CryptoQuant CEO interprets the current trend of the encryption market and the future of the industry

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Editor of this issue | Colin Wu

CryptoQuant is one of the most used data websites in the encryption world, how their CEO Ki Young Ju can see the current trend and the future of the industry from the data.

0: Please invite Ki Young Ju (hereafter referred to as Ki) to introduce CryptoQuant and say a few words to the Chinese community.

Ki: CryptoQuant provides retail investors with better investment visibility by providing data services. Most crypto investors experience anxiety when investing in cryptocurrencies, so they are trying to overcome the hurdle of data-driven investing. Without data, crypto investing would be gambling. This is where CryptoQuant comes in. We started as a data provider, and now our mission is to serve all investors in the cryptocurrency market by providing visual data and community-driven insights for all.

1: GBTC has had a negative premium for a long time, what do you think of this situation? How long will the negative premium last?

Ki: I think the main reason for this negative premium is that people think that Bitcoin ETF will be approved soon. If the ETF is approved, people will no longer need a bitcoin trust product.

This scenario could mean that most institutions believe a Bitcoin ETF will be approved within a year. In addition, the way institutions buy Bitcoin is changing from indirect purchases to direct purchases such as Tesla and MicroStrategy.

Instead of using Grayscale products to buy Bitcoin, they use Coinbase Prime, OTC counters, Custody products for direct purchases. Therefore, you probably don't want to interpret these data as "decreasing interest in institutional demand". Possibly, but not necessarily.

2: The current Bitcoin price deviates greatly from the price predicted by the S2F model. Is the S2F model still trustworthy? What do you think of the predicted prices provided by the S2F model.

Ki: I think the S2F model is flawed in terms of requirements. The model is based on scarcity, and scarcity is about the supply side. This is why the current BTC price is very different from the price predicted by the S2F model.

For example, all BTC reserves across all exchanges have a supply and demand side factor. If people want to sell BTC, they send it to an exchange. If not, they (mainly whales) will exit from exchanges to custodial wallets.

If Plan B added some variables to look at demand side factors, I think the model could be more accurate.

3: EIP-1559 will be launched today, what can it bring to Ethereum and even the entire cryptocurrency market?

Ki: I believe EIP-1559 will be a game changer. Reducing fees can solve blockchain’s trilemma, improving scalability, security, and decentralization. Currently, all DeFi services, NFT marketplaces, blockchain games are running with unreasonably high fees.

If we can use these services with very low fees, the number of transactions will increase, and network activity will generally increase the value of the blockchain, which will increase the price in the long run. But it cannot be used to determine the short-term price trend.

4: There is such a voice in the market that the rise of Ethereum and other blue-chip DeFi will break away from the shackles of Bitcoin and lead the market to a new peak. Do you think this is a possibility? Is there a chance, if any, for the rest of the year?

Ki: I think that in the long run, Ethereum may surpass the market cap of Bitcoin, but not this year. This bull run is being driven by the narrative of “institutional entry into crypto.” This trend may continue into next year. Ethereum cannot flip Bitcoin's market cap without institutional demand.

I met executives at Goldman Sachs, Fidelity, and other large institutional asset managers in Miami a few weeks ago, and they said they were still struggling to explain to their bosses what Ethereum/DeFi was. I think it will take a few years for Ethereum/DeFi projects to build confidence in institutional adoption.

5: Metaverse is very popular recently, can you share your opinion?

Ki: Nowadays, every term, such as NFT, AR/VR, game, etc., is called Metaverse. I think the metaverse is just NFTs and play-to-earn games. Both certainly have a lot of upside potential in a few years. But building a metaverse is likely to take at least a few years.

6: It is a cliché, a question that everyone is most concerned about, do you think it has entered a bear market? Is there still a chance to set new highs in the second half of the year? How to judge the price trend in the second half of the year?

Ki: Great question. I think the market is still in a bearish trend, with exchange flow indicators like the exchange whale ratio showing that whales are still depositing large amounts of BTC to exchanges.

If the whale ratio is between 85%-90%, the market may be bearish or sideways.

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Featured Audience Questions

1: What do you think is the future growth space of the NFT market?

Ki: I think there are three factors driving the NFT market: 1. Metaverse (+games); 2. Buying art/souvenirs; 3. Money laundering through buying NFTs.

The first point, there is a lot of upside potential, but it will take a few years to build the entire metaverse and launch more successful games;

The second point, works well now, if we can penetrate the traditional art market like Sotheby's (auction house), it will be huge;

Third, I believe some of the large purchases of NFTs are for money laundering. This will be the starting point for a larger digital art market.

Overall, I believe the NFT market will be huge in a few years.

2: Gamefi has become popular, but there is no killer game in this field yet. Do you think the follow-up killer games will be developed by professional game companies? Or a blockchain company?

Ki: I think traditional top game companies will not launch decentralized blockchain games because there is no advantage in changing their database to blockchain. If they decentralize the game, their income may be reduced. I think second-tier and start-up game companies can launch decentralized games, but I don't see any professional teams at the moment.

3: Recently, the issuance of stablecoins has slowed down. What do you think it means? Is there any other data that can corroborate this trend?

Ki: Many stablecoins are being redeemed these days. BTC needs more stablecoins or fiat on-ramps to break a new ATH, but the trend seems to be for stablecoins to be redeemed and fewer stablecoins to be issued.

I see two bullish scenarios:

First, big names announce purchases of BTC (eg: Apple)

Second, retail investors buy BTC with their local fiat currency (mostly Americans I think) You can see the premium on Coinbase to see this trend (the price gap between the Binance BTC/USDT pair and the Coinbase BTC/USD pair )

4: What do you think are the three most effective indicators to measure market bulls and bears?

Ki: There is no one indicator that can predict the future with certainty, but I mainly use Whale dumping indicators (such as All Exchange Whale Ratio (72h MA), All Exchange Inflow Mean (24h MA)), Exchange Net Flow and Stablecoin Ratio Determine if it is a bull or bear market.