Digital Assets in A Post-Cycle World
Our 2022 Digital Assets Outlook presentation covered topics relevant to the current trends and narratives that we typically monitor in the weekly reports. Because of this, we are sending out the presentation for this week in place of the usual weekly format.
Click HERE for the full copy of this report in PDF format.
On Tuesday, we held our 2022 outlook call. Some of the major highlights include:
- A discussion of the significant developments within crypto in 2021 and how they impact the industry’s immediate future. Many digital asset investors fear an impending crypto winter. We think that there is sufficient evidence that these fears are remnants of an old paradigm.
- Historically, crypto has waxed and waned in four-year cycles centered around supply constraints resulting from the Bitcoin halvening. We posit that the four-year cycle is no longer the best way to measure bull and bear crypto markets but rather inflows and demand for blockspace.
- An often-overlooked element of investing in BTC is the variable liquidity of the market, as some wallets are less likely to liquidate holdings than others. Bitcoin’s current supply dynamics can best be described as a powder keg.
- Bitcoin’s current valuation metrics point to a strong buying opportunity customarily seen during the depths of a bear market. While we anticipate continued choppiness in 1H, we see several potential catalysts on the horizon that could heat the demand side of the equation. These catalysts include negative real yields driving capital inflows (TINA), the possible resumption of a risk-on environment in the latter half of this year, and perhaps further nation-state adoption.
- Based on historical data, we think it’s reasonable to expect an increase in demand to bring us to $200k. Our best estimate for the global crypto market cap under such a scenario for BTC would be $9.6 trillion, based on the Bitcoin dominance support at approximately 40% throughout 2021.
- We continue to think Ethereum is undervalued based on the network’s annual fee growth in 2021 and believe that a combination of the impending merge and industry-wide tailwinds could lift us to $12k ETH by year-end.
- Outside of the majors, we are broadly constructive on emerging layer 1 networks and web3 dApps disrupting gatekeepers through tokenized networks. We highlight select examples that demonstrate this technological theme.
Key slides from this report…
Survey Results Show Importance of Demographics (Slide 5)
2022 Is Much Different From 2018 (Slide 7)
2022 Is Much Different Than 2018 (Slide 9)
Incredibly Bullish Supply-Side Dynamics (Slide 17)
Bull Markets Determined By Inflows, Not Cycles (Slide 19)
Ethereum Faces Competition (Slide 31)
Ethereum Undervalued Relative to Cloud Platforms (Slide 33)
Web 3 (Slide 41)
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