💥 Spot Bitcoin ETFs: The Hype and Where to Find Value in the Crypto Ecosystem

According to Hedgehog CEO Colton Dillon, Decentralized Physical Infrastructure Networks (DePIN) and Real World Assets (RWA) have great potential for long-term success, although most market analysts are currently fixated on bitcoin ETFs.

Crypto Innovations to Look Out for in 2024, Going Beyond ETFs

It’s a brand new year, filled with endless possibilities. But amidst the buzz, one topic seems to dominate conversations: the imminent approval of spot bitcoin ETFs. Sure, it’s exciting to think about retail investors gaining exposure to digital assets without diving into the complexities of crypto. But let’s face it, all the alpha has been scraped clean at this point.

So, where should we be looking for value in the cryptocurrency ecosystem? As believers in the fundamentals of various digital assets, like we do at Hedgehog, we find it helpful to craft compelling narratives around collections of tokens and identify key performance indicators that will drive demand for these assets. While we must acknowledge that past results do not guarantee future returns, we can learn valuable lessons from 2023 to uncover hidden alpha in the year ahead.

2023: Lessons in Unrecognized Alpha

The brilliant minds at CryptoKoryo have put together an impressive Dune dashboard, allowing us to easily monitor the performance of various asset baskets. They’ve even curated sensible defaults to help us visualize our own narratives. 📊

In 2023, the big winners included liquid staking derivative tokens on layer 2 protocols (ALCX, ASX, PENDLE), closely followed by DeFi 2.0 protocols (DYDX, FXS, INST). These narratives outperformed simply holding Bitcoin. However, Money Market protocols (AAVE, COMP, QI) and Decentralized Physical Infrastructure Networks (DePIN: FIL, RNDR, DIMO) were not far behind in terms of performance.

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An interesting observation is that these narratives seem to revolve around a combination of leverage and liquidity, essential elements for generating better yields than the 5% Treasury rates we saw last year. These traits are inherently superior when accessed on a shared database and runtime like a blockchain. But the DePIN narrative somewhat deviates from this thesis. Perhaps, alongside other narratives like Decentralize Science (DeSci: VITA, HAIR, GROW) and Real World Assets (RWAs: MKR, MPL, CPOOL), these more technologically and regulatorily sensitive applications are finally hitting their stride with major hardware deployment and licensing milestones, leading to real-world adoption.

Developers’ Oasis: Following the Code

Another area worth exploring is where developers are deploying contracts and turning over token inventory. A significant portion of Ethereum’s volume has migrated to its layer 2 chains, offering faster and cheaper transactions. Some even propose an appchain thesis, suggesting that the future belongs to individual apps that own their own layer 2 solutions, like Coinbase’s BASE. Based on the price action of their hottest assets, Avalanche, Arbitrum, and Optimism have shown strong growth potential.

Remember, Rome Wasn’t Built in a Day

Regardless of the thesis you choose to invest in, keep in mind that research and development efforts can take years to materialize into widespread consumer adoption. While we may enjoy speculating like wild degens, a steady and patient approach can deliver outstanding results in the long run. Just think, you would have had to hold BTC for 15 years to witness its entire growth trajectory! 💪 So, perhaps your next investment thesis will have a similar story.

🎯 Q&A: Addressing Your Burning Questions

Q: Why are liquid staking derivative tokens and DeFi 2.0 protocols outperforming Bitcoin?

A: These narratives combine leverage and liquidity, essential elements for generating better yields when accessed on a shared blockchain infrastructure.

Q: What makes DePIN, DeSci, and RWAs stand out?

A: DePIN, DeSci, and RWAs are at the forefront of innovative and sensitive applications. With significant hardware deployment and licensing milestones, these narratives are gaining real-world adoption.

Q: What are the promising layer 2 chains to watch?

A: Avalanche, Arbitrum, and Optimism have shown strong growth potential, attracting developers and offering faster and cheaper transactions.

Q: Is long-term patience necessary in the crypto market?

A: Absolutely! Research and development efforts take time to materialize into widespread consumer adoption. A steady and patient approach can reap substantial rewards in the long run.

🔮 The Future Outlook: Where Does It Lead?

As we look ahead, we can expect the crypto market to continue evolving at an exhilarating pace. New narratives will emerge, and investment opportunities will present themselves. By staying informed and vigilantly analyzing trends, we position ourselves to make well-informed decisions in this ever-changing landscape.

Are you ready to navigate the twists and turns of the crypto universe? It’s time to put your thinking cap on and dare to explore new frontiers.

References

1. CryptoKoryo Twitter
2. The Dune Dashboard
3. Crypto Long & Short Newsletter
4. Avalanche Blockchain
5. Arbitrum Official Website
6. Optimism’s Gateway to a Scalable Future
7. Liquid Staking Protocols Explained
8. CryptoQoryo’s Report on DeFi 2.0

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