7 Trends That Could Reignite Crypto Growth

Bernstein, an investment firm, lists its ideas, starting with the Ethereum blockchain's Merge.

AccessTimeIconSep 6, 2022 at 1:05 p.m. UTC
Updated Apr 9, 2024 at 11:49 p.m. UTC
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Wall Street investment firm Bernstein last week listed seven predictions that could reignite growth in crypto.

1. The Ethereum Merge is successful

Even though the switch to a proof-of-stake method of maintaining its network from a proof-of-work one is just days away, there remains a healthy bit of skepticism, Bernstein analysts Gautam Chhugani and Manas Agrawal wrote in a note last week. They believe it will happen between Sept. 10 and Sept. 20, and it will be a positive catalyst for crypto.

2. Rollups to bring the next wave of crypto user demand

Chhugani and Agrawal said there has been a notable increase in user numbers, on-chain liquidity and transactions on rollups such as Optimism and Arbitrum, with transaction activity on rollups now making up around 15%-25% of all transactions on the Ethereum blockchain. Rollups are Ethereum layer 2 platforms that help process transactions separately from the main network to increase speed and lower costs.

3. Ether flips bitcoin as the top cryptocurrency

The most asked question by investors is when will the ether (ETH) market cap eclipse bitcoin’s (BTC), the note said. For digital assets, what is more important is that it becomes more of an “innovation-driven, structural trend rather than a macroeconomic asset class.” Ether represents this “innovation-crypto,” and if it succeeds in building the blockchain digital economy, ETH could be adopted as digital money, the team argued.

4. DeFi on rollups brings back the DeFi summer

The summer of 2020 was the first “DeFi summer,” but since then, the decentralized-finance sector has underperformed layer 1 chains, the analysts said. Layer 2 scalability, however, is now making DeFi affordable again, the Bernstein analysts wrote, noting that the Uniswap exchange now gets about 10% of its fees from rollups.

5. NFTs pivot to gaming and play-to-earn becomes play-to-own

“Crypto games will have their own unique culture,” the Bernstein team said. “Over a million NFT (non-fungible token) avatars will become playable characters across multiple interoperable crypto games.” Chhugani and Agrawal are seeing a big migration in talent to Web3 game development from traditional gaming studios – a strong leading indicator in their opinion.

6. Token economic designs start to focus on value accumulation

“More sustainable token designs will bring back retail interest in investing in application tokens versus the latest fast blockchain or retail meme coins,” the analysts wrote.

7. Fat protocol thesis becomes the fat application thesis

The "fat protocol thesis" suggests that value in blockchains would accumulate at the base protocol layer, rather than at the application layer. Bernstein said that the “long-tail of application tokens” will grow thanks to enhanced scalability, economical transaction costs, better user growth on rollups, improved token value accrual and retail interest to invest in applications that they use.


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Will Canny is CoinDesk's finance reporter.

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