Author: Ignas

Translation: Shanouba, Golden Finance

I feel that the cryptocurrency market is about to undergo major changes and I am very bullish. Although I am not sure what exactly will happen, the market is experiencing significant changes.

Interest rates are starting to decline, ETH ETFs are approved, funds flowing into BTC ETFs are increasing, and Stripe is launching stablecoin payments…

Just like an army is deploying before a decisive battle, major cryptocurrency companies and traditional financial institutions are preparing for the upcoming bull market.

For more on this "feeling," see below:

At the same time, the internal machinery of the cryptocurrency market has not stopped running. Yes, prices are falling… but the market is always changing, with new narratives and trends constantly emerging and influencing the market.

Just as MakerDAO was launched before the term "DeFi" appeared, there are currently some emerging trends in the market. These trends are not yet significant enough to form a coherent story.

Here are 7 emerging trends that may have a significant impact on the market.

1. Repackaging

Old coins are boring, and gamblers want something new.

If you can change the brand name, create a new token symbol, and start over with new charts, it sounds more exciting!

Fantom → Sonic

This is exactly what Fantom did with the upgrade to Sonic.

Sonic is a new L1 with a native L2 bridge to Ethereum. It will have a new Sonic Foundation & Labs and an all-new visual identity.

More importantly, the new $S token "ensures the compatibility and migration from $FTM to $S at a 1:1 ratio."

This is a smart move, as the migration to Sonic generates more market speculation than simply calling it "Fantom 2.0." This allows Fantom to overcome its multi-chain bridging issues and start afresh.

Connext → Everclear

Similarly, Connext is rebranding as Everclear.

Renaming in the cryptocurrency space is not new, but the emerging trend here is repackaging significant upgrades as new products.

This sends a stronger signal to the market than just another v2 or v3 upgrade. People are not interested in just another "v4" upgrade.

By transitioning from Connext to Everclear, the team conveys that this is not just a simple renaming, but a significant advancement in technology.

Connext is transitioning from a simple bridging infrastructure to the first clearing layer. It's like a chain built on Arbitrum Orbit rollup (via Gelato RaaS) and connected to other chains using Hyperlane and Eigenlayer ISM.

Connecting any chain, any asset, paving the way for modular cryptocurrency future.

The NEXT token rose by about 38% after this announcement (but not sustained). Fantom's $FTM is once again hot, and its recognition on X has also increased.

I expect more protocols to be renamed to adapt to the market trends and technological advancements in 2024.

For example, IOTA is being renamed as an L2 for real assets.

Additionally, mergers may become more common, such as Fetch.ai, Ocean Protocol, and SingularityNet merging into a $ASI token, becoming a new encrypted super AI project.

The key is to pay attention to the price performance of new branded projects and tokens (if launched). Although it is still early, the initial price performance of FTM and NEXT, as well as FET, AGIX, and OCEAN, is optimistic. If the market starts to rise again…

Are there more repackaging / renaming coming soon?

2. Regulatory Support for Cryptocurrency

Regulation has always been a big issue, especially in the United States, where the SEC has targeted major players such as Coinbase, Kraken, and Uniswap. Although Ripple and Grayscale have achieved some victories and approved Bitcoin ETFs, the regulatory environment is still hostile, focusing more on legitimate projects rather than outright scams.

But things have changed: Trump verbally supports cryptocurrency, forcing the Democratic Party to change its anti-crypto strategy. Biden has accepted cryptocurrency donations. Now the SEC has dropped the lawsuit against Consensys, effectively recognizing ETH as a commodity.

Now, the short-term future of cryptocurrency will depend on the elections. I like Felix's (Hartmann Capital) analysis in the article below.

Here are the main points.

If Gensler is removed or his power is limited by the courts and Congress, it is expected that cryptocurrency assets will sharply rise by more than 30%, followed by a sustained bull market. If he continues to hold power, a long-term downturn is expected, benefiting law firms, while cryptocurrencies and taxpayers suffer, with only Bitcoin and meme coins relatively unaffected.

Clear regulation could bring about the biggest bull market in history, changing the digital asset market in several ways:

• Shifting from narratives to product-market fit: Cryptocurrency projects will focus on creating valuable products, not just speculation, leading to higher-quality development.
• Clear success metrics: Valuations will rely more on actual product-market fit and revenue, reducing speculation and highlighting fundamentally strong tokens.
• Easier funding environment: Stronger fundamentals will make digital assets easier to finance, reducing the cyclical fluctuations of shitcoins.
• Prosperous M&A market: Well-funded projects may acquire undervalued but valuable DeFi protocols, driving innovation and closer adoption, with some first-tier blockchains transforming acquisitions into public goods to increase network value.

3. BTC Arbitrage Trading: BTC ETF + BTC Shorts

Leverage always finds new ways into the system. Whether it's Grayscale's "widowmaker trades" or CeFi (Celsius, Blockfi, etc.) unsecured loans.

Each cycle mechanism is different. But where is the leverage hidden now?

The obvious target is Ethena's risk-free neutral strategy. As long as the funding rate is positive, everything is fine, but what happens when the funding rate turns negative and USDe positions need to be closed?

Another target is LRT's re-collateralization.

