Shaurya Malwa · 18 hours ago · 2 min read
Bitcoin · Ethereum › Analysis
Crypto infrastructure “far from” scale needed to support $1t Bitcoin or Ethereum
Bitcoin, Ethereum, and altcoins have seen rapid growth this year. BTC in and of itself was up nearly 100 percent just weeks ago while certain altcoins have surged literally thousands of percent.
This trajectory has made many analysts and fund managers in the space confident that cryptocurrencies will start nearing $1 trillion market capitalizations.
As reported by CryptoSlate previously, DTC Capital’s Spencer Noon commented on the path of the industry:
“The strong fundamental backdrop to #crypto — which is unlike any bull market previously — is that there are billions of cryptodollars coming on-chain to use #DeFi. Unless that shows signs of slowing, we are on track for a multi-trillion dollar aggregate marketcap for the space.”
This came shortly after Chris Burniske of Placeholder Capital argued that the leading cryptocurrency, Bitcoin, and Ethereum were both poised to surge to $1 trillion market capitalization
According to Arjun Balaji of Paradigm, though, this may not be the case.
He recently released an extensive personal blog that suggests that crypto market infrastructure and its underlying structure is not at a point yet where it can facilitate such inflows. The blog was celebrated by many others in the space who agreed with the sentiment he put forth.
Crypto not ready to support Bitcoin, Ethereum, altcoin market caps in the trillions?
In the blog, entitled “Crypto Market Structure 3.0,” he explained that crypto purportedly is far from a point where it will be able to support multi-trillion-dollar crypto assets:
“The crypto market structure has gone through two significant evolutions over the first decade. Despite rapid innovation, the market is far from maturity or the scale needed to support a multi-trillion dollar market cap.”
Ethereum is a good example of this assertion. As we saw with the launch of Uniswap’s UNI token, the blockchain quickly became unusable as the cost of gas hit 1,000 Gwei, meaning simple transactions on the network cost dozens of dollars.
Change is coming, though.
Balaji explained that the crypto market is in the midst of the early stages of a “structural evolution” that will bring capital efficiency and systems to bridge CeFi to DeFi. This change will transpire if the following trends form:
- Crypto will get dedicated prime brokerages to enable “clients to margin across venues and cold storage” to “speed up trade lifecycles by moving transfers off-chain.”
- A repo market will be developed that will allow institutions within the crypto space to borrow cash on a short-term basis.
- DeFi will become frictionless and will have a similar or better user experience than centralized finance platforms.
- Non-custodial trading will become normalized as users realize that fees and the spread may be lower on decentralized exchanges as opposed to centralized ones.
- Institutions will be entering the decentralized finance space.
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