Analyzing the current state of the crypto world and 7 future trends

Original title: "The current state of the crypto world and 7 future trends"

2021 has been a pretty remarkable year in terms of the evolution of the cryptocurrency world: we have seen the rise of many blockchains challenging Ethereum’s dominance, multiple currencies hitting all-time highs, a NF boom, new milestones, and steps towards actual mass adoption of cryptocurrencies.

CoinGecko publishes quarterly reports that highlight trends that are shaping the future of the market.

Here’s a quick breakdown of the 7 most important characteristics that describe the current state of the industry. To understand where it’s headed, it’s important to understand the following trends:

The rise in cryptocurrency market capitalization and the start of altcoin season

In April 2021, the value of the cryptocurrency market exceeded $2 trillion for the first time. The indicator almost doubled in a short period of time, driven by the rise in the prices of Ethereum and Bitcoin. The prices of both tokens set new all-time highs, and the market capitalization of Bitcoin remained at the $1 trillion mark for a week.

Bitcoin continues to dominate the market, gaining 65.2% share, but the indicator is down 5.7% from the previous quarter. The current trend is the rise of altcoins, and the market is entering the altcoin season. The main indicator of altcoin dominance in the market is the decline in Bitcoin's market value relative to the total market value of other crypto assets, which leads to a surge in altcoin prices. Therefore, this may be a good opportunity to diversify your altcoin portfolio.

Bitcoin hits new highs

In the first quarter of this year, Bitcoin’s price returned 103% and hit new all-time highs several times. The main drivers of Bitcoin’s new milestones are:

• The listing of Bitcoin on an exchange-traded fund (ETF) introduces an additional investment vehicle for both institutional and retail investors.

• Institutional investors and public companies entering the market buy Bitcoin as an inflation hedge (public companies hold 0.95% of the total supply). Coinbase's IPO and general acceptance of the crypto market.

• Visa, Mastercard, and PayPal use cryptocurrencies and support crypto payments.

• Rising inflation.

These factors indicate a growing demand for Bitcoin, while the coin supply remains limited at 21 million.

DeFi Market Cap Growth and the Rise of DEX Coins

Since the beginning of the year, the market capitalization of DeFi has increased by 382% to a record high of $95.7 billion. The total value locked (TVL) on Ethereum and Binance Smart Chain has reached $72 billion.

DeFi’s continued growth in Q1 correlated with corresponding growth in other sectors within DeFi. During this period, Ethereum stablecoin supply nearly doubled, DEX trading volume grew 2.5x, and total outstanding loans grew 3x.

About 50% of the total DeFi market cap is held in DEX native tokens such as UNI, SUSHI, and CAKE. All three tokens have seen significant growth in the first quarter. For example, on January 1, the price of one CAKE was about $0.64, and at some point in time, the price rose to $44.18.

The multi-chain future of cryptocurrency

The multi-chain model continues to gain popularity. As a result, projects are escaping the rising costs on the Ethereum network and exploring alternatives and new audiences.

• Projects like SushiSwap, Tether, bZx, and others are entering the Avalanche ecosystem.

• Many companies are preparing to launch on Polkadot.

• The Fantom ecosystem is growing and welcoming new platforms.

The multi-chain nature of the project is often seen as the future of blockchain technology. That is why projects that enable interoperability and free flow of liquidity within several blockchains will continue to grow and gain more users.

Binance Smart Chain is slowly eating into Ethereum’s market share

Binance Smart Chain (BSC) became the second most active blockchain in the first quarter of 2021, with a 61% increase in user base. Blockchains are reaching peak activity, which can be illustrated by many indicators:

• The number of active wallets increased by 50% month-on-month.

• The average number of active wallets per day reached 105,000.

• BNB, the network’s native token, became the third-largest cryptocurrency by market cap and hit an all-time high of $690.93.

The BSC ecosystem continues to grow and expand, but dApp developers remain heavily focused on DeFi. This provides many opportunities for projects to find their niche - with many joining the network specifically for this purpose.

Developing Ethereum Scaling Solutions

The growing interest in DeFi and crypto in general has highlighted the well-known issues Ethereum has experienced with scalability and network congestion.

Due to high demand, gas fees have risen by nearly 400%. To deal with this problem, Ethereum introduced layer2 solutions. Currently, there are four major scaling solutions: Optimism, Polygon, ZK Rollup, and xDAI.

• Projects such as Uniswap and Synthetix have chosen Optimism.

• Popular NFTs like OpenSea and Decentraland migrated to Polygon.

• Balancer and Cuve are working on ZK Rollup solutions.

• xDAI attracts smaller projects.

Going forward, projects must consider the technical characteristics of already existing layer 2 solutions and services. Many projects will likely follow Uniswap and Synthetix in staying connected to greater liquidity and larger projects.

NFT Market Booms

The NFT market exploded in early 2021. The total market value of the NFT market reached US$27.9 billion, accounting for 10% of the global art market sales.

• The largest proportion of NFT sales comes from collectibles and artworks such as Cryptopunk, Hashmasks, and Beeple.

• Sports is the second largest category. Some popular titles are NBA Top Shot and Topps MLB.

• NFT games based on the Enjin and Ultra platforms, such as Axie Infinity, account for a large portion of sales.

• Sales in the Metaverse, an alternative digital reality where people can play, work and buy goods, accounted for 8% of total NFT sales.

The interest in the NFT product market is not going to fade anytime soon. Famous musicians, artists, and athletes have all joined the craze. In addition, people are selling NFTs for charity and reselling artworks for millions of dollars. The key here is that any project that wants to stand out must have a unique product or solve a problem related to NFTs.

Summarize

The beginning of this year has seen many changes in the market, bringing more on-chain users and new blockchain use cases. However, most of the problems faced by all users and dApp developers are the same: scalability, interoperability, user experience, token price stability, etc. Considering the number of projects and new names emerging every month, the way for companies to break through is to solve the problems that all market participants are struggling with.