure and uselessness; CEX trading volume continues to wane after all the institutional crises, poor liquidity has caused the so-called value Token to plummet, and BTC and ETH have also been in volatile oscillation for some time. From the operation, it is more likely to belong to the BTC and ETH fixed investment / build the bottom position interval, the time to plunge the cottage should keep more patience.
Track: The most promising for 2023 is the development of on-chain derivative track
The FTX crash in November boosted the shift from CEX users to DEX users, with Uniswap and GMX, the leading on-chain spot and perpetual contracts, being the biggest beneficiaries as a result. On-chain spot trading should not be new to most crypto users after the 2020 DeFi Summer and Meme seasons, but on-chain perpetual contracts are still niche. Complex clearing rules, poor interaction interface and experience, and CEX-friendly contract support tools have made it difficult for on-chain perpetual contracts to thrive. But the two big opportunities this year are that GMX has shown great combinability and a huge sub-ecology around GLP on Arbitrum, and that the FTX event has greatly undermined user confidence and will be used as a guide for any future CEX developments. These two opportunities could be the points of opportunity for on-chain perpetual contracting protocols to capture CEX contract users.
In addition to the FT on-chain perpetual contracts, NFT derivatives track may become the key to turn around liquidity. Liquidity is a hurdle that NFT can’t get around. Over the past year we have witnessed the downturn and involution of the NFT trading market, and have also experienced the panic caused by the massive liquidation of BendDAO due to illiquidity bringing bad debt and possibly even a downward spiral. Currently NFT trading volume and core liquidity is firmly in the blue chips, but it is almost impossible for retail investors to participate in the blue chips, only to participate in the imitation plate or hope to dig the next blue chip. Whales, large investors and retail investors in the participation of the NFT game are completely unequal, whales can manipulate the market as much as they want, retail investors lose money and leave the market is a matter of time. Just as futures trading on FT exchanges is far more active than spot, the emergence of NFT Perp in the NFT space is almost inevitable. Although I am not quite sure what the future of derivatives such as NFT futures, may be combined with fragmentation, may do floor price perpetuity, etc., but NFT Perp must bring the opportunity and ability of retail investors to participate in a diversified NFT underlying market. The first problem to be solved by NFT Perp is the prophecy machine pricing problem, with the NFT trading market inward and mutual aggregation, as well as the emergence of new platforms, the future for a certain NFT floor price may be different in different markets, how to effectively measure and balance the price of NFT assets is the first problem to be overcome by NFT Perp.
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