Q2 2024 Outlook: The Web3 Market in the Upcoming Quarter

Mar 26th, 2024
6 min read

As we approach the conclusion of the initial quarter of 2024, time seems to have flown swiftly by. Since year 2024 commenced, we've witnessed a whirlwind of events within a remarkably short span. From the BTC spot ETF approval to the remarkable surge of crypto market and reached a staggering market capitalization, with BTC spearheaded the rally by soaring to $73K. Additionally, we've observed the resurgence of meme coins across various networks like Solana and Base. These are all the proofs that it's imperative for us to navigate the Web3 terrain with a sophisticated grasp of this evolving ecosystem.

Here Are Our Top Predictions for Crypto Industry in Q2 of 2024

The Continuous Resurgence of Bitcoin Ecosystem

Hard to see anyone who isn’t bullish on one of the most significant narratives for Web3 this year. Since the beginning of the year, every project related to Bitcoin and its branches such as BRC, Ordinals, and Rune is experiencing renewed growth from the Bitcoin spot ETF, combining with a fever pitch around the next halving event taking place next month, April 2024. Bitcoin NFTs, such as those inscribed on Ordinals, may also see increased popularity in 2024.

Until that time, it’s all about educated guesses and crossed fingers on what lies ahead for Bitcoin and the entire ecosystem. Will we witness another wild bull run? Or will it reach $100,000 this year? The answer will depend very much on how long the excitement in the market lasts. What’s more important is what we’ve learned. If the past events have taught us that halvings can kickstart rallies, they’ve also shown us that Bitcoin has an untamed nature, unbounded by past patterns. The trick then is to balance and look to ride the wave in this growing yet choppy sea.

The Greater Demand of Intent-based For Multichain Future

'Intents' is perhaps one of the big new buzzwords for this year.

Although "intent-centric" systems vary in their specifics, they generally operate on a similar principle: users, whether they are traders or protocols, express their intentions to a service and leaves out how it should be done in the equation. Subsequently, these intentions are delegated to a "solver" – which may be a human, an AI bot, or another protocol – tasked with executing the necessary actions to fulfill the given task. With this nature, intent-based architectures find a natural fit in DeFi applications where users can articulate their financial objectives, such as lending, borrowing, or yield farming, without navigating through intricate transaction details.

As the adoption of intents grows, fueled in part by ERC4337, the space is hyping up as several projects are exploring a variety of use cases. Many layer-2 solutions utilize intent-based approaches to the solve liquidity inefficiency problem and enhance transaction speed and reduce fees. DEX like dYdX and CoW Swap operate as spot and derivatives trading protocols that use batch auctions and dynamic solver marketplaces where solvers compete to find the best trade execution path, with the winning solver executing the intent and earning a fee.

LSD & Yield Separation Are Becoming the Building Blocks of DEFI

“Nothing worth trading off for time, make your money works for you”

To counter the constraint in the staking model, where stakers are unable to wait for the unstaking period or who want to utilize their assets productively for extra yield, liquid staking derivatives (LSD) come to light to make the whole DeFi system grow. LSD is beneficial not only for users but for the whole DeFi as well with the voting escrow system.

Allowing users to retain the benefits of staking while having the flexibility to trade or use tokens in applications, LSD is boosted with the combination of yield separation. The concept of making you money from the money it makes. This results in many new utilizations such as yield tokenization or yield trading, creating a new whole ecosystem for a yield market in DeFi.

Many projects are bringing this unique approach to enhancing liquidity, optimizing yield, and creating new user opportunities. That made many LSDfi protocols hold the potential to reshape the way users interact with staking assets and the broader financial ecosystem.

The Stipulation in AI-Integration

“AI will be the hottest narrative of this cycle”

You may think AI narrative will be primarily speculative from a ton of degenerate shitcoinery and ditch the trend, but there are actually fundamentals. As this trend persists into the coming year, we foresee that computationally intensive applications will increasingly become economically feasible on-chain soon.

Web3 can decentralize the different parts of the artificial intelligence model stack and we find ways to integrate AI legitimately in the project. You will see many protocols are now AI-powered, on-chain trading bot is a theoretical example. We are already seeing many interesting things from mixing AI and zk-proofs. Using zk-tech, we will be able to prove onchain that particular output is from a particular model and input pair.

This narrative can be one of the biggest money printers for the projects shilling this dream, Whether it is true or not, everyone should have exposure to it in this cycle.

The Unstoppable Surge of MEME-ing

While altcoin markets mirrored Bitcoin’s movements, the latest BTC rebound has sparked an uproar in the meme coin cohort, with DOGE, PEPE, and WIF leading the charge. Even Bloomberg mentioned that the the big winner in this bull will be the left curves.

Meme coins are regaining momentum, fueling excitement across their ecosystems. Solana, in particular, has become a hotspot, attracting traders with a flurry of new meme tokens launching by the minute. Meme is born for thrill-seekers and typically offers exciting investment opportunities. While some may broaden their ecosystems through initiatives like SHIB to Shibarium or ShibaSwap, we will still see many rugs from invalidated projects, but as long as degens are chasing where they think money will enter, memes will continue to dominate the narrative.

What’s most interesting in the meme coin industry seems to be the evolution of how each project raises funds from the public, ranging from fair launch, and stealth launch, to the recently emerging donation-pre-sale model, done by SLERF. This proves how creative meme token projects can be and may be in the future.

What we see from the bigger picture is meme tokens have become one of the main marketing strategies of many chains, including Solana and Base. After the success stories of BOME Coin (BOME) and SLERF serve as a testament with an incredible surge of over 1000% in less than a week after its launch, Solana's ecosystem has spurred a surge in activity on the SOL chain, marked by a significant increase in both new and active addresses, alongside its TVL, hitting the highest levels observed in the past two years.

The Interpollination of Modular Blockchains and ZK Proofs

Over the past year, both the concept of modular blockchains and Zero Knowledge Proofs (ZKPs) have significantly evolved. A notable development is the convergence of these narratives, as companies within the ZK realm are "modularizing" by specializing in particular verticals like co-processors, privacy layers, proof marketplaces, and zkDevOps.

Looking ahead, we anticipate this trend to persist, with ZKPs serving as a bridge between various components of the modular blockchain architecture. Acting as a universal interface among different providers, ZKPs will usher in a new era of smart contract composability. This shift will grant DApp developers greater flexibility in choosing providers and lower the entry barrier to the blockchain stack. Moreover, on the consumer front, ZKPs are likely to find expanded applications, particularly in safeguarding identity and privacy, exemplified by ZK-based decentralized IDs.

Final Thoughts

As we wrap up our thought about this diverse and complex landscape of Web3, one obvious conclusion is that the web3 world is on the brink of transformative changes, driven by innovations, evolving market dynamics, and an intricate sentiment of the market. From the Bitcoin EFT to the potential integration of AI, we are on the pivotal crossroads for the mainstream adoption, strategic movements of big tech and financial institutions. This means that we are moving towards a more inclusive future.

As we look to 2024, if you’re interested in unlocking the potential opportunities that Web3 can offer, we can help you stay ahead of the curve. Contact us: ventures@cleverse.com

author's profile image

General Partner