Introduction

In 2023, the total market capitalization of cryptocurrencies saw a significant rebound, rising from $1 trillion at the beginning of the year to over $1.6 trillion by the end of the year. This was seen as a clear signal that the crypto market was emerging from the ‘crypto winter.’ Besides the overall data, including market capitalization, showing a notable recovery, various sectors within the crypto industry each had their highlights.

Looking back at 2023, it was a year full of uncertainties in both the global macroeconomic landscape and the Web3 domain. Despite a slight warming in the crypto market, the global economy continued to face downward pressures, regional conflicts erupted abruptly, and there was little to speak of in terms of culture and consumption. Traditional industries were impacted to varying degrees. In the broader Web3 domain connected to these macro trends, significant developments included the acceleration of the Bitcoin spot ETF process, major shifts under U.S. regulation such as the resignation of CZ and the conviction of SBF, and the commercialization of AI technologies represented by ChatGPT.

‘Narratives’ are a driving force in the crypto industry, with investment institutions and the market creating new narratives and investors questioning and seeking to understand them. Looking forward to 2024, after reviewing the annual reports of dozens of top crypto institutions, most display an optimistic outlook for the crypto market in the coming year.

SoSo Value, after interpreting these dozens of reports and combining its insights, summarizes the eight key narratives you should know to help you position yourself in the ‘obvious bull market’ anticipated by institutions. At the same time, it hopes readers can avoid the ‘uncertainty’ and ‘reflexivity’ of the market that leads to investment traps.

This report selects annual reports and articles from institutions such as a16z, Coinbase, Messari, Hashed, Matrixport, Spartan, Binance, Delphi Digital, and Pantera, among others.

Comparison of Crypto’s total market capitalization and S&P 500 market capitalization (Source: SoSo Value）

Narrative Keyword One: Bitcoin’s Return to Dominance and Ecosystem Surge

Institutions Involved: Coinbase, Messari, Gemini, Hashed, Matrixport, Spartan, etc.

Overall Tone: Underpinned by policies and regulations, Bitcoin is increasingly favored by retail and institutional investors and is set to lead the market recovery and regain its dominant position. The approval of Bitcoin ETFs and the Bitcoin halving cycle are expected to provide momentum for price increases. The innovation waves of Ordinals and BRC-20 are poised to reshape the Bitcoin ecosystem.

Selected Views on the Narrative of Bitcoin Regaining Dominance and its Ecosystem Surge:

Coinbase:

At least in the first half of 2024, the institutional focus will be firmly anchored on Bitcoin. Unless a widespread risk-averse environment triggers a strong demand for liquidity, Bitcoin is expected to perform well even in a challenging macroeconomic context.

Gemini:

The approval of a spot Bitcoin ETF would allow U.S. investment funds to access Bitcoin, thereby opening the $36.7 trillion retirement fund market to crypto assets. Historically, Bitcoin’s price has experienced a parabolic rise after each of its first three halving events.

Matrixport:

The U.S. Securities and Exchange Commission is expected to approve a Bitcoin ETF in January, with trading likely to start in February or March. This event, coupled with the Bitcoin halving cycle, is expected to provide a healthy momentum for the following year.

Messari:

Bitcoin tends to lead recoveries. Recently, Bitcoin’s dominance reached a multi-year high. It is predicted that Bitcoin’s dominance will return to 60% either in ETF-driven rallies (leading the rise) or under severe macro pressures (consolidating in declines). Messari explicitly states a bullish view on Bitcoin but is pessimistic about Ethereum, expecting Bitcoin to outperform Ethereum.

Hashed:

The innovation wave of Ordinals and Brc20 helps in revisiting the Bitcoin ecosystem, with related technologies representing a paradigm shift in the Bitcoin ecosystem.

Spartan:

The development of Bitcoin Layer 2 and the ‘speculative value’ of BRC-20 are driving the growth of the Bitcoin ecosystem.

In 2024, the core narrative will undoubtedly revolve around Bitcoin, the most central asset in the crypto field, with most institutions dedicating significant sections to predicting Bitcoin’s development in the new year. The U.S.-compliant crypto exchange Coinbase stated in its year-end report that Bitcoin regained dominance in the crypto market in 2023. This shift indicates that retail and institutional investors are increasingly favoring Bitcoin.

