An Interesting, Yet Productive Q1 (2022) for Web3
The beginning of 2022 was certainly an interesting one for the web3 industry. In general, the space did an incredible job and grew more rapidly than ever. Few things to note before diving into more detail:
- Q1 2022 saw the most outside investment into the web3 space ever
- NFT hype may be stabilizing
- Digital currencies are struggling to find their footing
- Infrastructure is taking the hearts of VC’s
- President Biden’s Executive Order on crypto seems to be a step in the right direction
The beginning of 2022 was a very pivotal time for the investment side of web3. More than ever, VC’s and investors alike, poured money into the industry. Everything from decentralized protocols, tokens, gamefi, defi, and many other sectors were attracting large capital ingestions from investors. It’s no secret that a lot of investors are simply throwing money into this space, but I think that this approach is not necessarily a bad thing. It not only helps the industry grow at an exponential rate, but it also works out in the VC’s favor. When they make investments across 100 different web3 startups, they only need 5% to work out in order to cover the costly failures of the others — this is common practice in the VC space, but especially in the web3 industry, it seems as if they are throwing darts at a massive wall and seeing what sticks. One of the biggest adoptions within the industry that I’ve observed is that infrastructure for the industry has become a very popular sector for investors to base their thesis around. I’ve had the pleasure of meeting many different investors in the space and many of them echo this change by saying that infrastructure seems to be the more sustainable, longer-term growth proposition. In my own opinion, this is absolutely true — without the infrastructure supporting the industry, the growth won’t be sustained into the future. All of this, as well as several other factors, make web3 infrastructure one of the hottest spaces in the first quarter of the year.
Another change in the market that I witnessed through the first Quarter of 2022 was that the “hype” around NFT’s has begun to slow down. At the end of 2021, the attention around NFT’s and the NFT market in general was absolutely astonishing. They were the focal point of every Thanksgiving and Christmas family gathering and even had grandma talking about them. All of this attention however, I believe has been suppressed. Google searches for the term “NFT” have bottomed out and Opensea’s trading volume of NFT’s has slowed down as well. I think that there is a big shift happening in the NFT space as of recently. There are more and more projects trying to add utility in each possible way — which is a great thing for the industry. I’ve begun to see NFT’s more commonly be used as special passes for exclusive access to certain things like they were initially intended to do. Projects like exclusive restaurants, gatherings, clubs, investment organizations, and many more are only some examples of utility being added into the NFT space. This is certainly a step in the right direction. I personally believe that when we approach NFT’s, we need to strive for quality over quantity. Sure, there will always be the worthless project with absolutely no utility, but we’re starting to see very creative ways to add quality in the form of utility which is a great (and necessary) change for the market.
Outside of NFT’s, crypto currencies struggled to find clear market direction during Q1. The tokens started the year off on a very weak note. They had no momentum and were trending into bearish territory. This was only confirmed when bitcoin and eth both experienced major drops in their prices. To start of the year, this drop was very significant and almost acted as a wake up call for investors and speculators to understand the volatility that can happen in the market; however, towards the end of Q1, these currencies seem to be consolidating within a healthy range. They’ve trended back to a considerable price (bitcoin at $42k), and have not experienced the large drops like they did earlier in the quarter. It’s important to note that bitcoin and ethereum have both shown strength and support even in the wake of bad news like the information coming from the Russia/Ukraine situation. This behavior can be a good signal for the strength entering the market which may lead to another bull run through Q2. In the meantime, it seems like crypto is simply consolidating, but it will be interesting to see what direction the major coins trend.
The last major news and changes that was observed in Q1 was the executive order delivered by President Biden regarding the regulation of crypto. The Executive Order came under heavy pressure for the federal government to address the status of currencies. The people following and/or interested in crypto were expecting this order to be rather underwhelming and unfavorable; however, this order given by Biden sent a productive message. Essentially, Biden proclaimed that the federal government notices the prominence of crypto and will search for potential areas of implementations within the government. He also touched on the fact that the government could potentially figure out a scenario where they adopt/create their very own cryptocurrency. Whether or not this will be an effective way to address crypto, it is certainly an important occurrence that was experienced during Q1 2022.
If you ask me, I think we are set up for a very interesting year for crypto and web3. There is so much innovation, building, investing, and overall attention being directed at the space. There are groundbreaking companies being created or invested in every day which I believe will only add to the growing sustainability in the industry. Regardless, I think Web3 showed tremendous amounts of stability and maturity in the first quarter of the year, which is something that I anticipate will continue into the rest of the year.
-Tanner Thompson
