However, before diving into the 2022 crypto theses, we need to first understand the past and look at how the crypto world has changed over this year.
As you probably know, 2021 has been a very exciting year for the crypto world. it has been punctuated by a bull run, an alt season and a lot of innovative projects.
In order to structure this article in an organized and reliable way I will rely on Messari’s report published a few weeks ago (because who am I after all?) .
According to crypto.marketswiki “Messari is a startup company that seeks to promote transparency in the cryptocurrency space by creating an open-source data library for "cryptoasset" or digital asset companies. This library can be used by researchers, investors, and regulators. Co-founder and CEO Ryan Selkis has suggested the project may eventually be used to create a self-regulatory organization (SRO) for cryptocurrency.”
The year 2021 has seen the rise of many trends such as web 3.0. It now allows any user to claim ownership over their article, image, photo, virtual object, etc. which was not possible until now. Nevertheless, the year 2021 wasn't just about that: we also saw the surge of different Layers, Protocols, DAOs, NFTs. Today, a decentralized finance or NFT expert can make just as much money as an Investment Banking Analyst. Venture Capitalists have understood this well and are now rushing to the cryptocurrency industry where the business opportunities seem endless: according to Messari, in 5 years crypto will account for 7% of their global portfolio size.
Still, 2021 did not mark a $100,000 Bitcoin, nor even a flip with the ETH (which will soon become ETH 2.0 or consensus layer).
Ultimately 2021 also witnessed the introduction of many new users and investors in the crypto market thanks to the implementation of ETFs as well as IPOs that enabled democratization and high visibility to a sector that was still disparaged. Crypto world is progressively offering more conventional financial products.
2021 signals a massive institutional adoption of Bitcoin by countries such as Salvador or companies such as Tesla or Microstrategy. Major currencies such as euro and dollar are experiencing high inflation since Covid crisis (over 6% inflation in the US) which is leading to an interest in other types of assets such as cryptocurrencies.
Everyone was expecting a flip between Ether and Bitcoin this year, but everyone was wrong. Messari points out there is no comparison to be made between both: Ether is useful for computation and application production while Bitcoin provides the safest possible basis (Proof of Work) and virtual gold. ETH aims at a simple language and offers a toolbox to a set of entrepreneurs and individuals for the creation of applications. It is therefore senseless to compare both of them when they have nothing in common! We don't compare apples and pears after all!
Anyway, it will be interesting to compare ETH to other Layer 1 once the update is done on ETH. Besides, it is also good to note that 1.5% of BTC are currently used on the ETH blockchain.
Late introduction of ETFs almost 10 years after the creation of BTC has limited the power of Wall Street: only 5% of BTC is currently contained in ETFs.
Until May 2021, the calculation capacity to verify each cryptocurrency transactions was mostly in China. In fact, 70% of the hashrate was located in China. However, in May 2021, China banned miners who gradually relocated to North America and Europe. Although China recently ruled against crypto mining, CEO Ryan Selkis believes that China will reverse its decision and accept mining again in the near future.
An interesting (and funny?) story is that during rainy periods in China, miners would rush to the hydroelectric dams that had a surplus of electricity in order to benefit from cheap electricity.
There are three ways to optimize the crypto mining energy cost:
Use the energy waste surplus: gas leaks in the US over a year would allow crypto mining to run for that same period
Mining could justify the creation of green energy plants: the financial component of mining would make a large number of green projects viable
Mining heat recovery for individual or collective heating
Moreover, if BTC had a market cap of $20 trillion, it would consume 1% of the world's energy (which is significant). It seems then essential to allocate environmental budgets related to any future mining projects in order to make cryptocurrencies viable. However, BTC today consumes less than 0.1% of the world's energy consumption.
The Proof of Stake works because the Proof of Work worked before. The Proof of Work makes a calculation regardless of who holds the money. However, the Proof of Stake allocates more power to key holders. Therefore, in order to properly work, it will be necessary in the future to have many different validators over the network. Indeed, the same large validators often appear (such as Binance, FTX, etc.) despite a necessary diversity to ensure the good health of the system.
Of course not! we will cover in the next article at least four new subjects mentionned in the Messari’s report:
USA legislation
Infra
Central Bank Digital Currency
and many other topics…