Regarding spot Bitcoin ETFs: In 2023, several renowned financial giants applied for spot Bitcoin ETFs in the U.S. Coinbase believes that the participation of these financial giants helps validate and strengthen the prospects of cryptocurrencies as an emerging asset class. At least in the first half of 2024, the institutional focus will be firmly on Bitcoin. The overall macroeconomic environment’s impact on Bitcoin: Unless a widespread risk-averse environment triggers a strong demand for liquidity, Bitcoin is expected to perform well even in a more challenging macroeconomic backdrop.

Similar to Coinbase’s view, the exchange Gemini also stated in its report that the approval of ETFs and subsequent large capital inflows into crypto are expected to drive up prices. Additionally, the approval of a spot Bitcoin ETF would open the $36.7 trillion retirement fund market to crypto assets. Regarding the timing of the halving, a halving event in April 2024 is expected, and historically, Bitcoin’s price has seen a ‘parabolic rise’ after each of its first three halving events.

Matrixport, holding a similar view, predicts in its report on the market trend for the first half of 2024 about the ETF and Bitcoin will halve. The institution expects the U.S. Securities and Exchange Commission to approve a Bitcoin ETF in January, with trading likely to start in February or March. This event, along with the Bitcoin halving cycle, is expected to provide healthy momentum for the following year.

Regarding Bitcoin’s price and market cap share, the crypto investment analysis institution Messari predicts that although it is difficult to predict Bitcoin’s trading position in the short term, its attractiveness is almost indisputable from a longer-term perspective. Bitcoin’s long-term argument is straightforward: everything is digitalizing. Bitcoin tends to lead recoveries. Recently, Bitcoin’s dominance reached a multi-year high. The institution bets that Bitcoin’s dominance will return to 60% either in ETF-driven rallies (leading the rise) or under severe macro pressures (consolidating in declines).

Regarding the latest Brc20 ecosystem wave, the crypto exchange Binance mentioned in its year-end report that “the emergence of Ordinals and inscriptions brought innovation to the Bitcoin ecosystem.” The crypto investment institution Hashed conducted a more specific analysis, stating that “the innovation wave of Ordinals and Brc20 helps in revisiting the Bitcoin ecosystem, with related technologies representing a paradigm shift in the Bitcoin ecosystem, demonstrating the long-term sustainable potential of the most dominant, widely accepted, and safest blockchain.”

Hashed predicts that the Bitcoin ecosystem will unfold like Ethereum’s decentralized finance in 2020. The ecosystem infrastructure includes lending markets, decentralized exchanges, bridges, aggregators, portfolio management, development tools, and tracking infrastructure. Tools that help build secure and flexible programming for Bitcoin, develop independent index infrastructure or wallets, aggregation systems, and even startups or protocols that create native Bitcoin metaverses or NFT markets could have a significant impact in 2024. Addressing doubts about the technology related to Brc20, the crypto investment institution Spartan stated in its report that the development of Bitcoin Layer 2 and the ‘speculative value’ of BRC-20 could drive the growth of the Bitcoin ecosystem.

It is noteworthy that the crypto investment analysis institution Messari explicitly states a bullish view on Bitcoin but is pessimistic about Ethereum. Despite liking Ethereum and everything it has derived, the investment case for ETH, in the long run, is more akin to Visa or JPMorgan Chase. Due to institutional investors’ interest in the ‘pure play’ of digital gold, Bitcoin’s performance in the digital currency realm outperforms Ethereum.

Comparison of Crypto total market capitalization and Bitcoin market capitalization (Source: SoSo Value）

Narrative Keyword Two: Continuous Integration and Collision of AI with the Web3 Ecosystem

Institutions Involved: a16z, Messari, Spartan Group, Gemini

Overall Tone: With the large-scale commercialization of AI technologies exemplified by ChatGPT in 2023, what impact will this have on the cryptocurrency domain? The majority of institutions believe that AI will enhance the user experience for Web3 users and transform industry tracks such as smart contracts, payments, and code auditing.

Selected Views on the Continuous Integration and Collision of AI with the Web3 Ecosystem:

a16z:

The combination of AI and blockchain, through decentralized open-source cryptographic networks, will democratize AI innovation and enhance user safety. As AI becomes a key player in game development, cryptocurrencies will provide security.

Messari:

AI is highly beneficial for cryptocurrencies. There is no need to overthink this aspect.

Spartan:

There will be an increased use of AI to enhance Web3 user experience and efficiency, as well as the use of blockchain technology as a protective barrier and transparency layer for AI.

