Author: Ryan Selkis, Founder and CEO of Messari; Translated by: Cryptonaitive
Messari founder and CEO Ryan Selkis recently tweeted to summarize the macroeconomic and encryption industry conditions in the first half of 2023. He said that he has never been more optimistic about cryptocurrencies than now, and the second half of 2023 will be a grand second half. He also pointed out 10 people and 9 products worth paying attention to in the second half of 2023.
1. Everything is about the macro (Bitcoin, ETH), not "cryptocurrency" (DeFi, L2, NFT). Unless this is your first cycle, this isn't surprising. The good news: Bitcoin dominance tends to lead recoveries, and we’re at recent highs.
2. ETH successfully "merged" and completed the "Shapella" upgrade, ushering in a new era for ETH as a hard currency and net deflationary asset.
Despite this, I still place more weight on a historically high signal indicator, namely the ratio of market value to realized value, and BTC is still slightly lower than ETH.
3. Kaiko created a liquidity ranking that combines market depth (price slippage) and exchange trading volume. The difference between their liquidity ranking and market capitalization reflects my personal "overweight/underweight" list for other major assets. (Not financial advice)
4. Bitcoin spot ETF itself is not important, or at least its impact is easy to price in in advance: retail investors can rush in before the ETF is approved, because the structural shift in demand will come from new institutional credibility (BlackRock) rather than ETF flow. See the prediction below:
5. In terms of market liquidity, Bitcoin is unique, especially in the perpetual contract market. The king is still the king. The "net preference" of Bitcoin is growing rapidly: from 3:2 to 10:1.
6. US SEC Chairman Gensler is right: BTC and ETH account for 75% of the market share. But his approach to restricting other investments is wrong. Of the 26,000 stocks traded since 1926, 86 account for 50% of the US market's gains. Indexes can help investors get balanced investments:
7. An unelected, corrupt bureaucrat should not be allowed to be blocked from participating in a trillion dollar market with 190,000 employees, including 60,000 Americans.
Global cryptocurrency companies are valued at $180 billion. The US should win this market. Long US, India, UK.
Narrative Power
Cryptocurrencies must be placed in a macro context, and they only matter when it comes to the major medium-term trends that matter (lack of confidence in central banks; role in an AI-driven world; global economic Balkanization in the context of “great power conflict”).
8. Macro: The most likely scenario is that the Fed capitulates and shifts monetary policy, otherwise retail and commercial real estate debt markets and bank solvency will be under too much pressure. No one can buy Treasury bonds except the Fed. The printing press will come back.
9. Geopolitics: “Non-aligned” countries (independent countries or countries competing with the United States) will turn to “external currencies” such as gold and cryptocurrencies and diversify their reserves.
Some genies (abuse of sanctions) can't be put back in the bottle. Long live Lord Zoltan:
10. Artificial Intelligence: In an era of digital abundance, it is critical to provide reliable, global, and mathematically scarce technology.
Furthermore, AI will be the ultimate driver of cryptocurrency adoption, as crypto is the perfect machine-to-machine currency. If crypto and AI grow in parallel… watch out.
10 people to watch in the second half of the year
11. Paul Grewal leads the cryptocurrency fight against the U.S. government on behalf of Coinbase. Coinbase can maintain its cryptocurrency presence in the U.S. until the 2024 election. After that, our prospects depend on the courts and Congress.
12. Then there is Dante Disparte, Chief Strategy Officer at Circle. In terms of the bipartisan stablecoin legislation we see this year, it will largely depend on Dante and his team.
13. The third person to watch is a crypto PAC leader who could end up helping to win several key House and Senate seats in swing states in the 2024 elections. The PAC needs about $50 million.
14. If 2023 is the year cryptocurrencies sue the government, the most important lawyer is not Paul Grewal. It’s Stuart Alderoty. Ripple’s case against the SEC will have a huge impact on the future of non-Bitcoin digital assets and their trading in the United States. The verdict date is approaching.
15. Winklevoss Twins + Barry Silbert: The closure of Genesis, the settlement of Gemini Earn customers, and the fraud charges against DCG will lead to a long and ugly legal battle. That said, this is just a sideshow: DCG's fate depends on the GBTC ETF conversion.
16. The UK is taking cryptocurrency seriously. Maybe that’s because they have a Prime Minister, Rishi Sunak. In his previous role as UK Chancellor of the Exchequer, Rishi formed the UK CBDC Task Force and oversaw comprehensive new laws for the UK cryptocurrency industry.
“Where are the builders?” You might wonder why 6 of the 10 people I look at are lawyers, politicians, or active litigants. That’s where we are in this market cycle. But here are four more builders worth watching:
17. Rune of MakerDAO: Rune proposed a ten-year master plan called “Endgame” in the summer of 2022 to simplify Maker’s core governance structure and reduce the protocol’s reliance on centralized collateral (USD stablecoins and RWA caps).
18. Antonio Juliano must also be included, given DYDX’s ambitious transition from Ethereum Rollup to Cosmos-powered application chain.
19. CZ (and his remaining team), rumors are rife around possible DOJ action against Binance, especially after the CFTC/SEC actions and some executive departures. I am 44% confident CZ can get through this in 2 ways: 1) a record $1B+ fine, and 2) further decentralization.
20. Larry Fink, CEO of BlackRock:
A shift from five years of crypto skepticism; CEO of the world’s largest asset manager; Joins BTC spot ETF race with 575-1 record; “Digital gold”; “Tech is awesome”
This is bigger than Paul Tudor Jones’ 2021 endorsement.
9 products worth watching in the second half of the year
21. Firedancer is a Solana validator client developed by Jump Crypto, which can enhance Solana's scalability, reduce latency, increase client diversity, and have amazing TPS potential. It is a contrarian bet on "modularity" and "Rollup".
22. Sovereign SDK is a flexible, chain-agnostic Rollup development framework and the first major project focused on connecting different types of zk-rollups. Flexibility. Customization. Interoperability.
23. BASE from Coinbase, built on OP Stack. It doesn’t have a token yet, but Coinbase (with 110 million users) entering the Layer2 ecosystem is a major event for on-chain finance.
Coinbase’s “TVL” is 80% higher than DeFi.
24. Uniswap v4’s Hooks are customizable smart contracts with specific integration rules for specific protocols. They help enhance network effects. For example, Uniswap v4 plans to use hooks to develop from a DEX to a liquidity platform.
25. The ETH staking ecosystem is exploding. If the ETH staking rate reaches 50%, it will be a $3-5 billion revenue opportunity, and centralized services and liquid staking services will compete. My watch list is: Eigenlayer, Alluvial, Lybra.
26. Decentralized Database (Ceramic + Space & Time): Complements the smart contract platform and decentralized file storage network, and enables better data composability, ownership and verifiability, and Web3 native access control.
27. Lens (and Farcaster): An early leader in decentralized social use; ranks among the best in terms of composability and functional potential; may be a turning point in the need for decentralized social as Web2 giants (Twitter and Threads) fragment our social graph.
28. Safe (wallet) will benefit from ERC-4337 (account abstraction), which will have an impact on the early wallet industry. These early smart contract wallets currently have a value of about $35 billion on the Ethereum mainnet alone, and the adoption rate is increasing every day.
29. XMTP is building the messaging layer of Web3. There is a huge demand for a general messaging protocol and network that allows end-to-end encrypted messaging between crypto addresses. To date, nearly 1 million XMTP inboxes have been generated.
