After Bitcoin’s new high, the market structure has changed.

Bitcoin's new high

Europe and the United States continue to bet on DeFi, while Asia focuses on “post-public chain ecology” and transaction upgrades.

The digital currency industry ushered in an “institutional bull market” that pushed Bitcoin to a new level of US$37,000. According to CoinMarketCap data, as of the morning of January 7, 2021, the total market value of Bitcoin has increased by approximately 364% in the past year.

As the price of Bitcoin broke through the previous high of about $20,000, its price accelerated its rise, and it took only about 17 days to break through the $30,000 mark. In addition to the “leading” Bitcoin price continuing to break through historical highs, as of January 7, 2021, the total market value of digital currencies other than Bitcoin has also increased by about 374% in recent years, and other mainstream digital currencies that have not exceeded the previous high are about to move.

Behind such a rapid price increase may be brewing a “window of opportunity” that the entire blockchain industry has been waiting for for 3 years, or it may be fleeting.

In the context of the “institutional bull market”, the market structure has changed. There are early incubation investment institutions with different investment views, consultants and financial sellers focusing on business mergers and acquisitions in the digital currency field, and more flexible hedge funds. There are Internet-listed companies from outside the circle, such as MicroStrategy, which bought 70,000 bitcoins this year. In short, the market game in 2021 is more diversified than in 2017, and competition is intensified.

Asia-Pacific and North America are currently the regions with the highest degree of institutional specialization and the most active market in the digital currency field. In 2021, these two forces from the East and the West will have a greater impact on the market.

Europe and the United States continue to bet on “open finance”

When North American Internet venture capital firm Andreessen Horowitz (a16z) invested in DeFi products such as MakerDao and Compound and Synthetix from 2018 to 2019, Asian institutions were very busy with various new public chain operations.

Less than 2 years of growth. The DeFi of the Ethereum ecosystem has become a billion-level new ecosystem. The amount of TVL locked up is currently about 7 million Ethereum, and the annual growth rate of the currency standard is about 130%.

The development of the DeFi ecosystem has a close and fast pace, which is very “institutionalized”. In the first quarter of 2020, C-end users really began to use DeFi products, and as early as the end of 2017, investment in the underlying infrastructure of decentralized financial products had begun, such as various modules and free api interfaces for developers. Machines, etc.; user-oriented self-custodial wallets, DeFi asset management tools, etc. With the improvement of infrastructure, these financial platforms built on the Ethereum public chain have introduced AMM (liquid mining) machines to start their products, which will be the same in the second and third quarters of 2020 and will be on the Ethereum chain. Gas congestion is pushed to its peak.

It is worth mentioning that not only product investment, but also cutting-edge theoretical exploration, such as Gauntlet, an economic model research institution incubated by Coinbase Ventures, has a significant impact on Uniswap and Compound’s economic models and protocol governance.

Due to the “composability” of the Ethereum DeFi ecosystem, various popular decentralized trading platforms (dex) and aggregate trading platforms for various AMM pools have gradually emerged, helping DeFi players to search for the best price in the entire market liquidity .

The projects Uniswap (decentralized spot trading) and 1inch (aggregator) from North America and Europe will reward users with large airdrops in the third and fourth quarters of 2020, once again showing the charm of the DeFi ecosystem to the global blockchain industry .

With the verification of DeFi-type spot trading scenarios, the market’s demand for transaction efficiency and capital utilization will increase, and more complex financial services on the chain will be explored. For example, the combination of the second-tier network (such as Optimism Rollup) and decentralized exchanges (such as Synthetix) reduces gas consumption for ordinary users, and various margin transactions for futures and options derivatives that improve capital efficiency.

Framework Ventures is a leading DeFi investment institution in North America. Since 2020, it has switched from early infrastructure investment to a DeFi platform for margin trading. At present, it can be known from public information that there are only 4 similar products in the DeFi futures and options category. It can be said to be quite optimistic about the track.

Asia focuses on “post-public chain ecology” and transaction upgrades

Investment institutions in Singapore, China, and Hong Kong are still active in centralized financial products, such as wealth management wallets, trading platforms, and the ecological construction of a new generation of public chains, all thanks to their large retail user base market environment. The ecology of the two blockchains Filecoin and Polkadot, which will be newly launched on the mainnet in 2020, is very popular in China. A lot of Filecoin’s mining machine business to cloud computing power and other product needs come from China, and according to PolkaWorld, the Polkadot community is composed of 100 teams and projects, of which 30% are Chinese teams. Huobi also launched the Polka-like Ecological Zone, and currently there are 11 project tokens in the transaction.

Institutions active in Asia, such as Hashkey, have also continued to invest and incubate the ecology of the “post-public chain”. The topics range from Eth2.0, Polkadot ecology to the upcoming Dfinity, etc., which are worth looking forward to.

Unlike DeFi-themed investments advocated by European and American institutions, Asia has a “relative advantage” in centralized finance. At present, the most influential derivatives and spot platforms are still active in Asia, and the Okex, Huobi, and Binance trading platforms have all launched European options business this year. Okex and FTX launched products similar to “combined margin” at the same time at the end of 2020 to meet the high capital utilization requirements of advanced traders and large customers. It is foreseeable that the major upgrade of the centralized trading track in 2021 will form a stronger competitiveness for DeFi and break the argument of “industry involution”.

In 2020, with the increasing influence of institutions on digital currency, the cycle of digital currency will gradually become clear and iterate more rapidly.

VCs and hedge funds that represent “smart money” have a strong interest in the emerging field of blockchain and digital currency and have different opinions on the future development of the industry. Although the business development of Asia and Europe and the United States has a short-term divergence under the influence of multiple institutions, with the overall substantial increase in digital currency prices, 2021 is destined to be a year of contention between innovators and advanced players, and this is only a new year. The beginning of the financial era.


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