Analyst Q2 Outlook and Holdings: The metaverse will be mainstream in the coming years, with funds allocated to gaming and DeFi blue-chips
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Analyst Q2 Outlook and Holdings: The metaverse will be mainstream in the coming years, with funds allocated to gaming and DeFi blue-chips
The metaverse economy will ultimately surpass the real-world economy.
Navigating Web3 tides with focused insightsAuthor: Raymond Chng
Translation: TechFlow intern
TechFlow authorized translation and publication
Macro
The Russia-Ukraine war has dominated headlines over the past few weeks, triggering significant portfolio shifts among TradFi investors and bringing a local bottom to the crypto market. However, I believe this conflict may soon subside.
The Fed is raising rates amid rising inflation and slowing growth, which could lead to some negative events later this year. We could transition from inflation to stagflation as early as Q3 2022.
What does this mean for the world? –> It implies a slow death, unfavorable for most who aren't prepared.
If digital assets are to decouple from TradFi markets, now would be an ideal time.
The world is currently in chaos. On top of insufficient pensions globally and combined with stagflation, this is a recipe for disaster. Policymakers will need to consider how to navigate this issue. If things go poorly, will they: 1) let the ship sink—triggering a deep recession—making everyone unhappy; or 2) keep printing money—distributing cash to people while everything inflates, leading to a slow death under gradually eroding purchasing power?
Perhaps a parallel world could become a Noah's Ark? Letting today’s world slowly bleed to death → entering the metaverse → where virtual/metaverse economies eventually surpass real-world economies.
Crypto Market
Major TradFi funds continue to enter the crypto space, investing in infrastructure layers—for example, Temasek (a Singapore government-linked fund) invested in IMX.
An increasing number of funds are focusing on gaming and the metaverse.
Valuations in venture rounds are high; for some funds, buying liquid tokens (already listed ones) might be better, as some are near or even below seed valuations. This is good news for retail investors like me, offering opportunities to buy solid projects cheaply—if we do our research.
A fragmented market—some tokens are bearish while others are bullish. The key is recognizing this and trading accordingly.
Season of broad pullbacks—most coins rallied first then dropped, with almost no coin showing directional trends in recent weeks.
Older coins (EOS, WAVES, TRX) are making comebacks with news cycles, highlighting how the market creates hot narratives, but the broad pullback season also shows how PVP (player versus player) the market truly is.
Clearly, current market conditions favor quant/range traders over trend followers. Hoping this changes in Q2—I’ll share thoughts on navigating it. But will closely watch “May.”
Expecting Q2 to be stronger, with potential risk across most crypto sectors. Believe the market has and will continue allocating capital into: 1. Gaming 2. Blue-chip DeFi tokens.
Bitcoin
BTC began serving as collateral in TradFi—an early step toward monetizing BTC as a bond-like asset. After all, there are about $5T worth of negative-yield bonds in Europe alone (as of Feb 2022). BTC’s market cap remains below $1T (Mar 2022).
Luna Foundation Guard (LFG) sparked the current mini-bull run and may drive a trend over the next 2–3 months. I think the current price action (pa) is driven by front-running anticipation around LFG’s purchases.
Other market participants are buying in anticipation of stagflation—acquiring “the hardest money.”
Interestingly, after Ray Dalio mentioned owning some BTC in 2021, Bridgewater recently stated they’re entering crypto. As you know, they’re not the only ones seeking crypto exposure—expect them to start allocating to BTC too.
ETH
It all hinges on the Merge. While most market participants are bullish on the event, I’m uncertain how “done” it really is. Somehow, when the majority (“the herd”) believes something will happen, the outcome often goes the opposite way.
Due to its strong liquidity, ETH remains one of the primary gateways for institutional funds to access crypto. Long-term, it’s a solid asset to hold for market beta exposure, but if you aim to outperform the market as a retail investor, perhaps best not to focus on ETH.
Most activity related to ETH may shift to future L2s.
Eth L2
Starknet
Latest funding round valued Starkware at $6B, led by Sequoia, with participation from Paradigm, 3AC, Alameda, and others.
Significant developer activity on Starknet, vibrant community, consistent ecosystem updates.
Potential for robust DeFi infrastructure—MakerDAO and other blue-chip DeFi protocols preparing to launch on Starknet.
Strong gaming ecosystem as well—game scalability solutions being built on Starknet, such as Loot Realms. Also Matchbox DAO, aiming to serve as a hub for game developers, designers, etc., on Starknet.
Arbitrum
When will the airdrop happen? (Rumors suggest 2022.)
