05 January 2024

It's been another volatile week in crypto, and as always, we're here to break it down for you. Markets are fluctuating and the Bitcoin spot ETF buzz is louder than ever. So, buckle up, because we're diving into the hottest topic of the new year: the countdown to Bitcoin's halving! We will also be pointing out a few other trends we foresee.

But before that, here are the top stories of the week.

Top-3 stories of the week:

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2

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The newsletter is put together by Giottus Crypto Platform. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.65 trillion - DOWN 1.2%

• Bitcoin price - $43,351 - UP 1.6%

• The dollar index (DXY) - 102.49 - UP 1.3%

• Bitcoin Dominance - 52.74% -  UP 2.7%

• Crypto Fear and Greed Index - 72 - the market is in greed

THE HOT TAKE

Bitcoin and Beyond: How Crypto will roll in 2024?

We're less than 100 days away from Bitcoin's much-anticipated halving event in April 2024. While that is likely to dominate the conversation this year, 2024 is not going to be just that. Here are the trends and themes we think you need to watch out for.

Bitcoin Halving

I am sure you are trying to wrap your head around it, as are most of us. There are two aspects – the impact of halving on supply and demand economics, and its effect on miner's revenue – are pivotal in shaping the Bitcoin ecosystem. Understanding these elements is crucial for anyone trying to wrap their head around the future of Bitcoin and its underlying mechanics.

1. Supply and Demand Economics: Halving will play a significant role in the supply and demand of Bitcoin. Every four years, the rate at which new Bitcoins are created is halved. This means that if pre-halving, the Bitcoin network was generating 900 new Bitcoins per day, post-halving, this number drops to 450. This reduction in supply can have significant effects on Bitcoin's value. If the demand for Bitcoin remains constant or increases, the reduced supply can lead to a price increase. The halving event is designed to create scarcity, thereby potentially increasing Bitcoin's value over time.

2. Miner's Revenue Impact: Miners are the backbone of the Bitcoin blockchain. However, the halving event impacts their revenue significantly. After a halving, miners receive 50% fewer Bitcoins for the same amount of work. This reduction can have several consequences. First, it may lead to a restructuring of the mining landscape. Miners with more efficient operations, lower electricity costs, and better hardware will likely find it easier to remain profitable. In contrast, those with higher costs may find mining less viable, potentially leading to a consolidation in the industry.

Moreover, the future of mining is heavily influenced by Bitcoin's market price and the costs involved in mining (like electricity and hardware). If Bitcoin's price increases post-halving, it can offset the reduced mining rewards. However, if the price does not increase proportionally to the halving, miners could see a significant decrease in their revenue. This dynamic creates a complex interplay between the miners' economic incentives and the market forces surrounding Bitcoin.

Ethereum & Layer 2's Leap Forward

Ethereum is evolving its technology. The focus is shifting towards making Ethereum a foundational layer for rollups. This means more transactions can be processed in less time and at a lower cost. Scheduled for February 2024, the Dencun upgrade is an important milestone in Ethereum's development. This upgrade is expected to enhance data availability for Layer 2 solutions, like rollups. Data availability refers to how efficiently and securely data can be accessed and used on the blockchain. Improving this aspect is crucial for the effectiveness of rollups. With better data availability, rollups can operate more efficiently, leading to potential reductions in transaction fees and improving the overall user experience.

Sharding is also a planned upgrade in Ethereum's roadmap. This would spread the load across the network, further improving its capacity and speed. The Dencun upgrade, with its focus on data availability, sets the stage for implementing sharding by ensuring that data across these shards remains accessible and secure.

While the crypto community is awaiting the approval of Bitcoin spot ETFs, there's also anticipation that Ethereum spot ETFs might follow. The approval of such ETFs could significantly impact the market, as it would provide a regulated, mainstream investment vehicle for investing in Ethereum, potentially increasing its adoption and investment appeal.

