Crypto Market Outlook for October: Chain Abstraction, Layer 1 Competition and AI Narrative Confrontation

Original author: Yuzhong Kuangshui, crypto KOL

 

 

As mentioned in the previous introduction, this October Outlook will be very concise. I will only talk in detail about 3-5 tokens that I personally want to participate in. I hope everyone will like this format (it was too scattered before and the information efficiency was not high).

 

TLDR: $UNI $SOL Berachain $TAO $WELL $ENA

 

Market hype is generally divided into two modes. One is artificial narrative, which generally pushes a leading token to an independent market, such as $SUI. The other is the brewing, emergence and outbreak of innovation. This innovation may be a fun Ponzi, or it may be a narrative that meets market demand to a large extent, such as $AXS (this round of memecoin is an atypical case).

 

Generally speaking, the first wave of narratives will give us ordinary people more opportunities. This kind of big innovation is often born in the context of macro liquidity spillover - funds have a higher demand for money-making effects and capital efficiency, and demand drives innovation.

 

A big problem in this round is that "there is no narrative that can guide liquidity in and out like the previous round", and liquidity is the key to asset pricing. Narratives cannot guide liquidity, and asset speculation will be difficult to start. Everyone is speculating on memes, and attention is also on memes. As long as there are some disturbances, related memes will quickly appear. But meme narratives are also the easiest to make investors tired, and eventually a mess.

 

So is there still a chance in the currency circle?

 

I think there is, at least there are still several main narratives in the currency circle that are developing in parallel.

 

Intentional Abstraction & Chain Abstraction

 

The ultimate goal of this narrative is to "allow users and liquidity to enter and participate in Crypto in a low-threshold and non-sensing way", which seems to have a bright future. But this is not Ponzi, and there is a high probability that there will not be a large number of wealth opportunities.

 

In essence, these hypes are still based on the idea that "cryptocurrency users think that this narrative can bring them new buyers". But whether it can eventually bring a large number of real users and liquidity to the cryptocurrency circle, we still have to question it here.

 

The core catalyst of this narrative lies in the launch of $UNI v4.

 

The launch of Uniswap v4 is equivalent to a catalyst that draws market attention to this narrative. In the future, in the process of the development of this narrative, the front end may become the most popular hype target in the market, followed by "infrastructure layer targets" like Uniswap v4 and "liquidity interaction layer targets". But at the beginning, $UNI should still have the biggest opportunity. At the same time, $COW $1INCH with similar concepts should also have corresponding opportunities.

 

Layer1 Competition

 

In the current market, Layer1 competition is the most mainstream narrative, no doubt about it.

 

In this cycle, the main line of market hype is Solana, and from time to time other Layer1s will pop up to compete with Solana.

 

For example, the previous $AVAX, Avalanche promoted the growth of token prices through "hype meme" and "official announcements and PR of top companies". The current $SUI is the same. They use "OTC transactions to let English CTs shout orders (doubtful, uncertain) to create a new narrative", "memecoin hype (now there are some good wealth effects on Sui)" and "use $SUI tokens to incentivize liquidity (similar to Arbitrum)" to attract market attention and improve liquidity stickiness. It is worth mentioning that the DeFi yield on Sui is still good.

 

Now many Layer1s have begun to try to use memecoin to attract market attention and liquidity, but in the end they have little effect (such as BSC).

 

Therefore, I think the Layer1's "you sing and I come on stage" is likely to be a short-term event. These Layer1s are doing things, and short-term participation can definitely make a profit - because your behavior matches the needs of the project party.

 

Another Layer1 gameplay is Fantom's Rebrand - create a better performance chain for brand upgrade. If no one plays the blockchain at the beginning, then use the expectation of future airdrops as an incentive. In essence, it is similar to the previous Layer2 gameplay, which is not very novel, but it is effective before the airdrop.

 

If I want to talk about the Layer1 that I am optimistic about, my list here is: Solana $SOL and Berachain.

 

The reason for being optimistic about Solana is simple. Just look at which company has more large-cap memecoins on Binance. Memecoin is the trump card of Layer1.

 

Berachain’s PoL is the only major innovation in the Layer1 consensus mechanism in this cycle, which introduces a dynamic game between users, nodes and project parties. At the same time, they are also actively supporting ecological projects in a transparent, decentralized and fair way. I am deeply involved in the Berachain ecosystem, so I will give some support, DYOR.

 

In addition to the basic Layer1 competition, I also like the modular narrative. Modularity is a new narrative that has been discussed more in this cycle. In fact, just look at the picture below.

 

However, modular targets are a bit difficult to describe. Originally, I wanted to give $EIGEN a try, but I didn’t expect that $EIGEN had a hacker incident, which caused a great response from the community. In short, I am still optimistic about $EIGEN, and I think $EIGEN may suck blood from other modular projects. There will be a wave of price performance at some point in Q4 (it is estimated that it will take the next cycle to really hype it up on a large scale).

