Broad Market 2024/2028 And Beyond.

This essay is a reflection on the current state of broad Digital Asset (aka crypto) market in 2024/2028 and beyond.

There are several reasons behind our decision to delve into the crypto industry as a whole (excluding Bitcoin), but the primary one stems from a strong intuition that we stand at the reflection point of a broad crypto industry adoption.

In our view, we are in a sort of "post-dot-com bubble era", where what's not working gradually become apparent, at least for those willing to see, while successful use cases begin to manifest tangible results and we are able to identify with investable certainty potential trajectory of their development.

Preface: First and foremost, lets highlight a fundamental thesis that encapsulates our fundamental perspective on the industry.

In our subjective assessment (largely contraversial to most market participants), any endeavor to apply blockchain technology in various sectors, whether logistics, identification, gaming, or others, invariably encounters a simple reality -

blockchain's efficacy predominantly lies within financial applications and is inherently bad-suited for other purposes due to its design, specifically its monetary component inherent in any distributed ledger.

Any non-financial application must prioritize speed and cost-effectiveness, becoming exponentially faster and cheaper with increased usage.

Conversely, blockchain possesses diametrically opposite traits - its [VALUE = security and decentralisation] MUST grow in line with scale and usage, thus ensuring the long-term integrity of recorded (on-chain) data, what's called "security budget", which in turn entails increased expense on every additional interaction.

While this dynamic suits the financial realm admirably, it proves less conducive for other domains.

As evidenced in experiments in fields like play-to-earn and move-to-earn, hence monetary incentives boosts early adoption those mass use cases don't scale, exactly because of what we have just described - blockchains don't become exponentially cheaper and faster with scale.

At least that's true for the current nascent stage of the industry (with less than 2-3 billion users), but likely in the foreseeable future, scalability challenges persist indefinitely.

Bitcoin and Beyond.

For many years, we exclusively focused on Bitcoin because our stance have consistently been that almost all tokens are securities.

Even Layer 1 (blockchain) tokens, though possessing certain utility or application such as gas fees, fundamentally resemble shares or stakes in a company or project.

Other token functionalities, like voting rights or point systems, merely serve as veils to obscure their true essence - mechanisms for capital-raising / stake in venture. Tokens beyond the top hundred, numbering 19,900+, essentially function as casino chips and nothing else.

That's the hard reality. But real problem is not that, but rather industry's reluctance to acknowledge this reality. Thus tokens and, consequently, the industry itself, face an uncertain future until such recognition occurs.

Combining this with the aforementioned preface, a disconcerting picture wherein blockchain excels primarily in financial applications while the industry resists integration with the traditional financial realm and regulation, we now have described the full picture of current state of affairs in crypto industry. At least how we see it.

Additional note.

There exists a viewpoint that blockchain doesn't need traditional finance industry integration, and that blockchain should organically expand with assets, eventually surpassing and replacing traditional finance in size and scope.

While this trajectory is plausible, it presents a rather pessimistic scenario in our subjective opinion, with Bitcoin emerging as the sole king (once again).

In our opinion, new assets (tokens), have failed to surpass the market size of online gambling and gaming, mainly because

crypto industry continuously pretending be anything else: currency, loyalty points, voting etc., but not a security what it really is.

Yes, we see strong use cases like Stablecoins, potentially burgeoning into a trillion-dollar market soon, together with NFT activity which adds a layer of excitement.

However, if tokens persist in regulatory ambiguity, existing within the grey zone, their prospects pale in comparison to the traditional finance market which is hundreds of trillions of dollars in size.

Nevertheless, we harbour a suspicion that traditional finance entities appreciate the programmability and potential of blockchain technology, with several major players like BlackRock and Franklin Templeton eager to reshape the landscape.

Thesis Beyond Bitcoin.

With the institutionalization of Bitcoin, by which we mean the acknowledgment and adoption of Bitcoin by the traditional financial system (TradFi), rather than just price action, TradFi players are gradually grasping the immense power and potential offered by a distributed system like blockchain technology.

To us, the future where the entire financial ecosystem will migrate to blockchain appears inevitable. And by entire, we mean every asset class imaginable, from mainstream currencies to the most "esoteric" financial instruments. The scale of this market is in the hundreds and hundreds of trillions of dollars.

The only lingering uncertainty is what form this future will take.

With the recognition of the technology and the engagement of TradFi players in the arena, it's evident that the race has begun. It's now imperative to delve deeper into this space to make well-informed investments with manageable risk.

What constitutes the investment thesis?

If we accept the premises outlined in the initial part, we can now start recognizing assets with genuine utility and real use cases. We can also recognize areas without any utility and use cases - developments without future.

This understanding of current state leads to crystallized questions crucial to answer for successful investment in to crypto industry:

(a) What infrastructure do TradFi players require to transition existing assets onto blockchain?

(b) Which existing players in the crypto market can fulfill these requirements?

(c) What components are still lacking and need development to materialize this future?

The answers to these questions hold tremendous value, as it's evident that the entities emerging as winners in shaping the infrastructure for this envisioned future will evolve into multi-trillion-dollar enterprises.

PS: Is there life beyond TradFi or, in other words, will blockchain give rise to a new financial system?

The succinct response is no. HOWEVER! Just as the internet revolutionized numerous industries beyond recognition, digital assets, or simply crypto, will revolutionize the financial institutions to the same extent.

Yet, this doesn't negate the fact that entities like Uniswap operate as financial service providers. The question remains as to how the regulation of such activities will evolve, but evolve it undoubtedly will.

Additionally in this new paradigm, there will undoubtedly emerge financial instruments that were previously inconceivable, facilitated by possibilities of the new technology.