Since Part 1 of our 2024 trends overview the SEC finally green-lit the 19b-4 applications for 11 US spot Bitcoin ETFs. It has since become clear that the US Bitcoin ETF wars are now upon us, the battleground for which is manifest in everything from daily volume flows and BTC holdings data, to advertising campaigns and non-profit donations.
As the most publicised ETF launch ever, there's been a corresponding explosion of data points tracking the funds' progress since they started trading with an impressive $4.6 billion in volume on day one.
One data point of note is that Blackrock's ETF, IBIT, now holds more than 50,000 bitcoin (see graphic below), and this has been achieved in under a month of trading. For context, the Grayscale Bitcoin Trust (GBTC) took123 months to accumulate the approx 620,000 Bitcoin it held at the beginning of this year before the outflows began by investors looking to take advantage of lower ETF expense ratios.
This ultimately means that as the 'digital gold' narrative around Bitcoin continues to enter the mainstream of a $30 trn wealth management industry and advisers understand that 0% allocation is simply the wrong number given its impact on risk-adjusted returns, the thesis on the long-term demand-side impact of the spot Bitcoin ETFs looks increasingly convincing.
Figure 1: Bitcoin holdings of the newly-launched ETFs
But away from the world of Bitcoin ETFs, several other narratives are at work which will play as significant a role in driving the digital assets space toward mass adoption.
Trend #5 : Crypto Gaming
Though much of the conversations in digital assets have been dominated by institutional investment and the ongoing hype around real world asset tokenisation, it's easy to forget that crypto gaming has consistently been a major industry driver for several cycles.
And it isn't hard to see why – not only is the total market for video games slated to reach some $610.6 billion by 2032 driven in part by huge adoption in Asia, it also grapples with many of the pivotal areas of Web3 development needed for mass adoption, including asset tokenisation (in game), smart contracts, and decentralised governance.
Figure 2: Video game market size, 2022 - 2032 ($ billions)
Despite this, creating a thriving, long-term in game economy with crypto and NFTs is easier said than done and a lot of hardcore gamers have yet to gravitate toward crypto gaming. This is in part due to projects and developers attempting to force play to earn and NFTs that are in an immature state into games and taking the focus away from what gamers really want which is playability (e.g. RuneScape, World of Warcraft, and many others).
Consequently, it is difficult to predict whether play to earn is going to be the primary mechanism for crypto gaming, or at the very least it will have to be done in a way that does not diminish gameplay. PC games such as Star Atlas and Illuvium are good examples of quality games for which digital assets like NFTs and crypto earning are only incidental to the gaming experience itself.
Ultimately, part of the shift towards crypto gaming will be driven by demographics. The majority playing games in the future are going to be those who are natively familiar with digital assets, such as the Fortnight generation, and they will be more receptive to what crypto games have to offer. So it's going to be a change in the gaming population as well as changes in the fundamental concepts of crypto gaming themselves that will drive this trend.
Trend #6 : Zero Knowledge Tech
Though blockchain technology is already widely acknowledged for its ability to improve workflows and operational efficiencies in business, transaction authentication still needs information sharing with other systems. Zero-knowledge tech has gained traction increasing attention as a powerful tool for addressing privacy and confidentiality challenges in blockchain technology. It has also become an important tool for scaling L1s via ZK-rollups which makes them safer than pure off-chain scaling solutions such as sidechains.
Even though few people will care or need to understand the specifics around their mechanics, zero-knowledge technologies are going to start to permeate all areas and narratives, whether it's using a ZK-based roll-up or for daily functional use on an L2, DeFi, or other use cases. Moreover, ZK tech will be a critical element driving the space in the tokenisation of real world assets by financial institutions as well as organisations creating their own ZK-based chains using systems such as the Polygon Chain Development Kit (CDK).
Trend #7 : SocialFi
SocialFi, the confluence of social media and Web3 which uses blockchain to monetise social interactions, is a steadily emerging trend that has yet to have its day. Back in previous cycles, the concept of SocialFi revolved around decentralised social media applications and incorporating NFTs, but there wasn't enough traction and the technology was not ready from a scalability perspective.
However, the SocialFi trend is following a slightly different path than expected as with what we're seeing with X and the potential of ttraditional social media companies moving to engineer crypto native tools on their platforms (even though it's proven challenging so far).
Figure 3: Overview of the SocialFi landscape
Will we see all popular social media platforms do this? Not unless there's the type of fundamental shift of ethos necessary within the social media industry for it to actually take hold, but there can be no denying that we're seeing a boom in the Web3 native, SocialFi projects exploring the space (Figure 3).
Moreover, as it gains traction, it will drive a more open, transparent, and UX-centred social media experience by providing users with control over their personal data and privacy via integrated decentralised identity systems. This will also help to align economic incentives with social activities and could go some way to contribute significantly to the evolution of Web3.
If you missed part 1 of our digital assets trends for 2024, click here.
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