Gemini:

AI innovation has completely transformed smart contracts, supporting secure data solutions, enabling transparent large language models, and combating misinformation.

Hashed:

The fusion of AI and blockchain technology represents a synergistic effect with the potential to reshape various industries.

The renowned investment firm a16z, in its article “Exciting Things About the Crypto Field in 2024,” mentions that the integration of AI with blockchain, through decentralized open-source cryptographic networks, will democratize AI innovation, enhancing user safety. When AI becomes a game maker, cryptocurrencies provide security, such as AI generating legends, terrain, narratives, and logic for games, while crypto offers the ability to understand, diagnose, and correct issues encountered by AI. Spartan Group also notes that more AI will be used to improve Web3 user experience and efficiency, with blockchain technology acting as a protective moat and transparency layer for AI.

Messari, a crypto investment analysis firm, is optimistic about the impact of AI on the cryptocurrency field, stating that AI is excellent for cryptocurrencies and there’s no need to overthink it. However, Arthur Hayes (BitMEX founder) has an article worth noting on this topic, pointing out that the two most crucial elements for any AI are data and computational power. Hence, it seems reasonable that “AI would trade a currency that maintains its purchasing power over time,” perfectly describing Bitcoin.

Crypto exchange Gemini reports that AI innovation has completely transformed smart contracts, supporting secure data solutions, transparent large language models, and fighting misinformation. Specifically, AI’s asymmetric ability to create content exceeds human processing power, leading to an assumption that content is fake until proven otherwise via on-chain verification. Shortly, most payments will be conducted on-chain by AI agents. Code auditing firms are developing copilot versions for smart contract authors, so AI can assist in verifying the quality of smart contract code during creation, not just after.

Hashed believes that the fusion of AI and blockchain technology represents a synergistic effect with great potential to reshape various industries. For the content creation industry, deep learning models like Midjourney and Stable Diffusion could become protocols akin to ChatGPT for media, where original content and IP owners can stake their assets (NFTs, game items, photos, papers, iconic designs, etc.) to prove ownership and originality. A portion of the revenue generated by the products could be distributed as loyalty compensation. This approach addresses the issue of IP ownership for content generated by AI engines and opens up new markets for content creators.

List of some tokens in the AI ​​field (source: SoSo Value）

Narrative Keyword Three: Clearer Regional Regulation and Increased Competition

Institutions Involved: Coinbase, Gemini, Spartan

Overall Tone: The foundation for cryptocurrency regulation will continue to be established in 2024, leading to clearer regulations and greater institutional involvement in the crypto field. One of the major stories of 2024 will be the ongoing competition among jurisdictions to become key hubs for digital assets and the future financial system.

Selected Views on Clearer Regional Regulation and Increased Competition:

Coinbase:

The foundation for cryptocurrency regulation will continue to be established in 2024, leading to clearer regulations and more significant institutional participation in the crypto field.

Gemini:

One of the major stories of 2024 will be the competition among jurisdictions to become key hubs for digital assets and the future financial system.

Spartan:

Capital will partly flow towards regulated and local exchanges, leading to more dispersed liquidity.

Coinbase, a U.S.-based crypto exchange at the forefront of American regulation, has deep insights into regulatory matters. They believe that the foundation for cryptocurrency regulation will continue to be built in 2024, leading to clearer regulations and greater institutional involvement. However, they also analyze the negative and positive aspects of U.S. regulation, noting that “the uncertainty in the U.S. is fostering missed opportunities.” On the positive side, the U.S. approval of Bitcoin spot ETFs could expand access to cryptocurrencies to new categories of investors and reshape the market in unprecedented ways.

Global regulatory fields will also be highly competitive. Crypto exchange Gemini states that “one of the major stories of 2024 will be the ongoing competition among jurisdictions to become key hubs for digital assets and the future financial system.” This competition includes countries like the UK, EU, UAE, Japan, Hong Kong, and Singapore, all vying to attract business growth and innovation with the most credible regulatory frameworks.

Spartan expresses concerns that regional regulation could impact the overall liquidity of the crypto market, with capital partially flowing towards regulated and local exchanges, leading to more dispersed liquidity.

Narrative Keyword Four: Significant Potential in DePIN Track

Institutions Involved: Coinbase, Messari, Spartan, Pantera

Overall Tone: DePIN is considered a potential track by several crypto institutions, with two key views: one, DePIN has the potential for mass adoption; two, projects that use cryptographic economics to reduce structural costs are seen as strong competitors to existing Web2 businesses.

