Analyzing the current state of the encryption world and 7 future trends
Original title: "The current state of the encryption world and 7 future trends"
In terms of the evolution of the cryptocurrency world, 2021 has been quite a remarkable year: we have seen the rise of many blockchains, challenging the dominance of Ethereum, multiple currencies hitting new all-time highs, NF boom, new milestone and a step towards actual mass adoption of cryptocurrencies.
The quarterly report published by CoinGecko highlights the trends that are shaping the future of the market.
Below is a quick breakdown of the 7 most important characteristics describing the current state of the industry. To understand where it is headed, it is necessary to understand the following trends:
The Rise of Cryptocurrency Market Cap and the Start of Altcoin Season
In April 2021, the value of the cryptocurrency market exceeded $2 trillion for the first time. The metric has almost doubled in a short period of time, driven by rising prices of Ethereum and Bitcoin. Prices for both tokens hit all-time highs, with Bitcoin’s market capitalization holding on to the $1 trillion mark for a week.
Bitcoin continued to dominate the market, gaining a 65.2% share, but the metric fell 5.7% from the previous quarter. The current trend is the rise of altcoins and the market is entering altcoin season. The main indicator of altcoin dominance is the decline in Bitcoin’s market capitalization relative to the total market capitalization of other crypto assets, causing altcoin prices to soar. Therefore, this could be a great opportunity to diversify one's altcoin portfolio.
Bitcoin hits record highs
In the first quarter of this year, Bitcoin’s price return was 103%, and it has repeatedly refreshed its all-time highs. The main drivers driving Bitcoin to reach new milestones are:
The listing of bitcoin on an exchange-traded fund (ETF) introduces an additional investment vehicle for institutional and retail investors.
Institutional investors entering the market and listed companies buy Bitcoin as a hedge against inflation (listed companies hold 0.95% of the total supply). Coinbase's IPO and general acceptance in the crypto market.
Visa, Mastercard, and PayPal adopt cryptocurrencies and support encrypted payments.
Rising inflation.
These factors point to a growing demand for Bitcoin, while the token supply remains limited at 21 million.
The Growth of DeFi Market Cap and the Rise of DEX Coins
Since the start of the year, DeFi’s market capitalization has increased by 382%, hitting an all-time high of $95.7 billion. The total value locked (TVL) on Ethereum and Binance Smart Chain reached $72 billion.
DeFi’s continued growth in the first quarter correlates with corresponding growth in other sectors within DeFi. During this period, Ethereum stablecoin supply has almost doubled, DEX transaction volume has increased by 2.5 times, and total outstanding loans have increased by 3 times.
About 50% of the total market capitalization of DeFi holds DEX native tokens, such as UNI, SUSHI, CAKE. All three coins saw substantial growth in the first quarter. For example, on January 1, the price of one CAKE was around $0.64, and at some point in time, the price rose to $44.18.
The multi-chain future of cryptocurrencies
The multi-chain model continues to be popular. As a result, projects are fleeing rising costs on the Ethereum network, exploring alternatives and new audiences.
Projects like SushiSwap, Tether, bZx, etc. are entering the Avalanche ecosystem.
Many companies are preparing to launch on Polkadot.
Fantom's ecosystem is growing and welcoming new platforms.
The multi-chain nature of the project is often seen as the future of blockchain technology. This is why projects that achieve interoperability and the free flow of liquidity within several blockchains will continue to grow and gain more users.
Binance Smart Chain is slowly cannibalizing the Ethereum market
In Q1 2021, Binance Smart Chain (BSC) became the second most active blockchain with a 61% increase in user base. Blockchain is peaking, which can be illustrated by a number of indicators:
The number of active wallets increased by 50% month-on-month.
The average number of daily active wallets reached 105,000.
BNB, the network’s native token, became the third-largest cryptocurrency by market cap and hit an all-time high of $690.93.
The BSC ecosystem continues to grow and expand, but dApp developers remain highly focused on DeFi. This provides many opportunities for projects to find their niche - many join networks specifically for this purpose.
Develop Ethereum scaling solutions
The growing interest in DeFi and crypto in general underscores the well-known problems Ethereum has with scalability and network congestion.
Due to high demand, gas fees have increased by nearly 400%. In order to deal with this problem, Ethereum introduced a layer2 solution. Currently, there are four main scaling solutions: Optimism, Polygon, ZK Rollup, and xDAI.
Projects like Uniswap and Synthetix have chosen Optimism.
Popular NFTs like OpenSea and Decentraland migrated to Polygon.
Balancer and Cuve are working on a ZK Rollup solution.
xDAI is attracted to smaller projects.
Going forward, projects must consider the technical characteristics of already existing layer 2 solutions and services. Many projects will likely follow Uniswap and Synthetix, linking to greater liquidity and larger projects.
The NFT market is booming
The NFT market exploded in early 2021. The total market value of the NFT market reached 27.9 billion US dollars, accounting for 10% of the global art market sales.
The largest percentage of NFT sales come from collectibles and artwork from Cryptopunk, Hashmasks, Beeple, and more.
Sports is the second largest category. Some popular programs are NBA Top Shot and Topps MLB.
NFT games based on Enjin and Ultra platforms such as Axie Infinity accounted for a large part of the sales.
Metaverse sales accounted for 8% of total NFT sales. The Metaworld is an alternative digital reality where people play, work and buy things.
Summarize
Summarize
The beginning of the year saw many changes in the market, bringing more on-chain users and new blockchain use cases emerging. However, most of the issues facing all users and dApp developers are the same: scalability, interoperability, user experience, token price stability, etc. Considering the number of projects and new names that pop up every month, the way for companies to break through is to solve problems that all market players are struggling with.
Source：https://hackernoon.com/the-current-state-of-the-crypto-market-and-7-trends-to-follow
