The Breakdown - How Asia Will Shape the Next Crypto Bull Market

Episode Date: December 23, 2023

A reading of this piece by Serotonin's Amanda Cassatt https://www.coindesk.com/consensus-magazine/2023/12/19/how-asia-drives-the-next-crypto-bull-market/ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Saturday, December 23rd, and today we are doing some end-of-year prediction-type coverage, reading some interesting thoughts, and speculating upon them. Before we get into that, however, if you're enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation. Come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Hello, friends. Well, today, even though it's a Saturday, we're actually doing basically a long read Sunday just a day ahead.

Tomorrow we're doing another one, and this is all kind of part of end of year coverage. Obviously, right now news has slowed to a trickle, outside of Elizabeth Warren being Elizabeth Warren. But there's tons and tons of interesting, thoughtful analysis on the past and the future. We start today reading a piece by Amanda Cassatt, one of crypto's best-known marketers, the head of Serotonin, who wrote a piece called How Asia Drives the Next Crypto Bull Market. Amanda writes, with substantial developer communities flourishing Web3 scenes and a head start in SocialFi, Asia's blockchain hotspots are primed to lead the next cycle of crypto adoption. We have arrived at the start of the next bull market. If history is our guide, these cycles are powered by multiple factors, including Bitcoin's

having event, shifts in macroeconomic landscapes around U.S. elections, and Federal Reserve interest rates, as well as the advent of new Web 3 and DPI innovations. Yield farming, for instance, was a significant innovation that fueled the previous cycle. The upcoming cycle may potentially feature a mix of zero-knowledge proofs, novel DFI primitives like restaking, and innovative blockchain stacks that offer modularity, composability, and are primed for interchain asset and data movement. Each cycle is accompanied by a unique cultural narrative. The last cycle was dominated by art NFTs, sparked by Beeple's $69 million sale at Christie's, and further fueled by the PFP craze and the fine arts use case growing with proponents at the scale

of Sotheby's and Pace Gallery. The present cycle, predictions suggest, will be molded by the social-fi narrative as platforms like friend. Tech have already set the stage. Institutional and regulatory narratives, too, play a crucial role. The last cycle saw micro-stratagees Michael Saylor introducing Bitcoin to the corporate balance sheet, while this cycle is marked by traditional financial institutions and fintech giants applying for crypto ETFs and launching stablecoins. On the regulatory front, the U.S. is still wrestling with crypto regulations, causing many projects to market their new crypto products outside the U.S. This is why I argue that the next bull market will have a distinct geographical flavor, with Asia taking center stage.

The enthusiasm for crypto in Asia is hard to miss. A stark contrast was visible between less vibrant fall conferences in the States, and the buzzing scenes at Korea Blockchain Week in Token 2049 in Singapore. Cities like Bangkok, Ho Chi Minh City, Jakarta, Manila, Kuala Lumpur, not to mention a handful of large Indian cities, are home to substantial developer communities and flourishing Web3 scenes, bolstered by government support and enterprise adoption. The thriving environment at Token 2049 in Singapore, the real capital being deployed by APAC investors into crypto projects, and the increasing appetite for NFTs, collectively suggest to region primed to drive the next bull market. While Asian governments vie for the top spot as a

crypto hub, the U.S. seems to discourage its crypto entrepreneurs. As a result, marketing campaigns are excluding the U.S., businesses are expanding in Asia, Europe, and the Middle East to cater to growing demand, and entrepreneurs are relocating to jurisdictions with a friendlier regulatory environment. Opening serotonin offices in A-PAC, I've witnessed firsthand the unique advantages these markets offer to growing crypto projects, from tech-savvy mobile-first audiences to high-quality developers eager to contribute to decentralized projects, the region is brimming with potential. There's a palpable enthusiasm for Web3 culture and a readiness to adopt new technologies, particularly SocialFi, which is already the norm in the region thanks to exposure to WeChat. SocialFi refers to applications allowing users to monetize

social interactions and control their own data. Telegram, ubiquitously used for messaging by the Web3 community in Asia, is already testing out its own self-custody crypto wallet in app with non-US users. Combining this with the regulatory friendliness of places like Hong Kong and Singapore, we are looking at a potentially explosive crypto boom. To us Americans, it feels borderline unimaginable that First Digital in Hong Kong, for example, could launch its stable coin, FD, U.S.D, with regulatory approval when fintech mainstays like PayPal face subpoenas for doing the same in the U.S. This Asia speed, as we at serotonin affectionately term it, is a testament to the region's rapid adoption and contribution to Web3 technologies. I believe this dynamic will steer the

upcoming bull market and introduce a geographical narrative to the crypto cycle. However, I foresee the scenario changing in about 18 months post the next U.S. election. I expect regulatory clarity for crypto in the U.S. to emerge, sparking a new cycle of enterprise adoption and marketing to U.S. consumers. This period will also see the reemergence of the U.S. as a primary driver of Web3 innovation and adoption, contributing to a thriving global Web3 ecosystem, with leadership from Asia and other markets. All things considered, the crypto world is set for a more diverse and dynamic era driven by various global forces, with Asia leading the charge in the imminent bull cycle. So a ton that's really interesting to dig into here.

