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Can It Outperform ETH+5%?
The Blockchain Sector 2023-05-23
Ethereum staking has changed the markets forever. A year ago you had a layer 1 blockchain with evolving utility due to its EVM application layer and a first mover advantage in the smart contract space.
Today that asset now has a declining supply and staking rewards of 5% from sustainable distribution.
The impact of having multiple upgrades on the tokenomics to the already best performing digital asset are vast and still yet to be seen in my opinion.
When researching emerging DeFi technologies and assessing governance token allocations from an investment perspective I now have to ask…
Will this investment outperform ETH + 5% over any kind of timeframe?
Long term I think very few assets will be able to compete with the ever increasing utility and network growth of Ethereum. But that doesn’t mean stETH is where the biggest opportunity is.
The Game Got Harder
The massive early investor upside opportunities are still out there but the risk and reward has been skewed. Protocols and products built over the next ten years will go on to become pillars of a future financial and web3 ecosystem. The opportunity to find 100x investments still exists but it will take more work, luck and greed.
There is also more competition and sophisticated market participants looking at crypto markets. It’s rumoured some of them even have valuation models. We are now in a world where VC’s & crypto native funds get the lions share of pre-launch allocations.
Fortunately crypto isn’t a zero sum game and we don’t have to compete in a player vs player environment. The technological disruption will ensure price momentum in favour of all market participants over the long term (decades).
Long Term Opportunity
For long term investments I believe a set and forget staked Ethereum position will outperform the vast majority of digital assets we see on Coinmarketcap today.
Ethereum probably wont take you from living in your Mums basement to creating generational wealth however. It’s already a $223B market cap asset and realistically what is the limit if it fulfils its potential? $10T maybe, $20T? Gold market cap is $13T & Nasdaq is $18T for context.
40-80x upside is incredible, add in the developer moat, the compounding of staking rewards and you have an incredible long term opportunity but not a get rich quick investment.
The biggest opportunities will still be the shiny new things.
The DeFi protocols that go from a small community of believers to becoming important infrastructure for the future
The NFT artwork that goes on to become priceless in what is historically seen as a digital renaissance
The decentralized trading exchange that emerges from unjust regulatory interference
The metaverse product that breaks through and appeals to the Minecraft generation
The meme coins that capture Elon’s attention and promotion
The social network that emerges on decentralized web3 rails
These are some of the areas where there will be the opportunity for people working in the blockchain sector to make unprecedented returns. Perhaps the biggest opportunities for investors and developers are the things we haven’t even thought of yet.
Markets To Watch
Volatility is at a low and it wont last forever. I think the potential catalyst for a resuscitation of the crypto markets might be a break out of ETH/BTC which is reaching a critical zone.
It feels like the calm before the storm. Perhaps the depression stage of a market cycle, all be it after a strong recovery so far in 2023. The Bitcoin halving is next year and I expect it to get front-run to some extent perhaps towards the end of this year.
Altcoins are struggling with many market participants going risk-off and rebalancing their portfolios towards the majors. This again wont last forever and there will be a great migration back up the risk curve at some point.
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