Governments, businesses, blockchain games: Who will drive the next bull run?
Given the current situation on crypto exchanges, where the cryptocurrency market is stagnating, the following question arises: What will drive the next bull run?
The crypto market, like any other market, runs in cycles. Digital assets are known, if not infamous, for being more volatile than many other asset types. The price of crypto assets thus follows a well-known pattern of ups and downs. As an example, we can use the Bitcoin (BTC) four-year cycle, largely resulting from the algorithm’s internal rules – namely, the halving of miners’ rewards. Factors outside the chain can also come into play, such as U.S. tax rules.
Although the market is influenced by both external and internal factors, one thing remains the same. In a bullish uptrend, a value is always reached at which market growth stops. Likewise, bears eventually lose control of the market at low prices and give way to further upswings.
So far, the market is still recovering from the Terra collapse and many other pressures in abundance in recent years (the pandemic, the war in Ukraine, oil and electricity prices…). Market attempts at recovery have been fragile so far and the market is still in the red compared to the prices of a few months ago. However, everyone expects the bulls to come in and take control. So where could the growth impetus come from?
Just a few years ago, the idea that Bitcoin could be legal tender in any country seemed far-fetched. And yet, following El Salvador’s bold decision in late April, the Central African Republic (CAR) has also joined in and granted Bitcoin and other cryptocurrencies legal tender status.
The two countries provide an interesting comparison. It is already common knowledge in the crypto space that remittances from abroad make up a significant part of El Salvador’s budget, and this fact was considered the economic rationale for this experiment. While reports suggest the process is shaky, the country’s government is buying Bitcoin and adopting a “buy the dip” strategy.
In the case of the Central African Republic, the situation could not be more different. The economy of the war-torn nation has been struggling for a long time. In addition, according to the World Bank, only about 10% of the country’s population has Internet access. In other words, the use of cryptocurrencies is likely to be limited to a small part of the population. Given the geopolitical and local context of this decision, the outlook may be unclear.
Still, more emerging economies may choose to follow suit, especially given that El Salvador is not the only country that heavily relies on remittances to raise money for the budget. The mere existence of a precedent is significant enough to get things going and, if one more country joins the club this year, the crypto markets will know about it.
Blockchain for institutions
While mainly small private investors and traders were present at the beginning of the cryptocurrency wave, in recent years institutional investors have also joined the game – from top banks and hedge funds venturing into the crypto space, to fin-tech giants adding digital asset support to their platforms. Institutional acceptance is no longer just a pipe dream – it’s a reality.
For example, JPMorgan is experimenting with its private blockchain designed for interbank use. A group of leading information and communication technology providers uses the ClearX blockchain solution for data-on-demand services. All this lends additional credibility to the technology powering the cryptocurrency ecosystem, contributing to long-term investor confidence.
While many enterprise-level blockchain projects will remain on private blockchains, growing investor confidence in the technology is likely to further normalize crypto in the public eye and draw more attention to the public blockchain space. In addition, such projects fill a market gap and bring solutions that will help companies build their private blockchains. Another gap may be bridging these private chains and the public space. After all, cryptocurrencies are all about connectivity and inclusion.
The first U.S.-based Bitcoin-linked exchange-traded fund (ETF) launched in late 2021. The amount of interest it has garnered from investors is further evidence of how much appetite the market has for crypto exposure. We have reached the point where some financial advisors recommend that everyone, regardless of age and risk preferences, has at least some experience with cryptocurrencies.
Thanks to this change in sentiment, more and more asset managers will be involved in the crypto space, either at client request or on their own initiative. For the same reason, more and more high earners will join the ranks of crypto investors, bringing more value to the blockchain economy.
With all respect to ETFs and other traditional assets, any cryptocurrency-knowledgeable user will tell you that real crypto is better than a traditional asset imitating its movements. The reason is that crypto is much more dynamic. The funds in your ETF will only remain with your broker. With real cryptocurrencies, on the other hand, you can stake, use revenue farms, or other DeFi services for higher passive income. Additionally, crypto is more profitable as an asset class that can work for its owner 24/7 through always-on platforms that only take a few clicks to manage.
Games and gamers
Blockchain games aren’t exactly new, as anyone who remembers the CryptoKitties craze can attest. When the Axie Infinity game started making headlines as it began to rise in popularity, mostly among Filipinos looking for income during the pandemic, the blockchain gaming industry proudly stepped into the limelight.
Given the difficulties Axie Infinity faces now, it’s hard not to wonder whether that pride was misplaced. The game has long had a problem with inflation as its core business model began to decline. Adding to this problem was a recent cyber-attack, one of the worst ever seen in DeFi.
Axie Infinity’s woes could be just another case of an emerging industry searching to establish its own best practices. A whole host of new projects are now set to push this space further, aiming to bring it up to the AAA level in terms of visuals and gameplay. As these new companies enter the market, we are likely to see more gamers involved in cryptocurrencies.
The video game industry is an undisputed power in the entertainment world, and wherever it goes, its followers will follow. From e-sports to in-game advertising, the traditional gaming industry has already spawned multiple markets, all of which are creating new use cases, new audiences, and new business opportunities.