The next bull run in cryptocurrencies has begun. One of the most notable differences compared to past cycles is the type of new investors entering the market. The Bitcoin exchange-traded fund (ETF) has effectively opened the door to wider participation by making it easier for participants to participate, and an Ethereum ETF is widely expected to arrive soon.
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Newcomers may have some difficulty understanding cryptocurrencies, but given their first investment, there is a framework worth considering.
Easy to start, little to gain
Beginners usually start by investing in big names like Bitcoin and Ethereum. In most cases, you can invest in Bitcoin and wait at least six months before checking its price to see if it has grown enough to sell. But for those who only have a few thousand dollars to invest, investing in Bitcoin will not make you a millionaire. The growth potential in the near to medium term is 2-3 times the current value.
Experienced players know they need to check out the latest trends. Investing in a dozen small projects can really pay off if done well. Assets that proved popular during the last bull run, such as new layer-one protocols and lending platforms, may offer the opportunity to grow your investment 5-10 times.
However, risk and reward are two sides of the same coin. How much one is willing to gain or lose in cryptocurrency really depends on the time, resources, and energy one is prepared to invest in studying the market. That's the beauty of cryptocurrency: it's completely accessible to those who are willing to learn.
Three stories worth reading
There are three narratives that the average new user without any impressive experience can understand and be qualified to believe. The key is to figure out the story behind each product. Innovation is at the forefront of this space because people in the crypto space are innovative and constantly looking for something new. I see three such trends emerging.
First up is the marriage of AI and blockchain technology. A slew of projects are now attempting to innovate at the intersection of blockchain and AI. While there is no guarantee that these efforts will bear fruit, the narrative itself is powerful. This trend, riding the wave of blockchain’s potential and cutting-edge advances in AI, is likely to capture the imagination of investors and enthusiasts. I’m keeping an eye on RitualNet and Morpheus.
The second trend delves into more fundamental aspects related to the tokenization of physical assets, or debt tokenization. In traditional markets, the debt market is larger than the stock market. However, in the crypto space, the debt market currently does not exist. Stablecoins can be considered its starting point, as companies issue stablecoins in exchange for real dollars and then buy short-term US bonds themselves. However, the concept of corporate debt remains untouched in the crypto space. Therefore, everything related to debt tokenization has great potential. PV01 and Ondo Finance are two projects in this field.
The third trend focuses on enhancing blockchain technology itself - improving its efficiency, increasing throughput, and reducing operating costs. It uses new technologies such as the parallel Ethereum Virtual Machine (EVM) to process many things at the same time, thereby speeding up transactions. Similarly, zero-knowledge (ZK) proofs keep things private but simple, making the entire system work smoother and less expensive. Sei and Monad are projects worth watching in this area.
But how do we use these narratives to delve deeper into products? Imagine an investor researching a product. He is intrigued, perhaps even excited, by a project. Every time he encounters something in the documentation that is hard to understand, he highlights it in red. He then looks at the entire description and sees that there is too much red in the document: there are too many things in the product description that he does not understand. And he does not invest. It’s a simple strategy: if an investment is too complex to understand, it’s probably not the right investment. This approach emphasizes the need for clarity.
So when you think about investment trends, remember that the big funds are likely already in on the action. If there's a compelling narrative, there's a good chance they've already invested in it. It's a good reminder to stay informed -- to understand that in the investment world, it's often the big guys that rule the game.
