# Q1 2022’ Report Notes By [Scuuu](https://paragraph.com/@scuuu) · 2022-01-02 --- ![](https://storage.googleapis.com/papyrus_images/5a37385d37b78e0c7ae260baae04beee4fb5478c3aa7875a2f7e9b0a165d8f2c.jpg) Noted Picks for Q1 (and beyond) ------------------------------- ![](https://storage.googleapis.com/papyrus_images/e4589e30c47fc713bd75ddfdac394f7c15b953250c390e36479cb3719537f906.png) **_Generally speaking, the lower the rank/market cap of a crypto relative to its peers in the same category, the more room it has to grow if you believe it to be mispriced for example. ETH/BTC are the two largest cryptocurrency by market cap and so the aim is to try to outperform both (with the expectation that their marketcaps mean less room for growth)._** ### Takeaways from ‘2022 main trends’ * Continued trend in multi-chain DEFI * Modular blockchain architecture closer to mainnet * Emergence of \*successful\* play-to-earn economies * Everyone <> Metaverse ### Devs in Crypto * Talented web2 developers jumping over to web3 companies/projects * Languages more non-crypto native and traditional developer friendly being used * Blockchain infrastructure is overlooked and is a space for developers to grow * Infura for Ethereum <> AWS * Pocket Network! ### Layer 1s and IBC * **Solana** * SBF and Alameda backing * Protocol innovations allow really fast transaction processing (resulting in a v.good end user experience) * EVM Compatibility soon? * Pyth Network. The oracle for Solana has prominent backing from TradFi * Critique has been connection to VCs and Billionaires, Could also be seen as open endorsement * **Avalanche** * Strongest EVM chain * Best user experience out of all L1s * Potential for future subnets with different VMs makes it a standout among L1s * Blockchains deployed within their own subnets with 4k tps (transactions per second) sub-second finality * **Terra Luna** * The only blockchain with a native decentralised stablecoin * Built on the Cosmos SDK * Focuses on its stablecoin development and developing connections with dApps connected to other Cosmos chains * Best Tokenomics of any L1; as stablecoin tokens demand increases Terra native token is burnt to keep the peg at $1 * Market cap only $10B (Comparatively cheap) * Strong cross chain partnership developing (Solana, Near, Harmony Protocol) * Zs favourite play of the larger L1s going into 2022 * **Cosmos** * Most misunderstood ecosystem in crypto space * Designed from the begin with the idea of decentralisation and modularity * Chains are built with this chains SDK * Cosmos chains are connected by IBC * Should see an increase in usage with the ETH <> IBC bridge being setup * H1 this year include Umee, Shade protocol and Astroport as a first test (ones to watch) ### Modular Blockchain and ETH 2.0 * Execution, data availability and consensus, and settlement - The three layers of monolithic blockchains * Modular blockchains aims to take each of these as specialized chains * Monolithic blockchains are susceptible to bottlenecks when user growth accelerates so scaling crypto is going to require modularity * Market reflects the sentiment by the growth in other L1s and their usage * Eth is a monolith moving towards modularity * The roadmap is to utilize ETH as a settlement and data layer with L2 scaling solutions to handle transactions (zkrollups and optimistic rollups) * Favourite project focusing on the data availability layer is Celestia ### Play-to-Earn * **Axie Infinity** * First crypto asset to create an in-game ecosystem that millions of users interact with every day * People in the Philippines were making more playing the game than their actual jobs * How are these ‘in-game’ economies kept profitable long term is the questions * **NFTs** * We saw a lot of growth in 2021 around NFTs * Next we should see NFTs which provide utility to users * The possibilities for NFTs are only at surface level atm with 2022 expecting to bring out a lot of definitive players in the scene long term providing real value * **DefiKingdoms** - The 🐐 * Project most bullish on for 2022 (me to homie) * Defi + NFTs + Multichain * Competing for Axie on in game volume with a fraction of the user base * Decentralised exchange & NFT PVP game with quests, heroes, summons (PVP coming soon) * Liquidity providers are given the majority