Interestingly, NFT markets on Arbitrum have shown more resilience compared to others.
The Magic ecosystem is holding up the chain’s NFT market, featuring tangible games like Seed of Life, Battlefly, and more. Expect new capital flowing into the ecosystem.
Derivatives tokens like Dopex and Vesta may continue maintaining sticky TVL on-chain.
L1 (Sol/Luna/Avax)
1.Solana
OpenSea launching on Solana could kickstart their NFT and gaming seasons.
Gaming: Aurory may be the most anticipated upcoming game. Star Atlas is also highly anticipated but may take longer. One game I’ll be watching closely is Meekolony, possibly launching TGE in Q2 2022.
2.Luna
After observing the performance of ecosystem tokens, I decided to stick with Luna and anchor UST during risk-off periods.
UST’s ultimate goal is to surpass USDT. Do Kwon and team are building a full ecosystem to continuously increase demand for UST.
Gaming projects are coming to Terra ecosystem.
DeFi / FX products expected to help boost UST growth, further accelerating burns.
Could break ATH soon and enter an uptrend.
3.Avax
Subnets going live → cheaper transactions and greater scalability.
Gaming: Defi Kingdoms (Jewel) and Crabada (Cra) will soon launch their subnets. Despite delays in Crabada’s Swimmer network, it will eventually complete. Avax is becoming a top-tier chain for game developers—I'm excited to follow their journey.
DeFi: Most DeFi tokens on Avax have dropped 70–85% from their all-time highs. I see this as a good opportunity to monitor these tokens as Avax Summer approaches.
DEFI
1.Badger Ecosystem
Badger DAO is a DAO enabling Bitcoin to be used as collateral in DeFi applications.
TLDR; it generates yield on your BTC.
Previous Badger hacks have been resolved. I believe Badger could provide critical infrastructure for BTC holders to monetize their coins.
2.CitadelDao
Citadel is a treasury DAO aiming to become the largest BTC-holding community in the world.
Citadel will grow into the people’s Bitcoin whale, supporting creation of Bitcoin-focused products—not just DeFi, but also critically underfunded Bitcoin core development.
To ensure sustainable yield on its Bitcoin position, it will hold not only Bitcoin but also yield-generating assets across DeFi (e.g., Convex and BADGER).
3.Tetra Roundtable
a.Convex Finance
Everyone knows the story—CVX essentially controls voting rights over much of the CRV, FXS, and other tokens it partners with. The CRV war has turned into a CVX war.
Curve v2 launching soon—will bring substantial returns to CVX holders.
Still one of the key projects in any DeFi portfolio.
b.Dopex
rDPX tokenomics update
ve-DPX
c.Frax Financial
FPI airdrop
FraxSwap
As I mentioned in my Q1 outlook, Frax could become a top stablecoin, FPI the CPI of crypto, and Sam Kazemian the faith indicator giving us hope for a brighter metaverse future.
Possibly one of the few DeFi tokens that can sit in your wallet and return in price after 5 years of holding—but still speculative.
d.FeiRari
Fast code updates
New xTRIBE allows users to directly stake FEI or FEI LP tokens on Fuse lending platform. All rewards auto-compound.
Another DeFi token you might hold and come back with a Ferrari ten years later. NFA.
e.Redacted Cartel
All DeFi voting influencer.
The puppet master (check their docs).
Possibly a way for retail to buy tokens as an ETF, given Redacted’s broad influence.
I bought BTRFLY at auction and sold around $3,000. Plan to add it back to my portfolio in the near future.
AVAX DEFI
1.BenQi
Liquid staking - sAVAX
Pegged asset offerings
DeFi Kingdoms partnership
Still AVAX’s native lending platform.
2.Joe
New tokenomics allow the protocol to also function as a launchpad.
sJOE, rJOE, and veJOE mean higher buying pressure when demand rebounds.
Despite continuous outflows from DeFi over past months, the team kept building.
Might be a good time to reconsider. At recent lows, JOE approached VC funding round prices—so long as you believe VCs wouldn’t invest for just 2x, there’s significant upside potential.
3.GMX
If unfamiliar with GMX, check Blocmates’ complete GMX guide.
It’s a perp protocol widely used by many, remaining solid whether in bull or bear markets.
Other DeFi Projects on Watchlist
1. Aave v3 cross-chain, price has already risen, and OG DeFi protocols may stage comebacks after major overhauls.
2. A new decentralized forex protocol with a strong, seasoned team, reputable investors, reliable roadmap, ve-tokenomics, upcoming GLP tokenomics, MKR-style vault product, real-world asset tokenization, fiat on/off ramp partnerships prioritized, and a team focused on protocol profitability rather than pure TVL growth.
