6 catalysts that will drive the next bull market
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6 catalysts that will drive the next bull market
2022 was a terrible year for cryptocurrency.
Navigating Web3 tides with focused insightsWritten by: Ben Giove
Compiled by: TechFlow
Everything has been terrible this year. Stablecoins collapsed, hedge funds and lending companies went under, and so-called top-tier exchanges imploded. There's no sugarcoating it: 2022 was an absolutely brutal year for cryptocurrency.
Yet amid the chaos, the industry continues to move forward. Whether you believe it or not, there are many reasons to remain optimistic about the future.
That may sound like wishful thinking today... but as innovation deepens, another bull market will (eventually) arrive. Moreover, the biggest explosive events this year were all failures of centralized entities—making the value proposition of decentralized technology clearer than ever before.
I still think it will take a long time for crypto to recover, but below are some early ideas I believe could catalyze a brand-new cryptocurrency bull run.
1. BTC as a hedge against fiat
For cryptocurrencies to experience another bull run like those in 2017 and 2021, Bitcoin and Ethereum must lead once again. These two major assets account for 55% of the total crypto market cap, and there are strong reasons why investors might renew their interest in them.
In the case of Bitcoin, excitement around the asset still stems from its role as a hedge against geopolitical risks and declining credibility of central banks. The world faces painful geopolitical tensions, such as the ongoing war in Ukraine, U.S.-China tensions, and political polarization and instability across many countries.
Central banks like the Federal Reserve have reached unprecedented lows in credibility, as these institutions failed to respond promptly to inflation they themselves caused, compounding their earlier mistakes of reckless money printing.
This uncertainty creates fertile ground for a resurgence in assets like BTC, as investors may seek non-sovereign stores of wealth during these turbulent times.
2. ETH as an internet bond
ETH is another asset poised to benefit from renewed interest in crypto as an alternative to fiat currencies.
Not only does ETH possess store-of-value characteristics—with its issuance rate expected to turn deflationary even with a slight uptick in blockspace demand—but following the transition to "Proof-of-Stake," it now also offers yield to investors.
This staking yield will make ETH increasingly attractive to investors who prefer productive assets.
Of course, its role as trustless collateral and an index of the on-chain economy remains unchanged—and if anything, has been further strengthened by the string of crypto disasters throughout 2022.
3. Revival of DeFi
2022 exposed the opacity and fragility of CeFi—setting the stage for a strong comeback of DeFi in 2023 and beyond.
While centralized exchanges, lenders, and hedge funds went bankrupt, DeFi protocols remained unaffected, continuing to execute programmatically without downtime. These non-custodial, transparent, decentralized financial rails have proven themselves to be a solid foundation upon which we can rebuild.
Even as CeFi imploded, many exciting sectors within DeFi continued shipping and developing innovative products.
One such area is liquid staking. After the Shanghai upgrade, staking demand is set to surge, with many new protocols like Rocket Pool, StakeWise, Frax ETH, Swell, and Diva preparing to compete with established players like Lido and Coinbase.
Decentralized perpetual contracts are another exciting frontier, with protocols like GMX, dYdX, Perpetual Protocol, Gains Network, Rage Trade, and Cap Finance aiming to sustain their growth trajectories in 2023 as more trading activity moves on-chain following the FTX collapse.
4. Non-financial (sort of) applications
Trading and speculation may currently be crypto’s largest use cases, but several categories of non-financial applications are also primed for continued growth—including decentralized social media, music NFTs, and blockchain gaming.
Decentralized social media platforms have been one of the bright spots during this bear market.
User base expansion on platforms like Lens and Farcaster has been relentless, and recent turmoil at Twitter has only highlighted the advantages of censorship-resistant social networks that give users ownership and portability over their audiences.
5. Music NFTs
Music NFTs have begun emerging as a new way for artists to earn income.
Artists—especially smaller ones—are able to earn far more revenue from selling NFTs directly to a small group of fans than they do from streaming on platforms like Spotify, where intermediaries capture the vast majority of the value created.
While communities and markets remain niche, in recent months, music NFT platforms like Sound have seen strong growth across key KPIs including volume, users, and mints.
6. Blockchain Gaming
To many, play-to-earn games like Axie Infinity seemed incredible—and their subsequent downfall may have tainted the space—but GameFi remains another incredibly exciting frontier in crypto.
The intersection of blockchain, NFTs, and gaming holds immense potential. Over the past year, hundreds of millions in venture capital funding have flowed into this sector.
Given the amount of intellectual and financial capital entering the space, I believe it's only a matter of time—not if—before blockchain gaming becomes mainstream.
Stay hopeful
The old must die for the new to be born. Amid price declines and project failures, the seeds of the next bull market have already been planted. Though we may not see it clearly now, there are ample reasons to stay optimistic and hopeful about the future.
It may take some time, but between the resurgence of BTC and ETH, the revival of DeFi, and the rise of Web3 social, music NFTs, and blockchain gaming, there are plenty of reasons to believe that the crypto market will return to its peak.
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