After the airdrops of Pyth and Jito, Solana’s ecosystem has exploded and Jupiter is coming.
Written by: ADAM
Compiled by: Shenchao TechFlow
Bullish Narrative
Solana continues to be bullish
Solana was already a winner early in the bull market. FTX held billions of dollars worth of $SOL and Galaxy Digital was tasked with liquidating the assets through market and over-the-counter sales. Under these conditions, Solana not only survived, but with massive price appreciation, epic A short squeeze coupled with fanatical community support has cemented its position, and support for $SOL will become even more fanatical heading into 2024. I’ve learned a lot over the past few months and wrote a brief review.
I remember how the Ethereum airdrop exploded in DeFi Summer 2020 and brought incredible wealth effects, and the same thing happened with Solana. The huge airdrops for Jito and Pyth are just the beginning, followed by Jupiter, Tensor and Margin.fi. These protocols have proven their effectiveness and will reward loyal users, enhancing their position on the chain. DeFi’s TVL, new protocols, and new users will all grow on Solana, similar to Ethereum’s DeFi ecosystem.
Firedancer is the second validator client built by Jump and will improve Solana’s security and throughput. This is an important infrastructure step before they can proceed with token value accumulation.
Neon EVM allows developers to deploy solidity contracts on Solana. Providing a Solana-style user experience for existing EVM-compatible DApps provides a lot of help for additional TVL.
Composable is building interoperability between the Cosmos, Polkadot, Solana, and Ethereum ecosystems, which is pretty cool and provides credibility for a blockchain-agnostic future.
Solana is a candidate for the next potential ETF, most likely a futures ETF, which would propel it to become the third most important blockchain in the world.
Ethereum is making a comeback
Ethereum ETF
Bitcoin’s rise began in January this year, but began to accelerate after Cointelegraph posted a tweet announcing the approval of a Bitcoin ETF (which later turned out to be an own incident). BTC rose from $27,100 to the current $44,000 in only about 70 days, an increase of 62%. The market has begun to realize the importance of spot ETFs to cryptocurrency capital flows, and the same playbook is expected to be repeated ahead of the approval of an $ETH spot ETF in mid-2024. ETH could be in for a multi-month rally due to ETF speculation, rate cuts, and possible bullish inflows into BTC.
Airdrop Feast
The wealth effect of airdrops cannot be underestimated. We have recently observed explosive growth in the Solana ecosystem following the airdrops of Pyth and Jito, with Jupiter on the horizon. Here are some of the larger airdrops anticipated for Ethereum and L2:
- Eigenlayer restaking
- Swell liquid staking
- Ambient Finance
- OpenSea?
- Scroll L2 + DApps
- zkSync L2 + DApps
- Linea L2 + DApps
- Blast L2
- Manta L2
- Layer Zero
- Slingshot DEX Aggregator
- Bungee/Socket
Maturation of the L2 Ecosystem
With the launch of Base and other Rollups, Optimism’s ($OP) vision for superchains will begin to take shape. Rollup as a Service like Conduit will enable application chains to easily spin up infrastructure so they can focus on their products. There will be a chain battle between Optimism and other interoperable ecosystems such as Cosmos, Dymension, and Saga, but existing liquidity and bridge infrastructure give Hyperchain the upper hand.
Capital-efficient L2s like Blast and Manta integrate collateral types such as stETH and yield-generating stablecoins to generate additional revenue for the ecosystem. We’ll see if these are enough to sustain development and motivate users and teams.
Eigenlayer is a fascinating blockchain and data availability layer secured by staked ETH. This rehypothecation creates a self-sustaining yield component, which will create additional demand for staked ETH and exacerbate supply shocks. It’s still early days so the only DApps being built are recollateralizing the protocol to allow liquidity, but this could be a revolutionary blockchain starting to happen with many Rollups being launched in the future.
Mantle will be the best new L2 in terms of attracting new users, TVL and transactions. They have huge ETH reserves, which they are already using to provide users with higher ETH staking returns ($mETH). $mETH will become the most important collateral in the entire ecosystem and become Mantle’s secret weapon. They also have large $MNT and stablecoin incentives for bootstrapping and investing in new projects.
