Analysis of the Current Status of the Crypto Assets Market: From Optimism to Reality

The annual "Crypto Assets Status" report recently released by a16z has attracted widespread attention. This report leaves a positive and optimistic impression, but we need to take a more comprehensive look at the current market situation.

Adoption of Crypto Assets

The report begins by stating that "Crypto Assets activities and usage have reached an all-time high" and shows the correlation between the growth of monthly active Crypto Assets addresses and internet users. However, this data needs to be interpreted with caution. One address does not necessarily correspond to an actual user, and sometimes it may not represent anyone at all.

In fact, transfers between wallets are one of the most common types of transactions, with each transfer activating two addresses. The surge in the number of addresses on certain blockchains is often related to activities involving meme coins. Active meme coin traders typically have multiple wallets. Additionally, an average of 25,000 new tokens are issued on certain platforms every day, each regarded as an active address.

As a more representative indicator, it is worth paying attention to the monthly visit volume of major Crypto Assets data platforms. As of the latest data, a well-known data platform has a monthly visit volume of 73.96 million, while another platform has 22.8 million. Even when adding the traffic from other professional platforms, the overall number of retail investors does not seem to have significantly increased.

The user data for mobile crypto wallets appears optimistic, but it is necessary to consider that in some emerging countries, mobile devices account for a significant proportion of internet traffic. As mobile wallets become more user-friendly and feature-rich, their market share will naturally grow. Users also often need to install multiple different wallets in the current environment.

These data more reflect the widespread application of Crypto Assets in emerging countries, which has long been the mission goal of Web3 and DeFi.

The "killer application" of Crypto Assets

The report considers stablecoins to be one of the most obvious "killer applications" of Crypto Assets. Indeed, stablecoin transfers are faster and cheaper, and many countries have established relevant legal frameworks, with numerous businesses paying taxes in stablecoins. As regulations improve, stablecoins are likely to gradually replace traditional remittance methods.

The fact that the trading volume of stablecoins exceeds that of a well-known payment network is noteworthy. However, it is important to note that stablecoins are primarily used for large transfers, while daily small payments still rely on traditional payment methods.

Although stablecoins are undoubtedly a success story, it is somewhat disappointing to have them as the focus of the annual report. A few years ago, we were discussing breakthroughs in DeFi here. And now... just stablecoins? It seems that there haven't been any more innovative killer applications this year.

Infrastructure Development

The improvement of infrastructure lays the foundation for the next generation of DApps and high-load applications ( such as games, consumer applications, social applications, etc. ). However, ordinary users have not yet felt significant benefits. Although some games ( have emerged that are almost completely off-chain, due to lack of necessity ) and local consumer applications, the transaction capacity does not seem to be the main bottleneck.

Taking games as an example, the main use case is the tokenization of in-game assets and the open market trading of these assets, which do not require ultra-high TPS.

The advancement of infrastructure undoubtedly creates opportunities for Web3 innovation and new use cases in the future. However, considering that the most popular application this year may be a simple game, the development of the DApp sector seems to still have room for improvement.

Current State of DeFi Development

The report states that "DeFi is still popular and growing." This is indeed the case for 2023, but we have not yet reached the levels of 2022. In 2022, the total value locked in DeFi was close to $180 billion, while now it is only about half of that. Even considering price factors, we have not returned to previous highs.

The growth of the industry is mainly attributed to new areas such as liquid staking, re-staking, and RWA. Institutional capital has finally started to enter the DeFi market.

Observing the monthly active user ( MAU ) data of a leading DeFi project, the current number of users is close to 6000 per month. What does this mean? In my opinion, the recent growth of DeFi is mainly attributed to the increase in average deposit value and the rise in overall market capitalization.

The Integration of AI and Crypto Assets

AI and Crypto Assets jointly exhibit tremendous potential; they can drive the development of decentralized economies and promote more affordable, community-centric advancements in the AI field.

The correlation between AI and Crypto Assets traffic may stem from their common characteristics: both are emerging, promising, and speculative cutting-edge technologies. Web3 is at the forefront of technological innovation, quickly attracting the interest of AI users ( and vice versa ). Both industries share similar user demographics and interests, and neither belongs to conservative domains.

Decentralized computing use cases, internet sharing methods, and collaborative AI agents are showcasing enormous potential.

Summary

In 2024, the development of Crypto Assets will mainly be reflected in significant advancements behind the scenes. However, these innovations have yet to attract the attention of a broader Web2 user base, as they are often highly technical or targeted at specific users such as institutional investors.

For newcomers to Crypto Assets seeking quick profits, these developments may lack appeal. This explains why many are drawn to the meme coin craze and prediction markets.

In 2024, people's enthusiasm for airdrops and points programs gradually cooled down. Users now see it as a form of additional APR, which has driven a liquidity rotation among more risk-tolerant passive investors after token generation events. Similarly, the craze around GameFi has also faded with the arrival of reality. While some games have successfully attracted users, none have reached the success level of mainline AAA games. This is normal - innovation takes time to mature.

In other words, we remain optimistic about the industry. But are we in the golden age of Web3? Clearly not yet.