of the initial token distribution (no early VCs or seed rounds) * Active players on harmony will receive airdrops ### Quarter 1, 2022 Playbook * Combination of: * Layer1s * Layer 2 Scaling Solutions * Blockchain Middleware Infrastructure * Defi + Metavers plays * Largest positions Q1: * Jewel LPs * Near Eco * Cosmos Eco * $Near ecosystem and its 800m fund should do v.well * Cosmos has many development milestones in Q1 * Blockchain Infrastructure and middleware are among the least spoken about sectors * Pocket Network * Arweave * Aleph.im * If wrong on how bullish 2022 should be the best hedge is to short Bitcoin/Ethereum on resistance within the current range ### Portfolio Allocation * **Layer 1s / Layer 2s** * **NEAR Protocol** * Sharded Proof of Stake layer 1 blockchain * No media hype as of yet * Focused on usability * Feed abstracted away from users and allows for a smooth onboarding via further abstraction around the confusing parts of blockchains/wallets etc * **Aurora** * High performance EVM built on the Near Protocol Blockchain * Most activity on NEAR is on AURORA as of now, this will change with the utilization of the $800m fund * **Octopus Network** * Multichain network to create appchains which utilize the network for security * Set of smart contracts within the Octopus Relay on the Near Blockchain * Structure similar to Polkadot with much less fees * Will be IBC compatible soon * Has a lot of potential upside for multichain collaborations * **Metaverse / Defi** * **Defi Kingdoms (JEWEL - 🐐)** * At its core it’s decentralized exchange on the Harmony ONE blockchain * User can provide liquidity and earn between 400-600% APR * Fair community launch, no VCs or seed round * 37% / 63% unlocked to locked rate for JEWEL earned via providing liquidity (Currently. APR eventually drops and the unlocked rates increase with each Epoch passed) * LPs (Liquidity Pools): * **Jewel-Matic** * Polygon/Matic is the leading research team building zkRollups for ETH 2.0 * Monthly Chart ATH close * Consolidation for second half of 2021 after breakout above previous yearly all time highs in May * **Jewel-Avax** * Detailed earlier * **Jewel-Luna** * Detailed earlier * **Blockchain Infrastructure** * **POKT Network** * Decentralized relay for blockchain API requests * “Uber for servers” * Incentivizes node operators by paying them when devs use their network * More developer join network -> more node operators earn bank -> More node operators join the network * Cheaper experience overall for devs as there’s no centralised overhead for costs * One of the most efficient bets on builder growth, user growth in the crypto space * **Arweave** * Decentralized network focused on permanent data storage * The storage solution for Solana * ALternative to AWS data stores * Bets on infrastructure like this that many application will use/need >> * A more scalable solution than some of its counterparts like Filecoin * AR/FIL could be a good pair to look at for the year * Technicals: * Consolidating over previous year all time highs from may * Re-accumulation before expansion upwards? Could happen soon * **Lido** * Multichain staking solution * Stake tokens, receive tokens that represent collateral, use these tokens across other DeFi ecos * Not much competition and is a first move with speed of execution on other chains * Technicals: * Close to all time lows / testing major support * Devs are deving well and haven’t received the attention they should * **Aleph.im** * Decentralized distributed cloud platform * Compute services, file storage, database hosting * Indexing solution for Solana blockchain * Partnered with Ubisoft for their AAA game * Partnership with Neon Labs (Focused on bringing the EVM to Solana) * Will use Aleph.im as their indexing solution * **Cosmos Ecosystem** * **ATOM** * Native token of the Cosmos Hub * Connects all blockchains built with the Cosmos SDK via its inter-blockchain communication protocol (IBC) * Focused on connecting all Cosmos ecos together * With interchain staking, stakers of ATOM will not only secure the network for the Hub but all smaller Blockchains connected through IBC * Paid out in ATOM AND receive rewards as antive tokens from all other blockchains on Cosmos * **LUNA** * Strongest Alt in 2021 * Focused on building out its DeFi