LayerZero
I predict that LayerZero will bring a new trend of full-chain tokens. Account abstraction will allow users to hold assets and transact on their favorite L2 or L1 instead of constantly crossing chains.
The intersection of AI and cryptocurrency
In 2024, multiple AI projects will enter the top 50 in market capitalization. The potential for AI in cryptocurrencies is huge. The potential of artificial intelligence in crypto is huge. The simplest manifestation is the combination of trading robots, automated payment and arbitrage robots with blockchain. Tokens enable decentralized ownership of AI tools, greatly improving efficiency and simplifying many painful and complex tasks in today’s blockchain. Bittensor ($TAO) is building a censorship-resistant, decentralized LLM, and the ecosystem around the toolkit has exploded. Autonolas ($OLAS) is building AI agents that perform on-chain and off-chain tasks, leveraging all open source LLMs. Grass.io is building a decentralized AI training data oracle by connecting the global Internet.
Cosmos Ecosystem
Despite issues such as confusion in ATOM governance, founder issues, team disagreements, and the lack of real utility of the Cosmos Hub, Tendermint consensus and interoperability are both excellent technologies that may ultimately make for a good investment in 2024. Celestia’s data availability layer is built using Tendermint and will become Rollup’s key infrastructure. The $TIA token has a good supply mechanism until the end of the year, and stakers may receive airdrops from any chain using their DA. Dymension and Saga are building a clone chain based on the Cosmos hub, focusing on the business development of rollups as a service. They will share resources to make it easier for new teams to get started running specific application chains. These tokens are set to launch in January 2024 and may have attractive valuations as they have not raised large amounts of capital during the bear market. Injective, Sei and Kujira are all projects with outstanding price performance, and builders will be attracted by the newfound wealth in these chains. DYDX is the first of many successful application chains and the leading permanent DEX. Stakeholders now earn USDC (actual yield) instead of relying on token emissions to secure the network. This is a revolutionary change that may set the standard for the future.
Bitcoin DeFi
Inscription, Markets, and DEX are reminiscent of early Ethereum DeFi. They are slow, expensive, and often fail. The opportunity here is huge, and while there are many $BTC purists, the community must acknowledge that Bitcoin block space demand must increase over time to ensure network security (miners will have to sell Bitcoin to maintain their operations ).
I’m looking at DEXs, wallet infrastructure, stablecoins, and lending markets for simple DeFi upside. In addition, with the growth of DeFi, cross-chain swaps of native assets will become more important, and Chainflip has built a new, secure, and highly liquid DEX for BTC-ETH.
GameFi is a big hit
Chain games have raised a lot of money in the past 2-3 years, and I expect there will be native crypto games that attract both native and non-native users. One of the most anticipated and popular games is Illuvium. Fans of Magic/Strategy games are very excited about Parallel, and I’m also looking at Arbo.
In the gaming space, ‘picks and shovels’ may be played out with infrastructure solutions like ImmutableX, which enables large-scale NFT minting for in-game tradable items, or permissionless gaming Item market.
For those less involved in the crypto game, guilds such as Yield Guild Games and Merit Circle/Beam are potential favorites, and these guilds will also attract the attention of large investors/advisors such as Pentosh1.
The Curve/Frax/Convex ecosystem is thriving
Decentralized stablecoin yields will be a winner-takes-all situation. Frax has been hard at work during the bear market. The rate of return on the Frax base pool is very high, they have built a highly liquid ETH token and are building the Frax chain. They just know how to play the long game and will be the big winners from ETH and stablecoin inflows. Convex also benefits from the success of Frax and Curve, with the huge amount of CRV locked in them increasing LP pool returns.
AlladinDAO has built some interesting new products like CLever and the f(x) protocol, which have received a lot of positive feedback from extreme stablecoin supporters and may be of great interest to DAOs looking to maximize their treasury and hedge their native token risk. interest.