First of all, let's talk about the reaction of different regions to everything that happened in 2022. Undeniably, the reaction to the failures of Luna and Celsius and FTX were taken the hardest here in the United States. They became fodder for an expanded attack on the crypto industry in the form of Operation Chokepoint 2.0, which was of course followed by Elizabeth Warren's anti-crypto army. and even now, as institutional excitement returns to the space in advance of an anticipated Bitcoin spot ETF launch coming next year, the industry definitely has a long way to go in terms of the enthusiasm that we saw back in, for example, 2021.

From all reports that I heard, many Asian crypto communities simply didn't take all of the failures and frustrations of the last couple years as hard as we did here in the U.S. Investors seemed a little bit more open to deploy, and communities remained enthusiastic, and I think that that has created a halo effect, which is attracting builders to the region. Amanda is a case study in exactly that. Now, when it comes to regulatory clarity, the biggest boon in that region is, of course, the re-emergence of Hong Kong as a viable space for crypto projects. There was a time when that didn't look likely.

In the wake of China basically banning all things having to do with crypto, Hong Kong was getting increasingly hostile. Indeed, coming up to the end of 2022, it was anticipated that the city-state was going to announce some pretty serious restrictions, particularly around the way that retail customers could interact with crypto assets. When those announcements came, they were much more pro-crypto and much more favorable than people had anticipated. Now, part of that, the speculation goes, might be that as the U.S. was starting to clamp down on crypto, China was reevaluating its position given what it might have seen as a new market opportunity. The evidence for that sort of shift or thinking was found in the fact that Chinese

officials were showing up at Hong Kong Web3 meetups and interacting positively with the community there. Hong Kong in many ways plays a role of China's economic bridge to the rest of the world, allowing China to retain full control the way that it wants to on its home shores, but being a little looser in a market that's right nearby. And so in some ways, people are viewing Hong Kong as a bellwether for China's larger attitude. The other thing that's interesting is the extent to which the differences in how mobile culture works in Asia will impact what use cases of crypto and blockchains they actually adopt. What I mean by that is that no matter what anyone says about Frentec, I am completely unconvinced right now that socialify or the financialization of social networks

is something that's actually going to hit mainstream American audiences in any meaningful way. Could always be wrong, norms are constantly shifting, but I just don't think there's much evidence to support the idea that that's going to be a big theme. Now, do the DGens in crypto like trading each other? Yeah, but that doesn't necessarily have anything to do with what the rest of the world is going to think. On the other hand, in a cultural context and a technological context, where mobile already powers everything and there's different types of financialization, maybe that's totally different. Maybe this feels much more normal. And even if it's not the social fi use case that Amanda identifies here, it's entirely possible that the different ways those

communities already interact with each other, will end up being an interesting genesis point for other use cases for crypto. I would be remiss finally if I didn't note that while it is undeniably true that U.S. and American-based entrepreneurs are starting to look abroad, be it in the UAE or be it in parts of APEC, there are also some who are very determined to keep fighting to the last breath here in the U.S. I'm thinking notably of people like Masari's Ryan Selkis. I think Amanda's right to identify the next election as the potential pivoting. or inflection point moment when it comes to U.S. crypto rules. But of course, if that's the case, it's going to be because in part, the crypto lobby was successful in placing some allies in positions

of power. So, for those of you who want to go be global explorers and see where innovation is on the cutting edge and people are finding new use cases, go abroad, man, do the thing. However, for those who want to stick around the U.S., I can confidently say that there will be a fight to be had here, and that the bright light of opportunity for crypto is certainly not going to go out without a hell of a fight. One thing that I will personally be watching is the extent to which we see an actual break or demarcation between the U.S. and the rest of the world, where the U.S. becomes the great market home base for Bitcoin and other core crypto assets, but where innovation happens elsewhere farther away outside the purview of the U.S. government. Anyways, lots of interesting

things to think about heading into next year. Thanks to Amanda for a thought-provoking post, and until next time, be safe and take care of each other. Peace.