Beyond BTC and ETH: Navigating upcoming themes for the next bull run

As the crypto winter thaws and institutional interest in this new asset class grows, the obvious question for investors is: which crypto do I invest in? The conservative recommendation would be the two largest crypto assets, Bitcoin (BTC) and Ethereum (ETH). They are both time-tested networks and flag bearers of innovation in the space. These two assets also have the most regulatory acceptance globally.

But for those willing to take bigger risks, the search for the next champion is already on. The recent price rally of Solana (SOL), Maker (MKR), and Chainlink (LINK), was a stark reminder. Even as BTC prices rose in line with speculations over a spot ETF, altcoins with lower market caps saw an exponential jump in prices, as risk capital poured in seeking alpha, or “market-beating” returns.

But there is a pattern in these riskier bets as well. The key themes these investors are looking for are faster and more scalable Layer-1 chains, real-world tokenization, and convergence of traditional and decentralized finance. These trends are not isolated phenomena; they are interconnected and mutually reinforcing, driving innovation.


Quest for fastest Layer-1 chains
The quest for scalability has become a central focus in blockchain development. Layer-1 chains, the underlying infrastructure of blockchain networks, often face limitations in handling high transaction volumes without compromising speed, decentralization, or security. This is particularly challenging for applications that require real-time transactions or a large number of concurrent users.

In 2024, we can expect to see even faster and more efficient layer-1 solutions emerge, addressing the scalability challenges that have hindered wider adoption. Networks like Solana (SOL), Avalanche (AVAX), and recently launched Move programming language-based chains like Aptos (APT) and Sui (SUI) are already making significant strides in this area, utilizing innovative consensus mechanisms and sharding techniques to achieve high transaction throughput while maintaining decentralization.

Such advancements will pave the way for a new generation of blockchain applications that require high scalability, such as decentralized exchanges (DEXs), decentralized finance (DeFi) protocols, and Web3-powered gaming platforms.

Real-world tokenization
Tokenization—the process of converting real-world assets into digital tokens—is gaining momentum. By tokenizing traditional assets, such as real estate, commodities, financial assets or even intellectual property, we can create fractional ownership, enhance liquidity, and democratize access to these asset classes.

Soon, we can expect to see further advancements in tokenization protocols and the emergence of tokenized assets across various industries. This will enable individuals to invest in a wider range of assets with smaller amounts of capital, while also providing institutional investors with new opportunities for diversification. Progress on this front is already underway, as seen in recent real-world examples such as investment firm KKR’s tokenized fund, PolyTrade’s tokenized trade invoices, and the growing number of tokenized US Treasuries.

For reference, the real-world assets (RWA) portfolio of MakerDAO, the decentralized autonomous organization that develops and maintains the Dai stablecoin, is now more than $3 billion. The community governing MakerDAO has paved the way to purchase up to an additional $1.28 billion in U.S. government bonds via crypto asset manager BlockTower Capital.

TradFi and DeFi join hands
Traditional finance (TradFi) and decentralized finance (DeFi) are increasingly converging, as institutions seek to gain exposure to the crypto ecosystem while leveraging their existing infrastructure. DeFi protocols offer innovative financial services, such as lending, borrowing, and trading, but they often lack the liquidity and institutional backing that TradFi institutions require.

In the coming months, we can expect to see more bridges and gateways connecting TradFi and DeFi, enabling seamless transactions and the creation of new hybrid financial products. This integration will facilitate the flow of capital between the two worlds and help to legitimize the crypto space. Some of the networks enabling this include Chainlink (LINK), Aave (AAVE), and MakerDAO (DAI).

Consider Chainlink, for example. A decentralized oracle network, Chainlink bridges real-world data and smart contracts on blockchains. It has built a network of node operators who access external data feeds and relay them to smart contracts. In fact, Chainlink's recently launched Cross-Chain Interoperability Protocol (CCIP) aims to become the "TCP/IP of finance" and connect various blockchains. The network has partnered with traditional finance giants like SWIFT, BNY Mellon, Citigroup, BNP Paribas, and ANZ—an Australian bank that recently completed a successful transaction using Chainlink's CCIP.

We can expect to see a new wave of innovation in the financial sector.

The crypto market cycle is entering a new phase. To capture outsized alpha, investors thus need to focus on trends rather than individual tokens. Think of DeFi summer of 2020 or the NFT Mania in 2021, where both these themes led to a broad-based rally in token prices associated with them. Themes such as Layer-1 chains, real-world tokenization, and convergence of traditional and decentralized finance should thus be on the radar of market participants, and so should trends such as SocialFi and Web3 Gaming.

(The author, Parth Chaturvedi, is Investments Lead, CoinSwitch Ventures)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)