Meme Coin
Meme coins have product-market fit for both cryptocurrency natives and retail investors. While they were once viewed as signals of market tops, they are now more complex in terms of their marketing, supply mechanisms, liquidity concentration and, most importantly, lottery speculative nature across both web and mobile. A small investment can turn into a big return, and it pays to pick a meme and hold on to it. The fundamentals for choosing a Meme include its creativity, video, CX team, number of holders, supply distribution, and more.
Intent-based DEX is an innovation from 0 to 1
Symm_IO is off to a good start, even though the founding team is part of the dying Fantom ecosystem. The Deus team has formed a new protocol that now has supporters to develop the most advanced derivatives system in DeFi. Symm leverages off-chain liquidity through “hedgers,” who provide traders with quotes from centralized exchanges and then hedge the risk in a manner of their choosing. This allows professional market makers to do what they do best and eliminates the need for inefficient on-chain liquidity pools like GMX and Uniswap v2. This means traders will get the best execution (lowest fees and spreads) and be able to access the largest number of trading pairs in DeFi without the risks of centralized exchanges (geofencing, locking funds, stealing funds, closing profitable trades ). Symm_IO has been deployed on front-ends such as Thena, IntentX, Pear Protocol, Based Markets, etc., and other platforms will be launched soon.
This system is also applicable to the spot market and will enable timely liquidity to improve capital efficiency. Cowswap is a V1 version based on intent exchange, providing good execution/MEV protection.
New Narrative
Every bullish cycle, some new narrative emerges that surprises everyone. There’s some heat in social this summer, and I predict DeSo or SocialFi will be the winner. Many teams, seeing incentives attractive to creators and fans willing to pay for access, have raised funds to build better user experiences.
Bearish Narrative
RWA narrative slowdown
The emergence of on-chain Treasury bond yields coincides with the time when interest rates peak. Cryptocurrencies are chasing the same gains that all traditional financial investors are chasing, and I expect demand for this product to wane before it really gains momentum. This is a test of the huge concept of tokenizing everything, but local stablecoins could earn far higher yields than Treasury bonds in the next few years. Other RWAs may be more interesting and therefore worthy of attention, but development will be slow.
Bearish Base
Coinbase has an extremely strong brand and is the leading centralized exchange in the West. They have a huge reach and marketing engine, which allows them to attract retail investors into DeFi through Base. I don’t think it’s difficult for Base to attract users. What’s difficult is how to attract teams to build an ecosystem on the chain. Other Layer 2 and Layer 1 have significant venture capital and potential token airdrops to convince developers to build, recruit, and incentivize growth. In a bull market, customer acquisition costs are very high, and if Base didn’t have such incentives, they wouldn’t win, even with the narrative of Coinbase and Optimism Superchain. In a cyclical, speculative, and reflexive market, you have to strike while the iron is hot to stay relevant.
Coinbase’s relationships with government agencies are a superpower, and they should be leveraging those relationships to leverage their credibility, security, and compliance rather than focusing on crypto-native developers.
NFT trading volume will not be as high as during the mania of 2021
While NFTs are great technology and have flexible applications, the last NFT craze was the result of low interest rates. Truly valuable NFT projects can grow a project’s treasury funds, brand, and accumulate value (such as Pudgy Penguins and Yuga), but most NFT projects will fail, and NFT creators will need to shift their strategies to become more competitive.
There will be less capital inflows into Bitcoin ETFs before the second half of 2024
I am not bearish on the flow of BTC spot ETFs (quite the opposite), however, I expect to have a longer time commitment to marketing, building products, and selling BTC spot ETFs. I don’t expect significant inflows until the third quarter of next year. I think most retail and high-net-worth investors are already investing through individual accounts or private equity funds right now.
Liquidity Pool
Idle liquidity pools are inefficient and disperse cross-chain and smart contract liquidity. Market makers are smarter at managing positions and spreads, and paying for order flow will win over time. While derivatives trading volumes are growing overall and increasing in proportion to centralized exchanges, GMX style platforms will lose market share to centralized limit order books managed by market makers (e.g. dYdX, Hyperliquid and Vertex) and intent-based DEX (such as Thena, IntentX, Pear Protocol, Based Markets).