Layer 2's Rising Tide

With Ethereum's Dencun upgrade, Layer 2 rollups like Optimism, Arbitrum, and Polygon are gearing up for reduced gas fees. This is because the upgrade is designed to enhance the network's ability to handle more transactions at a lower cost. As a result, there's a growing interest in Layer 2 solutions. This interest is reflected in a surge in the value and popularity of tokens associated with these Layer 2 platforms. This shift is marked by a growing recognition that these Layer 2 platforms can play a crucial role in addressing the scalability and cost issues associated with the Ethereum network.

The potential success and growth of Ethereum's Layer 2 solutions are also being supported by various ecosystem programs. These programs might include funding, development support, and community-building initiatives designed to foster innovation and usage of Layer 2 platforms. Such support can accelerate the development and adoption of these platforms, further enhancing their visibility and viability in the blockchain space.

Ethereum's upcoming Dencun upgrade is a pivotal development, poised to significantly benefit Layer 2 solutions by reducing gas fees and improving overall network efficiency. This upgrade, coupled with the burgeoning interest in Layer 2 tokens and the support from ecosystem programs, suggests that Ethereum's Layer 2 platforms are well-positioned to gain prominence in the blockchain industry, much like Layer 1 solutions did in the past.

Top Layer 2s to Watch:

• Arbitrum (ARB)

• Optimism (OP)

• Polygon (MATIC)

• Skale (SKL)

• Immutable X (IMX)

2024's Top Narratives

1. Real World Assets (RWA): Real-world Assets (RWAs) are like digital versions of physical or traditional assets, represented as tokens on the blockchain. Think of them as unique digital barcodes for things like real estate, art, or even bonds.

The global real world assets are valued over $613 trillion. Today, the tokenized RWA ecosystem accessible on-chain is only about $2 billion. Bringing only 1% of RWAs on-chain would result in a $6 trillion valuation, way more than the current total crypto market cap. BCG estimates that the tokenized RWA market could grow to $16 trillion by 2030.

If you’re looking for exposure to RWAs, here are the best projects to consider:

Maple Finance (MPL)

Maple offers undercollateralized lending for borrowers and transparent fixed-income opportunities for lenders on-chain.

Pendle (PENDLE)

Pendle is a DeFi protocol that facilitates the tokenization and trading future yield. Its primary objective is to empower users with control over prospective yield by introducing optionality.

2. GameFi: GameFi is another hot narrative well-positioned to perform well in the coming years. Web3 infrastructure offers one of the best methods to distribute value within gaming ecosystems, and the resulting potential could be huge. So far, GameFi projects have registered a solid performance within the bear market. More and more users are attracted to the profitable economic models enabled by GameFi.

Top GameFi projects to consider are:

Big Time (BIGTIME): MarketCap - $118 million

Big Time is a free-to-play, multiplayer action RPG game that combines fast-action combat and adventure through space and time.

Star Atlas (ATLAS): Marketcap - $79 million

Star Atlas is a next-generation gaming Metaverse that combines blockchain technology, real-time graphics, multiplayer video games, and DeFi.

3. Artificial Intelligence (AI)

Our third narrative for 2024 is AI. No single technology has the potential to revolutionise human life like AI. The emergence of ChatGPT and Bard ignited a mini-bull run for AI tokens, and the AI trend continues with its hype. The total market cap for the AI sector is only about $6 billion. This is negligible, considering AI will be widely adopted in the coming years. As more companies look into integrating AI and web3 solutions, the AI narrative will stand out as one of the best performers over time.

Some AI projects to look out for:

 - Top Picks: Render (RNDR), SingularityNet (AGIX), Ocean Protocol (OCEAN)

Our Other Big Bets for 2024

• Celestia (TIA)

• Polygon (MATIC)

• Avalanche (AVAX)

• Solana (SOL)

There you have it, folks – your dose of crypto insights for the week, and for the year ahead.

Stay tuned for more updates, and remember – in crypto, the only constant is change!

Happy Trading!

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.