Away from the memecoins and celebrity endorsements, there is a bigger story unfolding as a generation forsakes traditional investments for digital analogs: collectibles, cryptocurrencies, and synthetic assets that can be represented and traded on-chain, permission-less, globally, and around the clock.
Evidence of crypto’s maturity as an asset class can be found in a new survey that suggests Americans find bitcoin twice as attractive as gold. In a bitFlyer USA survey, 20 percent of respondents claimed to have used cryptocurrency, while 30 percent see it as being an attractive investment this year.
As millennials prepare to inherit the wealth acquired by their boomer parents or spend the cash from their stimulus checks, it’s unlikely gold they’ll be buying. To an increasing number of web natives, the future is digital, decentralized, and tokenized.
Ethereum Elevates the Long Tail of Defi Tokens
Ethereum has surpassed its all-time high, set three years ago, and this has benefited the projects whose own tokens are issued on its network. Decentralized finance (DeFi), the Ethereum-centered movement for recreating banking and lending services in a crypto environment, has been the biggest beneficiary of Ethereum’s rally. The market cap of DeFi tokens has now passed $66 billion, while the total value of assets locked into decentralized finance protocols has doubled since the start of the year to reach $34 billion.
UNI, the native token of Uniswap’s decentralized exchange, which processed $30 billion of trading volume in January, has tripled in value this year. This surge in trading activity has sent Ethereum fees soaring, prompting traders to seek more scalable blockchains that can handle the strain.
With ETH breaking all-time highs and other assets such as Polkadot’s DOT making impressive results, many blockchain investors are looking for the next rising star, with more people now pointing at Tezos as the sleeping giant of the crypto world. With the much documented legal issues behind them, Tezos is starting to gain traction and islooking to 2021 to prove that beyond the early hype, they offer an attractive alternative to the community and are here to stay.
Bitcoin Takes on ETH at Its Own Game
One of the most dramatic trends within decentralized finance has been the growth of bitcoin-based DeFi. This has occurred within the Ethereum ecosystem, through tokenized representations of bitcoin such as WBTC, and externally on networks such as RSK, which directly connects to the Bitcoin blockchain, providing a smart contract layer for decentralized finance.
Applications that were once synonymous with Ethereum, including DEXs, stablecoins, and crypto-collateralized lending protocols have been recreated RSK on , allowing bitcoin holders to put their assets to use for trading and yield generation.
By default, bitcoin is not a yield-bearing asset. Decentralized finance provides a way for holders to earn a return on their BTC through lending, yield farming, and stablecoin issuance, using their bitcoin as collateral. More than 120,000 BTC have been issued on Ethereum as WBTC, while Bitcoin-focused DeFi protocol Badger Finance has close to $1.8 billion in value locked into its vaults. Anything Ethereum can do, it seems, Bitcoin can do too.
Pick-and-Shovels Plays Power Crypto Gold Rush
Digital gold beats physical gold, according to bitFlyer USA’s recent survey on the investment habits of Americans. If there is a crypto gold rush underway, then the smart money may lie in the pick-and-shovel plays.
In a blockchain context, these take the form of developer tools that enhance the capabilities of distributed ledger technology. Oracles such as Chainlink pull in reliable data from external sources, enabling the creation of decentralized markets for real world events, and for assets such as physical gold to be tokenized and traded as synthetics.
While mainstream investors ask their crypto friends whether it’s too late to buy cryptocurrencies, cryptocurrency veterans are looking beyond the memecoins and zeroing in on the low cap gems. Whether it is native assets of Ethereum alternatives, oracle tokens, or trading protocols – everyone is searching for the next big thing.