Why Web 3.0 Tokens Could Be The Next Cryptocurrency Hot Trade

Digital assets such as Livepeer, helium, and bittorent have soared this year despite the recent drop in cryptocurrencies.

With Bitcoin (BTC, +2.44%) prices stuck in a months-long holding pattern, some cryptocurrency traders are speculating what could be the next bet in the market: a digital asset tied to the insights of a ‘decentralized internet’, colloquially called Web 3.0 Tokens.

Data tracked by Messari and released by Arca Chief Investment Officer Jeff Dorman shows that the cryptocurrency sub-segment of “Web 3.0 tokens” rose 22% in the week ending August 1, outpacing Bitcoin and all other sub-segments, including Tokens are not replaceable. (NFT). Bitcoin, the largest cryptocurrency by market capitalization, is up 10%.

Year-to-date, tokens associated with decentralized internet applications have seen an average increase of 244%, trailing the 2.726% increase for the NFT sub-sector but exceeding Bitcoin’s appreciation by 37%.

Encoder performance
Source: ARca, Messari, TradingView

Some of the most important Web 3.0 currencies, such as Livepeer (LPT), helium (HNT) and bittorrent (BTT, +14.56%) (BTT), have increased at least 800% this year, despite the collapse of crypto markets since April, according to Massari.

“Seeing the Web 3.0 ecosystem grow exponentially year-to-date and retain most of its gains after capitulating even in May is very positive for the cryptocurrency market,” Nick Mancini, CoinDesk Research Analyst for Trade The Chain said. Higher prices are directly related to increased demand and expansion of services in each layer, and because of this, the ecosystem is able to continue to grow. »

Web 3.0 refers to a paradigm shift of the Internet managed by network participants around the world and defined by a set of open, decentralized and decentralized networks and protocols that provide services such as computing, storage, bandwidth, finance, and identity.

For example, the Ethereum-based Livepeer protocol provides a marketplace for video infrastructure providers and streaming applications, while Filecoin and The Graph provide decentralized storage and data management networks. Helium uses blockchain and tokens to incentivize consumers and small businesses to provide and validate wireless coverage and to transmit device data across the network.

Messari tracker shows that the Web 3.0 token sub-segment, which includes more than 40 coins, has a total market capitalization of $25 billion, excluding Oracle provider Chainlink. (The Oracle provider is widely associated with decentralized finance and has a market capitalization of $10 billion.)

However, when considering only high-profile projects like The Graph, Filecoin, Helium and Livepeer, the market value of Web 3.0 tokens comes to less than $15 billion. This is only 2% of the total market capitalization of Bitcoin, which is $735 billion. But this is comparable to the size of the decentralized finance (DeFi) space a year ago. Data from Messari shows that the DeFi sub-sector now has 137 assets and is worth more than $50 billion.

Waiting for the audience’s attention

Although Web 3.0 tokens have largely outperformed Bitcoin and other major currencies this year, the sector has not seen the euphoria or mainstream interest that Bitcoin, Ethereum, DeFi, NFT, and even Ethereum layer 2 have received since October 2020.

This is probably because the underlying technology is relatively complex.

“Web 3 is not as easy to understand as DeFi, and it is likely to be 12 months behind DeFi in terms of mainstream awareness,” said Kyle Samani, co-founder and managing partner of Multicoin Capital. “We expect this to change as consumer apps based on NFTs, social tokens, and creator monetization grow over the next 12 months, such as Audius, Mirror, and many more.”

The DeFi boom started a year ago and has remained the same to this day. The market value of this segment has grown from around $5 billion at the beginning of 2020 to over $50 billion at the time of writing.

Samani is confident that Web 3.0 tokens will catch up, as DeFi sometimes gets a bad reputation; However, there are no downsides associated with the idea of ​​a decentralized internet yet. Recently, CFTC Commissioner Dan Berkowitz stated that DeFi derivatives may be illegal in the US.

“Nobody is really saying that The Graph, which is an indexing protocol for querying networks like Ethereum, Solana, and IPFS, is bad, while a lot of people in the current financial system are saying that DeFi is bad,” Samani said. “As awareness of Web 3 grows, it is hard to see anything other than public support and enthusiasm.”

Participating institutions

While mainstream adoption is still at least a year away, wealthy investors are pouring money into Web 3.0 tokens. Multicoin Capital invests in The Graph, Helium and Livepeer, according to the official website.

Grayscale, the world’s largest digital asset manager and one of the institutional investors to identify digital assets, launched a huge confidence boost in March. Rehana Sharif Al Askari, director of investor relations at Grayscale Investments, told CoinDesk last month that investors are diversifying into Web 3.0 tokens.

“It is diversification within the asset class, if investors want exposure to bitcoin as a store of value, then Ethereum for smart contracts,” said Sherif El Askari.

“Then applications other than these build on those networks and solve other problems in the real world,” she said, adding that Livepeer’s Grayscale trust is structurally identical to the backend Grayscale Bitcoin Trust (GBTC) (Grayscale is a unit of Digital Currency Group, an investment holding company that is also CoinDesk’s parent company.)

Livepeer’s LPT token is up 1,050% this year. The protocol’s weekly revenue increased 10-fold to more than $10,000 from February to June, according to data provided by Web3Index.

Doug Petkanics, CEO and co-founder of Livepeer, told CoinDesk that online streaming has a $70 billion market and represents 80% of today’s internet traffic. In addition, the market is expected to grow from $70 billion to $250 billion over the next five years, according to analyst forecasts, according to Betanix. The outlook for The Graph and Ocean Protocol is bright, too, as noted by the Messari Q2 review.

Apart from a strong use case, many of these Web 3.0 tokens offer attractive returns through Staked, a platform that allows investors to earn returns through staking and DeFi without custody of their crypto assets.

For example, Helium’s HNT token currently offers a nominal annual return of 8.7%, while Graph’s GRT (+0.94%) offers a return of 15% and LPT offers a return of 30%. The higher returns led to positive sentiment for these coins, as shown in the sentiment chart below.

“Traders are feeling optimistic about them, which is fueling the network effect,” Mancini said. “Traders win and bet, and in return, they tell others about the huge opportunity.”

Why Web 30 Tokens Could Be the Next Trade

sentiment graph
Source: TradeTheChain

The Crypto Market Is Much More Than Bitcoin

Gone are the days when investors thought the cryptocurrency markets were synonymous with bitcoin. While bitcoin remains the top cryptocurrency by market capitalization, recent poor performance relative to other currencies indicates that investors are delving into the digital asset markets to find investments with faster growth potential.

“One week’s data may not mean much, but if we look at three months, six months and 12 months, there is a clear shift from bitcoin to other sub-sectors, and Web 3.0 is one of them,” said Jeff Dorman of Arca. In a Telegram call.

According to an Arca research note published earlier this week, bitcoin has had “both a bad upside gain and a bad pickup” this year. Simply put, Bitcoin struggled to outperform the other major currencies during the broader market downturn seen after mid-April, but it has also been frustrated with the market’s recovery over the past two weeks.

According to Dorman, the data shows that some new investors are skipping bitcoin and ether (ETH, +6.99%) and heading straight to other sub-sectors of the industry. Historically, investors have used the first two currencies as gateways.

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