Bitcoin achieving a new all-time high? Huge! What’s next for crypto? With the huge inflows of capital from the Bitcoin ETF approval, where are the major innovation points able to capture investors’ attention?
My opinion? The native digital yield.
In the last bull cycle, ultra-sound money for ETH was one of those prominent narratives. The idea that Ether would become a deflationary asset, as a consequence of the Merge and burning of transaction fees, would make Ether scarcer than ever and its price go to the moon.
🦇🔊💰
However, it didn’t fully materialize as its proponents had anticipated.
The Merge occurred. Ethereum protocol now offers a native digital yield. But ether did not go to the moon (yet).
Yet, at this juncture, another merger is occurring: that of the TradFi and crypto markets. Remember the Bitcoin ETF approval, two months ago, and the success it had? This means one thing: crypto assets are becoming part of the traditional financial system. They are a new asset class with widening adoption and acceptance. And this adoption and acceptance mean that the value of those digital assets, particularly the larger ones, is also increasingly recognized and accepted.
Bottom line: no one truly believes, anymore, that it’s going do zero.
Now let’s sum up the two factors. On the one hand, we have wider acceptance and recognition of the value of digital assets (meaning, higher demand and higher sustained prices). On the other hand, we have digital native yield deriving from the rewards of sound Proof-of-Stake protocols. Something financial markets and institutions absolutely love and die for.
Thus an industry is born. Yield and stripping of principal and yield. Derivatives and complex products. All built on top of each other. Liquid staking and “delta-neutral strategies”. DeFi degens love some extra yield and financial complexity… just like hedge fund GPs.
We are all still digesting what’s happening. The Bitcoin ETF is opening the path for new financial products from TradFi to enter crypto. Merging the two industries. On the other hand, technological evolutions, such as Ethereum’s Merge, clearly benefiting the future outlooks for their financial sustainability. And an explosion in innovation, with new projects and derivatives taking advantage of these opportunities, also contributing to more efficient crypto markets.
Of course, everyone knows what’s coming. There will come a moment when a bust will succeed the boom, and crypto asset prices will go spiraling down. Some crypto projects will go to the ground, making the day for some traditional media journalists to claim in headlines their beloved “I told you so”.
But that’s an issue for another moment. Nothing will be as it previously was. Crypto was born with a promise to revolutionize money. With money comes the financial industry, and here we are faced with new digital primitives, the OG digital bond.