Featured Interview | Crypto Outlook With Jeff Dorman, CIO of Arca
Dec 22, 2023
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Crypto Outlook with Jeff Dorman, CIO of Arca. Topics include: changing sentiment in crypto markets, broadening of the market, investor concerns and regulatory progress in DeFi, outlook for gaming, NFT, and blockchain, emergence of new marketplaces and intersection of AI and crypto, overlooked aspect of blockchain utility: data storage.
Crypto markets have seen a shift in sentiment with increased interest from investors in sectors like DeFi, Web3, gaming, and NFTs.
Investor sentiment towards crypto has improved, with more investors considering it in their portfolios and recognizing its role in diversification.
Bitcoin is expected to see continued growth in 2024, driven by institutional demand, market cycles, and the introduction of Bitcoin ETFs.
Deep dives
Changing Sentiment in Crypto Markets
The sentiment towards crypto markets is shifting, with increased interest and inquiries from investors. The negative press has focused on the fallout from 2022 and the rise of a few successful stocks and tokens, but the DeFi, Web3, gaming, and NFT sectors have quietly thrived and gained attention. Investors are now curious about the drivers behind Bitcoin's success, the growth of different sectors, and the legal and regulatory landscape. The difference now is that investors are more educated and ask better questions, which shows the progress of education and sophistication in the investor base.
Shift in Investor Mindset and Interest
Investor sentiment towards crypto has changed, with more investors considering crypto in their portfolios. The career risk associated with investing in crypto has diminished, and those who left the market after the 2022 downturn are starting to re-allocate funds. While some institutional investors stepped back temporarily, they haven't lost interest and continue to pay attention to crypto. Investors now understand the potential of blockchain technology and recognize its role in portfolio diversification. They are looking for new investment opportunities that challenge traditional bond and equity portfolios. The interest from both existing and potential crypto investors bodes well for the industry's growth and potential adoption in the future.
Bitcoin's Increasing Appeal and Value
Bitcoin is expected to continue its upward trajectory in 2024, driven by increasing institutional demand, upcoming halving, and the influence of market cycles. Investors acknowledge Bitcoin's role in the modern portfolio and see it as a means of diversification in a changing market landscape. The introduction of Bitcoin ETFs and the interest from major players like BlackRock reinforce its attractiveness to investors. Additionally, the mining sector associated with Bitcoin is expected to benefit significantly, given the growing transaction fees and the involvement of institutional players. The outlook for Bitcoin and its associated businesses is positive, although specific price targets are not provided.
Ethereum's Role as the App Store of Blockchain
Ethereum is regarded as an app store for blockchain technology, offering a wide range of applications and possibilities within the ecosystem. Investors see Ethereum as a representation of blockchain technology and a gateway to various sectors such as NFTs, DeFi, and stablecoins. While Ethereum may face competition from other chains, its trusted reputation and security advantages make it a preferred choice for large and institutional transactions. The outlook for Ethereum in 2024 is promising, given the ongoing upgrades and improvements in scalability. However, the investment potential of DeFi remains somewhat limited due to the presence of multiple chains and tokens, regulatory uncertainties, and a lack of economic value capture for token holders.
Opportunities and Challenges in Gaming, NFTs, and AI
Gaming has emerged as a significant investment theme, with the anticipated launch of new games and the rise of new ecosystems like Ronin, Avalanche, and IMX. Investors recognize the potential for value creation within games and the ability to preserve value across different versions and platforms. The intersection of AI and blockchain technology is also gaining attention, as decentralized AI models foster better training by incorporating diverse global inputs. The gaming, NFT, and AI sectors offer exciting opportunities for investors, but the complexity of token valuation and the fragmented nature of projects pose challenges in selecting promising investment prospects.
Overvalued and Undervalued Narratives in the Market
The market is currently overvaluing layer one and layer two blockchains, considering the abundance of block space relative to the demand. The influx of investment into app stores and platforms exceeds the actual number of apps and projects being built. Therefore, a reevaluation of valuations and a focus on identifying promising consumer apps are necessary. On the other hand, undervalued narratives include the potential of blockchain-based AI models like TAO and the transformative power of the gaming, NFT, and AI sectors. Understanding these narratives and their investment potential is crucial for investors navigating the evolving crypto market.
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As the year comes to a close, host Noelle Acheson speaks with Jeff Dorman, CIO of Arca, about what the crypto narrative is shaping up to be in 2024.
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This episode was hosted by Noelle Acheson. “Markets Daily” is executive produced by Jared Schwartz and produced and edited by Eleanor Pahl. All original music by Doc Blust and Colin Mealey.
