Source/LongHash

Source/LongHash

The digital currency industry ushered in an "institutional bull market" and pushed Bitcoin to a new height of $37,000. According to CoinMarketCap data, as of the morning of January 7, 2021, the total market value of Bitcoin has increased by about 364% in the past year.

As the price of Bitcoin broke through the previous high of around US$20,000, its price accelerated, and it took only about 17 days to break through the US$30,000 mark. In addition to the "leading" Bitcoin price continuing to break through record highs, as of January 7, 2021, the total market value of digital currencies other than Bitcoin has also risen by about 374% in recent years, while other mainstream digital currencies that have not broken through their previous highs are just around the corner.

Behind such a rapid price rise, there may be a "window of opportunity" that the entire blockchain industry has been waiting for for three years, or it may be fleeting.

Under the market background of the "institutional bull market", the structure of the market has changed. There are early incubation investment institutions with different investment views, consultants and financial sellers who focus 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 with a high profile. In short, the market game in 2021 will be more diversified than in 2017, and competition will intensify.

Asia-Pacific and North America are currently the regions with the highest degree of institutional specialization and the most active market in the field of digital currency. 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, Compound and Synthetix in 2018~2019, Asian institutions were busy with various new public chain operations.

In less than 2 years, the DeFi of the Ethereum ecosystem has become a new ecology with a level of hundreds of millions. The TVL lock-up volume 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 tight 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, predicting machines, etc.; user-oriented self-hosted wallets, DeFi asset management tools, etc. With the improvement of infrastructure, these financial platforms built on the Ethereum public chain have introduced the AMM (liquidity mining) mechanism to start their products coldly, and they will be in the limelight in the second to third quarters of 2020. Gas congestion is pushed to the peak.

It is worth mentioning that not only investment in products, but also exploration of cutting-edge theories, such as Gauntlet, an economic model research institution incubated by Coinbase Ventures, has had a significant impact on the economic models and protocol governance of Uniswap and Compound.

Due to the "combinability" of the Ethereum DeFi ecosystem, various popular decentralized trading platforms (dex) and aggregation trading platforms for various AMM pools are gradually emerging, helping DeFi players search for the best price in the entire market liquidity .

Projects Uniswap (decentralized spot trading) and 1inch (aggregator) from North America and Europe conducted large-scale airdrops to reward users in the third and fourth quarters of 2020, and once again demonstrated the charm of the DeFi ecosystem to the global blockchain industry .

With the verification of DeFi spot trading scenarios, the market's demand for transaction efficiency and capital utilization will increase, and more complex on-chain financial services will be explored. For example, the combination of a two-tier network (such as Optimism Rollup) and a decentralized exchange (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 investment institution in the DeFi field in North America. It has shifted from early infrastructure investment to a DeFi platform for margin trading in 2020. It is 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, mainland 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 of which benefit from the market environment with a large retail user base. The ecology of the two blockchains Filecoin and Polkadot, which will be newly launched on the mainnet in 2020, is very popular in China. Much of Filecoin’s demand for products such as mining machine business and cloud computing power comes from China. According to PolkaWorld, the Polkadot community consists of 100 teams and projects, 30% of which are Chinese teams. Huobi has also launched a Polkadot-like ecological area, and currently there are 11 project tokens in the transaction.

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

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

VCs and hedge funds representing "smart money" have a strong interest in the emerging field of blockchain and digital currency and have different views on the future development of the industry. Although the business development of Asia, Europe and the United States has experienced short-term differences under the influence of various institutions, with the overall substantial increase in the price of digital currencies, 2021 is destined to be a year of innovators and advanced players, and this is just a new year. The beginning of the financial age.

LongHash, Use data to understand the blockchain.