 

 

AI

 

There is no need to mention the AI narrative, just look at OpenAI’s recent operations. In addition, AI tokens used to follow Nvidia stocks. Recently, the best performing token in the Crypto AI track is $TAO. If you want to choose a target, choose the strongest one. The hype of AI tokens has nothing to do with fundamentals. We should focus on the changes in the AI industry. (China's TAO $NMT can also be paid attention to, but its hype is a matter after $TAO) The key words are "price performance during the market correction" and "appropriate time node".

 

This kind of hype will continue until the AI bubble bursts. Before the burst, all we can do is enjoy the bubble.

 

Stablecoin competition and DeFi

 

The current competition in the stablecoin track is becoming more and more fierce, such as Paypal's entry, Binance's turn to support FDUSD, BlackRock is also actively deploying the stablecoin track, and Coinbase has USDC and euro stablecoins on Base.

 

Under this fierce competition, the three tokens that can be hyped for us at present are mainly Sky (formerly MakerDAO), $LQTY and $ENA.

 

Sky is the oldest decentralized stablecoin project, and is currently promoting the transformation of its governance token and native stablecoin. Obviously, Sky hopes to reduce the impact of interest rate cuts on project products, and transform from the model of "using RWA income to incentivize adoption" to "using tokens to incentivize adoption". Later, Sky will open new plates by issuing SubDAO to maintain the adoption scale of the project's stablecoin. There will definitely be wealth opportunities, but the community is not buying Sky's recent operations. I have also seen some negative comments from the community.

 

In addition, as Mr. Shenyu said, interest rate cuts will definitely increase the competitiveness of DeFi. DeFi tracks, including Ethereum and Solana's DeFi, have opportunities. In short, the higher the activity on the Layer1 chain and the higher the TVL, the more popular the DeFi project tokens on that chain will be. Later, the demand for high returns may also give rise to new plates. But that's a matter of the big bull market, so let's take it one step at a time.

 

Here I want to mention Ethereum Layer2 Basechain separately. Base has performed very well recently, and TVL has increased a lot in September. The growth of fundamentals will bring new wealth opportunities. Here we need to clarify Coinbase's needs for Basechain: Base can expand Coinbase's influence in the crypto industry and bring sorter income to Coinbasse. If Base is good, Coinbase will benefit, so Coinbase will have every motivation to promote the continued growth of the Base ecosystem (the same is true for the previous pull of $AERO).

 

 

What is Coinbase promoting now?

 

cbBTC.

 

Moonwell and Aerodrome will be the main places for cbBTC to grow. At present, Moonwell has launched cbBTC liquidity mining subsidies. Pulling up $WELL will be able to promote more cbBTC adoption (personal opinion).

 

 

$LQTY has v2 expectations (November) and is also a decentralized stablecoin recognized by the community. Sky's transformation itself is good for $LQTY, which is one of the reasons why it has risen so fiercely in the past period of time (my personal opinion). The impact of industry changes and the upcoming fulfillment of expectations may affect the future price performance of $LQTY.

 

The competitiveness of $ENA lies in: "a new type of stablecoin coming out of this cycle" and "cooperating with BlackRock to launch a new UStb stablecoin". The influence of this form of cooperation is much greater than those projects participating in the BlackRock Buidl Fund, and in-depth cooperation is the best catalyst. $ENA's recent airdrop and unlocking should give us an opportunity to enter the market.

 

Other promising tokens are $PENDLE and $BANANA. $PENDLE has been discussed many times before. Recently, it is promoting BTCFi and has v3 expectations. For $BANANA, you can refer to this article by @BensonTWN (very well written): https://x.com/BensonTWN/status/1839664439093813397

 

As for games, I will consider $PIXEL $PRIME $PIRATE. I personally think that we cannot look at these projects from the perspective of the game sector, but need to look at the catalysts corresponding to these projects separately.

 

The BTC ecosystem needs to be observed (the core demand is still there, for details, please see my metagame article). At present, we are still in the stage where the market believes that miners need on-chain activity to increase their income, and we look forward to new plates in the BTC ecosystem. But the problem is that the surge in on-chain fees is likely to be only a short-term phenomenon. Miners like it, but the market cannot continue to pay for it.

 

Regarding the memecoin narrative, I personally think that the mainstream memecoin will see a huge increase after the return of liquidity, and $WIF $PEPE has the greatest chance. Memecoin cannot be predicted, and we can only follow the trend. Overall, I am still optimistic about the memecoin track, and I think there will be at least two memecoins with a market value of 10B+ in this track, just like $DOGE $SHIB in the last round.

 

Finally, let's take a look at what will happen in October:

 

· $JEWEL Colosseum PvP on Metis: I don't know what kind of sparks these two projects can create, but $METIS is indeed doing well;

 

· $XRP ETF and SEC: I think there is a chance for a good rebound;

 

· $STX Nakamoto Upgrade: It is good for $STX, and there is a high probability that there will be good wealth opportunities on Stacks;

 

· $DUSK Mainnet Launch: I won't pay much attention to this track at the moment;

 

· $AVAX Summit (16-18 Oct)$WLD "New World" with Sam Altman: It is also related to the AI industry;

 

· $RENDER Migration Rewards End$TIA Unlock of $1.05BJPY Interest Rate Decision