5 areas to watch during a bear market

Markets are in turmoil. The regulatory noose is tightening. Block space demand is at its lowest level since 2019. Crypto Twitter is a ghost town. And now, the biggest event of the year — the merger — is a thing of the past.

Am I the only one who thinks this way, or does the crypto space feel like it has no direction now?

We know this feeling won't last forever. Anyone can build and innovate on the blockchain, and the potential for intellectual capital in this area means that certain applications or technologies will inevitably get people excited again and bring back the interest in the blockchain space. demand and drive the next wave of user adoption.

The question is, what's next in the crypto space?

Let's take a look at a few exciting areas in infrastructure and applications to see what might be next.

1. Layer 2

Layer 2 will continue to grow in the coming months.

While there is currently insufficient demand for block space, the increased transaction capacity provided by these networks has begun to unlock new use cases and will create long-term dividends in the next bull market by allowing more users to join the on-chain economy.

In fact, despite the bear market, the ETH-denominated value locked on Layer 2 is at an all-time high.

Source: L2beat

Arbiturm and Optimism are undoubtedly the two largest L2s, and optimistic rollups together account for 96.6% of the DeFi TVL on all L2s .

Each of these networks has several upcoming catalysts.

Arbitrum, for example, is expected to grow with the resumption of the Arbitrum Odyssey campaign, which aims to encourage users to try different protocols by rewarding NFTs.

The network is also poised to benefit from the launch of their (still to be determined) native token, which is expected to take place after Odyssey is complete. In the meantime, this L2 will continue to benefit from numerous upcoming protocols.

Optimism also has some exciting catalysts, including Odyssey-like event Quests , where users can earn NFTs by interacting with the protocol, and Bedrock network upgrades.

Even though zk-rollups are still very early in their life cycle, they are also going to create some buzz in the near future. Some zk-EVMs developed by zkSync, Polygon, and Scroll will release the mainnet or testnet at the end of the year, while StarkWare’s governance token STARK is scheduled to go live at the end of this month.

2. Cosmos

L2 isn't the only infrastructure game. There are many exciting developments happening in the Cosmos ecosystem. Cosmos enables developers to create highly customizable, application-specific blockchains that can leverage interoperability through Inter-Blockchain Communication (IBC), and thanks to key network upgrades and chain launches , Cosmos looks set to see growth in both user and developer activity.

One such upgrade is interchain security . Interchain security, which will be launched in January 2023, will enable Cosmos chains to leverage the Cosmos Hub (the network with the largest stake value) to guarantee their security, which means they do not need to start their own set of validators. Tough and expensive, and it poses a security risk.

There are also several exciting Cosmos chains that look set to gain traction in the coming months, including Canto, the LI chain that offers native DEXs, stablecoins, and lending markets as public goods, and Berachain . Berachain is an upcoming, DeFi-oriented L1 that uses a unique, Proof-of-Liquidity consensus mechanism and has a large following.

3. DeFi recovery

Driven by the above-mentioned L2 and application chains, DeFi will usher in a recovery when it enters the fourth quarter of 2022 and the first quarter of 2023.

The options agreement space appears to be gaining considerable momentum. Benefiting from the increased capacity offered by L2, protocols such as Dopex , Lyra , and Premia appear to be gaining traction in the near future as options become a more important part of the crypto market structure, and sophisticated DeFi users appear to manage their risk on-chain increase.

Another segment poised for explosive growth is NFT-Fi (the DeFi of NFTs).

Like it or not, NFTs are not going away, and the JPEG market will become more liquid and mature as trading, lending, and derivatives continue to evolve.

There are many exciting NFT-Fi projects underway and launching in the coming months. This includes AMMs like SudoSwap , lending projects like NFT-Fi, JPEG’d , and MetaStreet , valuation protocols like Abacus , and perpetual contract DEXs like NFT Perp .

4. Web3 Social

Between DeFi, NFTs, and purely speculative trading, many of the most popular crypto use cases to date are entirely financial in nature.

While almost all dapps are related to money in some way, there are also numerous non-financial applications that seem to be gaining traction in the near future.

One of the exciting areas is decentralized media platforms. These networks differentiate themselves from Web2's existing networks by providing strong censorship-resistant safeguards for users, and the ability for creators to reach a larger audience for porting.

Several applications and protocols to watch in the coming months include gm.xyz and Lens , as well as DeSo, an L1 network dedicated to hosting blockchain-based social applications.

5. GameFi

Another area likely to grow is crypto gaming (GameFi).

With the success of play-to-earn (P2E) games such as Axie Infinity, STEPN, and Sweatcoin, hundreds of millions of people have flocked to the space over the past year.

While many gamers seem to hate cryptocurrencies and NFTs these days, GameFi has the potential to become a major conduit, bringing hundreds of millions, if not billions, of users on-chain.

Will we finally see a breakout AAA crypto game?

hope is at hand

While cryptocurrencies feel stagnant, there are still many network upgrades and innovative applications that will help drive the next wave of adoption and make cryptocurrencies exciting again.

The macro clouds will eventually dissipate, and the insatiable demand for block space will return once again.

Meanwhile, the seeds of the next bull market will continue to be planted.