Selected Views on the Significant Potential of the DePIN Track:

Coinbase:

DePIN has great potential for development, with a major theme in 2024 being the “decentralization of real-world resources.”

Messari:

To mitigate the risks of large tech platforms, a 1% ‘insurance fee’ could lead to a tenfold increase in DePIN utilization.

Spartan:

Projects using cryptographic economics to reduce structural costs will be strong competitors to existing Web2 businesses.

Pantera:

DePIN is a consumer-facing application layer, like DeFi, gaming, and social, with the potential for mass adoption, and could drive consumer demand for underlying chains or ecosystems.

Pantera partner Paul Veradittakit, in discussing the DePIN track, notes that DePIN’s development over the past year has had a significant impact and meaning for the entire blockchain ecosystem. One of the most important reasons is that “DePIN, being consumer-facing like DeFi, gaming, and social, has the potential for mass adoption and could drive consumer demand for underlying chains or ecosystems.”

Coinbase believes that “DePIN has great potential for development, and blockchain technology will play a central role in managing and distributing real-world resources in the future.” A major theme for 2024 is the “decentralization of real-world resources.”

Coinbase highlights the concept of DeComp (distributed computing), a specific extension of DePIN, which relies on a distributed computing network to complete specific tasks. They predict that this concept will be revitalized due to the mass adoption of generative AI, as training AI models can be computationally expensive. The industry is exploring whether there are opportunities to mitigate this issue through decentralized solutions.

Regarding DePIN and its relation to traditional cloud infrastructure, Messari notes that cloud infrastructure services represent a $5 trillion market value in traditional markets, with DePIN accounting for only 0.1% of it. Even assuming 0% of online services currently use DePIN as their primary stack, the demand for decentralized redundancy alone could cause a significant surge in demand. A mere 1% ‘insurance fee’ to mitigate risks from major tech platforms could lead to a tenfold increase in DePIN utilization. This small change could significantly alter the current state, especially considering the demand for GPUs and computational resources driven by AI.

Spartan shares a similar view, believing that projects leveraging cryptographic economics to reduce structural costs will become strong competitors to existing Web2 businesses.

Narrative Keyword Five: Tokenization of RWA to Become a Significant Part of the New Market Cycle

Institutions Involved: Coinbase, Hashed

Overall Tone: It is expected that tokenization will become an important part of the new cryptocurrency market cycle. In 2024, tokenization is anticipated to expand from the current main bond market to other market tools, including stocks, private market funds, insurance, and the carbon credit sector. There are considerable opportunities to explore projects in the areas of derivative tokenization and securitization.

Selected Views on Tokenization of Real-World Assets (RWA) as a Significant Part of the New Market Cycle:

Hashed:

The tokenization of RWAs and equity tokens could lay the foundation for the next generation of financial systems. Significant opportunities exist in exploring areas like the tokenization and securitization of derivatives.

Coinbase:

Tokenization is expected to be a key aspect of the new crypto market cycle, extending from the current primary bond market to other market tools, including stocks, private equity funds, insurance, and carbon credit sectors.

Crypto investment firm Hashed believes that “RWA and equity tokens could lay the foundation for the next generation of financial systems.” The current market is primarily focused on products related to U.S. Treasury bonds and basic asset tokenization. However, significant opportunities exist in exploring areas like the tokenization and securitization of derivatives.

Hashed’s investment philosophy in this field includes assessing compliance, risk management, and due diligence as regulatory elements, as well as efficient processes for deposits and withdrawals, market accessibility, and scalability as operational elements. The tokenization of RWAs is crucial in bridging the gap between decentralized finance and traditional finance, laying the foundation for a more integrated and resilient financial ecosystem.

Crypto exchange Coinbase will explore the significance of tokenization, category expansion, and development in combination with regulation in its report:

1. Tokenization is an important use case for traditional financial institutions and is expected to be a key aspect of the new crypto market cycle.

2. Category Expansion: In 2024, tokenization is likely to extend to other market tools (currently mainly in the bond market), including stocks, private equity funds, insurance, and carbon credits. This is due to the increasing demand for high-yield products and diversified sources of income.

