Markets
Crypto’s Disruptive Long-Tail Trends
The first half of 2024 marked the start of a new crypto adoption cycle. The long-awaited approval of Bitcoin ETFs was a deciding factor for this new cycle, along with the strong price momentum that allowed Bitcoin to reach a new all-time high. This not only pushed Bitcoin back to the threshold of institutional adoption, but it also positioned the market for another potential bull market cycle.
These cycles were marked not only by the introduction of new projects, from Bittensor and ZKSync to Bonk and Dogwifhat, but also by strong price appreciation of many digital assets. With a higher beta than Bitcoin, assets of different sizes and sectors often experience greater volatility, reflecting investors’ expectations for higher returns.
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Several trends are shaping the altcoin market in 2024 and emphasize innovation, sustainability, and the exploration of new use cases, thereby boosting the growth of altcoins.
Re-staking has become a notable vertical for this new cycle, which involves continuously staking rewards earned from staking tokens, thereby increasing returns over time. Projects like EigenLayer (EIGEN), EtherFi (ETHFI), and Renzo (REZ) have implemented mechanisms that encourage users to reinvest their staking rewards, thereby increasing their stake in the network and contributing to its security and stability.
Altcoins are increasingly adopting Layer2 scaling solutions such as Optimistic Rollups, zkRollups, and side-chains to improve transaction speeds and reduce fees. Projects in this category include Arbitrum (ARB), Optimism (OP), Polygon (MATIC), Starknet (STRK), among others. This trend aims to improve user experience and attract more users to these projects’ platforms.
Interoperability between blockchain networks is also a growing trend. Some projects collaborate and build bridges to enable asset transfers and communication between disparate blockchains. This trend aims to create a more interconnected and efficient blockchain ecosystem instead of many different siled blockchains. Examples of such projects include Axelar (AXL), Across (ACX), and Stargate (STG).
With the rise of layer 2 solutions and interoperability, modular blockchains represent the next phase in the evolution of digital assets. With their adaptable and customizable design, these provide a flexible framework into which developers can plug modules such as consensus mechanisms, token standards and governance models. Blockchains such as Celestia (TIA) and Dymension (DYM) use this modularity to improve scalability, interoperability and security.
Parallelized Ethereum Virtual Machines (EVMs) decompose smart contract execution into parallel tasks, harnessing the power of multiple nodes simultaneously. The most popular parallelized EVMs, such as Sei (SEI), Canto (CANTO), Nomad, and NeonEVM (NEON), attempt to do this by processing transactions off-chain and then aggregating them on the Ethereum mainnet. This approach significantly improves transaction throughput and reduces latency, addressing Ethereum’s historical limitations.
Current crypto market prices seem to indicate that a bull market is underway, mega-caps may still have room to grow before smaller coins outperform the rest of the market. However, this phase may not be far away and, once it begins, being under-positioned could prove difficult and potentially costly, especially as institutional adoption grows and the need to generate alpha increases.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.