eco & connecting to the rest of the Cosmos eco through IBC * UST growth should accelerate in 2022 * Positioned well for the developing multichain world * **SCRT** * Layer 1 blockchain focused on programmable privacy * Top performer in Q4, relatively low market cap by peer comparison * Should grow loads as an ecosystem in 2022 * Shade protocol incoming as defi hub, Stash Network for NFTs * Defi users <> Privacy * **ANT** * Focused on providing groups with the tools/infra to build their own DAOs * Becoming commonplace and expected to expand in 2022 * **NFTs** * Treeverse * Strange Clan * Aurory Project ### Thoughts on other majors * **SOL (Solana)** * 2 Catalysts in Q1 * Phantom mobile wallet * Neon Labs EVM-compatible implementation * Better r/r plays than Sol for Q1 considering it’s market cap * Technicals: * Current range is re-accumulation before more upside * Sentiment on Sol DeFi at peak lows * Top Sol Project WILL outperform SOL (See recent hackathon for potentials) * Plan is to roll profits into SOL as these catalysts start to appear later in the Q/year * **AVAX (Avalanche)** * Main catalysts for Q1 is Defikingsoms CrystalVale expansion * Has outperformed most other chains for second half of year in terms of user onboarding * AVAX/Crystal pool after Single-Staking JEWEL as largest Q2 positions * **BTC (Bitcoin)** * The riskiest asset for non-crypto natives BUT considered the risk-off asset for those in Crypto * Bitcoin Dominance as a metric for risk on/risk off * Q4 BTC Pushed it’s all time high twice * All BTC breakouts have aligned with a local low on the ETH/BTC pair * TradFi warming up to BTC -> Long term BTC holders warming up to Alts * Holds value as a long term multi year investment so always keep/build the stack but it’s better served to hedge downside during bull markets * Expectations: * BTC ranges between 42-53k * Most bearish scenario is a 42k break nd potential 27k rest (The absolute floor scenario) * Likely scenario is a range in this area before push for new ATH * **ETH (Ethereum)** * By midyear ETH should be what it considers a functioning modular blockchain stack * Interesting to see if alternate L1 users will use rollups once rolled out over the chains they’re currently used to * Unlikely ETHs scaling solutions take this market share from other L1s that have onboarded non crypto users (Unless UX is vastly different/improved) * New retail chasing 100x aren’t using Ethereum or won’t be using it as much for a variety of reasons (cost, speed, opportunity at present on other L1s) * The claim to fame of security and decentralization isn’t a good enough sell to onboard new users * This may attract non crypto boomer but won’t attract a large portion of new users/investors * Reasoning on  why it isn’t a great trade * Market cap MUCH larger than other monolithic L1s with the worst UX of them all * L2s that perform best will have tokens available from Centralized exchanges * Holding these tokens should outperform holding spot ETH * ETH is not optimized for modular architecture * ETH present day is a monolith pivoting towards a settlement and data availability layer with rollups for execution layer * Celestia as a team arte focused on being a data availability layer and were built for this from the ground up * NEAR similarly has been built from the ground up with one thing as their focus * Once ETH transitions to a settlement layer some of its market share will be taken by other parts of the ecosystem. Expect more value to go to these other layers as they’re starting from 0 * Future of DeFi will be multichain! * More likely we have multi chain eco of networks all functioning together than one solution working well with all others failing ### Other plays not mentioned: Curve Wars: CV / CRV / YFI / BTRFLY SYS+MUTE Spell & MIM + Sushi FXS INV GMX / dYdX / PERP / MNGO / DRIFT Protocol DPX / RBN / PsyOptions Dusk Metis Magic (TreasureNFT) Ninja on SOl Levana Protocol ### Some BOLD predictions for 2022 that piqued my interest: * **DeFi Kingdoms in Top 10 by market cap 👀** * **SOL-DeFi outperforms SOL by a wide margin 🤌** * **SoLunAvax flips ETH and stays there 🚀** * **ATOM $100B+ Market cap (Sorry wut ?!)** * **DeFi Options gain a lot of traction 🚜** --- *Originally published on [Scuuu](https://paragraph.com/@scuuu/q1-2022-report-notes)*