Web3 Gaming Summer
Thoughts on Gaming Sector
In January 2022, I decided to pivot toward GameFi because I believe the future of the metaverse requires solid games people want to spend significant time playing. So I dove deep into gaming. I’ve shared more insights on Twitter, so feel free to explore further.
Jason Choi noted GameFi feels like DeFi in 2020—meaning we’re likely entering a GameFi bull market, and we're still early.
Wangarian suggested the next 100x potential lies in GameFi, and I tend to agree—it’s been a topic I've consistently discussed with peers.
Guild Transformation
Recently, a guild sold all its Pegaxy assets, leaving scholars jobless. With recent SLP changes, guilds relying solely on scholarship models may struggle to survive long-term.
Thus, guilds need to reassess their core roles. I wrote a post outlining 12 areas guilds could expand into, and believe some may evolve in these directions.
I believe some guilds will shift toward becoming game hubs or studios as their primary model. Merit Circle started by partnering/investing in select games, and I believe GuildFi will move in this direction too—I’ve heard they’re evolving, with announcements on plans coming soon.
Games to Watch
Game Ecosystem - Treasure DAO (MAGIC)
MMORPG - Ragnarok / Treeverse / Meekolony / Ember Sword
RPG - Crypto Raiders (RAIDER)
FPS - AFAR / Blast Royal
Metaverse
Upcoming BAYC metaverse land sale could spark the next metaverse bull run.
Currently, The Sandbox (SAND) remains the most interesting project and the leading successful virtual world.
NFT Worlds (WRLD) is definitely one to watch—leveraging Minecraft design, allowing developers to easily build virtual worlds. Various NFT projects continue buying land and developing their own metaverses (e.g., Floki Verse)—NFT Worlds seems to have massive potential, and I’ll write deeper analysis on it soon.
As Jason Choi pointed out, winning metaverse base-layer projects like The Sandbox will dominate this space—similar to fat protocols in L1s.
Q2 2022 Portfolio Allocation
Overall idea—what I observe happening in the market naturally reflects in my portfolio allocation, so...
1. What are possible upsides of a prolonged bear market?
Bear market unlikely to extend, as people I speak with working in TradFi institutions keep telling me they’re preparing to allocate to crypto—buying power is coming soon.
Market is maturing—market participants know BTC/ETH/crypto will persist. What we may face are frequent corrections instead.
If a bear market does occur, I’m prepared to mostly move into stablecoins and focus on active trading.
2. Which niches aren’t being discussed now but could gain traction in coming months/years? (A question I frequently ask myself)
Personally believe the metaverse will be mainstream in coming years, yet few are talking about it. Perhaps this is a space worth watching.
I do know Facebook (Meta) supports Realy, while an independent Web3 protocol called MONA remains overlooked.
3. Attack or defense?
Defense, and hunting for strong tokens.
4. Based on above, how can I better manage my risk?
Lean toward more liquidity, while sticking to solid R/R plays.
My Portfolio (NFA).
1.(30%) Gaming
Crypto Raiders (RAIDER)
Recently wrote about my views on this game project, but in short: the Raider team has long-term vision, sacrificing short-term profits for long-term game sustainability.
It’s a game even some game designers enjoy playing.
TreasureDAO (MAGIC)
One of the most vibrant communities out there.
Treasure DAO is building a decentralized Nintendo—games interoperable, items from Game A usable in Game B.
Other Games
There are other games I’m currently securing whitelists and/or beginning to purchase their game NFTs. Will share more as I gather additional information.
2.(20%) Productive Assets
Benqi(QI)
For reasons mentioned earlier.
Convex Finance ($CVX)
Accumulating more CVX ahead of Tetra Roundtable and CitadelDao.
Badger DAO (BADGER)
Have initial position, plan to increase exposure over time.
3.(40%) Stablecoins / Blue-chips or L1 / Coin-Perps
Given current market conditions—a fragmented market—I find it difficult to buy and hold. It feels more like a trader’s market.
My strategy has shifted from holding productive assets to doing more active trading—scalping, swing trading—basically anything that maintains portfolio liquidity while capturing market moves.
This portion of my portfolio will receive the most attention—from stablecoins to holding Avax/Luna or actively trading markets.
4.(10%) Alpha Speculation
Always maintain such allocation for very low-market-cap projects that may require over 6-month holding periods—essentially moonshots easy to forget. Currently, part of this bucket includes the DeFX coin I mentioned earlier.
Won’t disclose tokens here since they’re small-cap and highly risky.
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