November 24, 2021
The Markets Are at a Pivotal Point – Waiting For the Next Big Catalyst
Introduction
Since the “mini bear market” of this summer, the cryptocurrency markets have certainly become more interesting than before. While Bitcoin used to dictate each and every move of the markets, now, we see subsectors within the crypto space do their own thing: Meme tokens, L1s, and especially gaming and metaverse projects are the best examples of increasingly uncorrelated behavior and decoupling from Bitcoin.
Does that mean that projects fitting these narratives will go up only? Of course not, but instead of just following Bitcoin’s lead, these subsectors have their own market cycles whose understanding is critical to every crypto investor’s success!
Is the Metaverse Narrative Overheating?
Metaverse and gaming projects have really been on a tear in the last few weeks! 🔥 Many projects in this niche have experienced double-digit gains on almost a daily basis and today, 6 out of the top 10 performers are from the gaming and metaverse category… This is certainly a strong validation of the metaverse trend and shows how big this space will become in the future.
Is now an opportune time to jump into metaverse projects? While there is certainly tremendous potential for long-term growth, In the short- to mid-term we have to ask ourselves: How near are all of these projects to fulfilling their visions? The reality is that many projects are still months and years away from reaching their goals and building fully functional metaverse and gaming experiences. There are some notable exceptions though like the Sandbox which is very close to revealing a fully functional gaming metaverse…
Overall, with metaverse FOMO being rampant right now, it might be wise to take a step back, evaluate projects on an individual basis and take some profits if you feel like valuations and fundamentals have diverged somewhat – at least in the short term. Just betting on projects with the term “metaverse” on their roadmap might soon not be a viable investing thesis anymore – a reality check will come sooner or later.
Play-to-earn projects like Axie Infinity in particular follow their own adoption and economic cycles. Here is an interesting visualization:
NFT Bridging – an Increasingly Important Subject
The NFT market has shown us in the last few months that despite cheaper alternatives and the fact that a big part of the NFT community is being priced out, “blue-chip” NFTs still mostly live on Ethereum’s L1. While more and more gaming projects and emerging NFT projects are choosing to deploy on cheaper chains like Solana, BSC, and Polygon, or L2s like Immutable X, so far, liquidity fragmentation has been an issue that made it hard to accurately value NFTs that are not on Ethereum.
Hence, there is no doubt that just like bridges are playing a huge role in the “fungible” token space, bridging will also be of vital importance in the NFT space which is increasingly becoming multi-chain! Thanks to bridges, NFT projects can both leverage Ethereum as a core settlement layer and alternative L1s and L2s for daily transactions and gaming activity. All chains will need an NFT bridge but at this point, it is hard to pinpoint the winners of this category. It's time to be on the lookout.
Inflation Is Everywhere – Act Accordingly
Inflation has been the central topic of conversation in financial markets this year. While assets across the board have been benefitting tremendously from the massively increased money supply, everyday people are getting the short end of the stick, having to witness how inflation is eating away at their savings and spending power in real-time.
Even central bank employees are rebelling over inflation eating away at their salaries… 😂
And for those who get the macro/crypto-linked joke, here is another example of the crazy inflation situation the world is facing today 😄
We all know that the best way to protect ourselves against raging inflation has been to buy hard assets, particularly cryptocurrencies.
We have proof that even banks are holding crypto as an inflation hedge.
And we already knew that institutional investors are scrambling to get into the crypto space…
Should you go all-in to assets as Robert Kiyosaki suggests? With asset markets reaching bubbly territory and central banks around the world scrambling to get inflation under control (except for the Fed for now), it’s certainly wise to also hedge against a looming Fed intervention, by holding enough cash (or stablecoins) – especially since the consensus is not to do so!
Even if you're not speculating on a total market crash, it's wise to have enough cash on the side for a rainy day (or to buy cheap assets). Because the reality is: Nothing in the markets really looks cheap right now… not crypto, not real estate, and certainly not stocks.
Thanks again Oliver. Good info. I'm in the Immutable Apes community and they are a great bunch. Can't not see them growing with their creativity.
Concise, succinct, and transformative info...as usual. Thank you for your efforts.