3. Integration with Regulation: Jurisdictions like Singapore, the EU, and the UK have made regulatory progress worth noting. The Monetary Authority of Singapore sponsors ‘Project Guardian,’ which has generated dozens of proof-of-concept tokenization projects on both public and private blockchains of global tier-one financial institutions. The EU’s DLT Pilot Regime has developed a framework enabling multilateral trading facilities to execute and settle transactions on a blockchain instead of through a central securities depository. The UK has also introduced a pilot regime seeking to provide a more advanced framework for issuing tokenized assets on public networks.

Narrative Keyword Six: Increased Attention on SocialFi and Web3 Social Applications

Institutions Involved: Binance, Spartan

Overall Tone: The emergence of a friend. tech in 2023 has drawn significant attention in the industry. Crypto institutions predict this is just the beginning, with SocialFi, represented by the potential of Web3 social applications, set to gain further attention. This marks a significant shift in the industry’s focus towards consumer and social applications.

Selected Views on Increased Attention on SocialFi and Web3 Social Applications:

Binance:

Friend. tech has demonstrated the potential of Web3 social applications. In 2024, the growing attention on SocialFi will define the form of social interactions on Web3 in the coming years.

Spartan:

Friend. tech is just the beginning, signifying a significant shift in the industry’s focus towards consumers and social applications.

Binance’s report notes that the attention was drawn by a friend. tech, especially from influencers outside the cryptocurrency field, underscores the potential of Web3 social applications. In 2024, the growing focus on SocialFi will shape the future of social interactions on Web3. Similarly, Spartan discusses the surge in similar projects following the breakout of friend. tech and possible airdrops in the coming year, indicating the start of a trend that marks a significant shift in the industry’s focus towards consumers and social applications.

List of some tokens in the SocialFi field (source: SoSo Value）

Narrative Keyword Seven: Decentralized Science (DeSci) Becomes a Strong Use Case

Institutions Involved: Spartan, Messari

Overall Tone: Decentralized Science (DeSci) as a powerful use case of blockchain technology is expected to gain more attention in 2024. The incentive mechanisms of cryptocurrencies in this market are considered meaningful.

Selected Views on Decentralized Science (DeSci) Becoming a Strong Use Case:

Messari:

In the DeSci market, the incentive mechanisms of cryptocurrencies are meaningful.

Spartan:

DeSci, as a strong use case of blockchain, will gain more attention in 2024.

Crypto institution Messari, in the final section of its annual report, mentions Decentralized Science (DeSci) and indicates that the projects under this concept are still in their early stages, with 50% of the DeSci projects they track having been established in the past year. The incentive mechanisms of cryptocurrencies in this market are meaningful. Token sales and DAOs aim to fundamentally change the way research is conducted. Interest in longevity, rare disease treatments, and space exploration is significant enough to drive the development of this field. Meanwhile, crypto institution Spartan predicts that DeSci as a powerful use case of blockchain will receive more attention in 2024. Its significance lies in using Web3 technology to establish secure, lasting records of scientific contributions, thereby achieving fair credit allocation, simplifying transactions, allowing global resource sharing, and overcoming economic barriers.

Narrative Keyword Eight: Transition of GameFi to Play-and-Earn and NFTs as Brand Assets

Institutions Involved: a16z

Overall Tone: In the GameFi sector, a16z’s narrative prediction is particularly noteworthy. The firm indicates that the GameFi domain is transitioning from Play-and-Earn (P2E) to a model where gaming itself is monetized (Play-and-Earn) in 2024. Concurrently, NFTs are becoming ubiquitous brand assets, with more and more well-known brands integrating digital assets into the mainstream consumer market through NFTs.

Selected Views on the Transition of GameFi to Play-and-Earn and NFTs as Brand Assets:

a16z:

1. In 2024, the GameFi domain is transitioning from Play-and-Earn (P2E) to a model of monetizing gaming activities (Play-and-Earn).

2. NFTs are becoming ubiquitous brand assets, with an increasing number of well-known brands bringing digital assets into the mainstream consumer market through NFTs.

a16z, in its predictions for the crypto market in 2024, notes a significant shift in the GameFi domain from the once-popular “Play to Earn” concept to “Play and Earn.” The firm believes that the gaming industry needs games that not only attract players but also provide them with added value. This transition establishes a clear distinction between gaming and “gold farming” (working) activities. Furthermore, Messari reports that the current market size of the gaming industry is approximately $250 billion, with expectations of significant growth. The value addition of utilizing a web3 architecture in the gaming industry lies in the potential to “improve user acquisition and retention,” although this remains an unproven argument to date.

List of some tokens in the GameFi field (source： SoSo Value）

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