But another target is our beloved BTC ETF buyers.

Spot Bitcoin ETFs have seen 19 consecutive days of inflows, with 5.2% of circulating BTC held by ETFs (although this record has now been broken).

So why isn't BTC soaring?

It turns out that hedge funds are record shorting Bitcoin through CME futures.

A possible explanation is that hedge funds are buying spot and shorting BTC, engaging in a 15%-20% neutral strategy.

The strategy is similar to Ethena's.

What will happen when the funding rate turns negative (because gamblers no longer see a rise and close their long positions)?

Ethena (dominated by retail) and spot BTC + short CME futures (dominated by institutions) would cause a major collapse when these positions need to be unwound?

Concerning. But perhaps there's a simpler answer: institutions are arbitraging the positive price difference (currently at 2.3%) between different BTC spot and BTC futures.

In any case, these new dynamics brought by spot ETFs need close attention, as the so-called "risk-free" arbitrage often turns out to be "more risky" than initially thought.

4. Gamification of Point Farming

Our addiction to points is getting worse, but we don't know how to stop.

Protocols need points to attract initial user bases. They help boost adoption statistics, leading to higher valuations for fundraising.

We're tired of points, but there's no better alternative yet.

Instead, I've noticed a trend of gamifying points, adding extra elements to make the mundane point farming strategy more interesting.

Sanctum introduces Wonderland, where you can collect pets and earn experience points (EXP) to level them up. As a community, you need to band together to complete tasks.

This isn't much different from other point programs, as your airdrop largely depends on the SOL deposited, but… the community loves it!

Sanctum's first season activity for just one month has already boosted people's emotions. I hope to see 0 to 1 innovations in point farming, but even with point fatigue, our addiction to them is too strong.

Instead, I expect more gamification attempts to bring some fun to the farms.

5. Anti-Trend of Low Circulating Supply, High FDV (Fully Diluted Valuation) Issuance

Everyone hates low circulating supply, high FDV issuance. Except for VCs and teams, who can sell at higher prices. Oh, and airdrop hunters, who get more tokens in airdrops.

But retail? No. 26 out of 31 tokens recently listed on Binance are in the red.

Binance used to be the place to buy hot new tokens, but not anymore. Listing on centralized exchanges is a sell event and cash-out event.

Unsurprisingly, Binance recently announced listings at moderate valuations, prioritizing community rewards over internal allocations.

We haven't seen words turn into action yet, but this would be a step in the right direction.

VCs are taking on their due responsibility. What was once seen as a positive signal of large VC investments is now seen by the crypto community as value extraction. The concern is that VCs aim to profit by selling their large allocations, which they acquired at the lowest cost.

Project teams also need to take action to avoid perpetually declining price charts.

Protocols are also experimenting more. For example, Ekubo on Starknet allocates 1/3 of tokens to users, 1/3 to the team, and 1/3 to be sold by the DAO within two months. Not everyone likes the two-month sell-off, but it's somewhat like a community token sale, similar to past ICOs.

Similarly, Nostra on Starknet launches NSTR at 100% FDV, with 25% distributed through airdrops and 12% sold during the liquidity bootstrapping pool period. They call it the fairest release in DeFi, but it raises concerns about low circulating supply tokens (team, VC early cash-out and exit). Nostra states that team and VC tokens will be marked on-chain.

If you see them selling, you better sell too.

We've also conducted 100% airdrop experiments, such as Friendtech and Bitcoin Runes, mostly minted for free by the community (although Runes also allows for pre-mining).

What are the results? Uncertain. But there's hope in this area.

Keep an eye on new token issuance models—a new type of successful issuance could become a new trend in this bull market. If you find one, please share in the comments.

6. McKinsey Entering DeFi

DeFi allows for self-sovereignty, enabling you to own and use your assets regardless of borders.

But DeFi has become very complex! There are many strategies available, and its complexity increases as we want to squeeze every % of yield.

Additionally, governing these increasingly complex protocols requires specific knowledge.

As a result, consulting firms similar to traditional finance have emerged to help protocols with security, governance, and optimization issues. The most notable example is Gauntlet, whose clients pay millions in fees annually.

More importantly, DeFi protocols are adapting, allowing McKinsey in DeFi to manage user assets and/or external risk management.

Morpho Blue's permissionless lending allows McKinsey in DeFi to create markets with any asset and risk parameters without relying on governance.

7. Web2-like Onboarding for DeFi

I really like this one.

While Friendtech may have issues, it has successfully popularized Privy, allowing the creation and management of wallets using Web2 accounts.

During the NFT craze, I helped a friend buy NFTs on OpenSea. Teaching how to use Metamask was a pain.

But now, you can use Privy to create a wallet on OpenSea using email and 2FA codes. Seriously, give it a try. It took me a minute.

Fantasy Top is leveraging Privy and other user-facing applications.

This trend extends beyond Privy.

Infinex, developed by Synthetix, allows wallet creation using keys, so you only need a password manager for the wallet.

Coinbase has launched a smart wallet that can pay gas fees on behalf of users, support batch transactions, and allow wallet creation using Web2 tools.

Now, complex user onboarding is no longer an excuse for lack of cryptocurrency adoption. We just need unique consumer applications.

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