Notes on Pantera Capital’s 2022 Crypto Market Forecasts


One of Pantera Capital’s investors, Paul Veradittakit, was brave enough to make predictions for this year in the tumultuous world of crypto. Even though we applaud the courage, we are going to poke holes in it. Because this is the internet and that’s what we do here. To be clear, the author has gone through the biggest trends of 2021 and extrapolated them into the future. What a safe technique.

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Since Pantera defines itself as the “first institutional asset manager in the US to focus solely on blockchain,” you know that Veradittakit barely mentioned Bitcoin. The following is a purely crypto affair. It’s also worth noting that the biggest criticism Web3 gets is that it’s funded by venture capital and they’re the ones who will ultimately benefit from it. And, well, that’s exactly what Pantera is and does.

In any case, let’s take a look at Veradittakit’s ideas and predictions.

Pantera on L2s and rollups

Surprisingly, the article starts by throwing Ethereum under the bus. According to Veradittakit, all action will be on L2s. Those grew massively in 2021 and the Pantera investor considers them essential to Ethereum’s scalability.

“As mainstream crypto adoption continues to grow, Ethereum’s network congestion will only get worse, exacerbating its latency and cost issues. Rollups are critical to supporting Ethereum’s growth by ensuring the compute infrastructure is highly scalable, allowing users to interact with dApps with similar or even better usability expectations as traditional web apps.

Reading between the lines, this prediction also says that Ethereum will not release any of its network upgrades this year. Which is about right.

Pantera on Non-Ethereum/Bitcoin Chains

This prophecy refers to the battle for the L1s, or the alleged Ethereum killers. The Pantera investor is clearly fond of one in particular:

“Recent activity in the Solana community, including the launch of massive funds for decentralized social media and gaming, suggests the ecosystem will continue to grow tremendously over the coming year.”

First of all, you can’t have “decentralized social media and gaming” in a centralized platform like Solana. Second, forget to mention Veradittakit Solana’s Constant Technical Problems and outage. Make it what you want.

Another tendency the author mentions is bridges, “which enable interoperability between vastly different networks.” He believes these will “accelerate the growth of non-Ethereum ecosystems”. Or, to put it more bluntly:

“Overall, these improvements in cross-chain infrastructure will accelerate the speed at which alternative layer one-chains gain traction, furthering the development of a truly robust, diverse, multi-chain crypto ecosystem.”

What the Pantera investor really means is that all other L1s on Ethereum will continue to leak. Which is about right.

SOL Price Chart on FTX | Source: SOL/USD on TradingView.com

Veraditta Kit About Composability and Web3

This theme is related to the previous one. However, the Pantera investor gets into a very interesting topic:

“Decentralized identity projects, which allow users to maintain complete, more precise control over personal data and reputation, enable use cases around unsecured loans, know your customer’s rules (KYC), and more. In 2022, we will see more projects extend the scope of our -extend chain ownership, giving users complete, functional control over their identity and possessions in the digital world.”

One thing is certain, the world needs “a single login for all services”. No one can handle the number of passwords we have to remember. This is a real problem. However, in the article, the author focuses on Ethereum-based solutions. We would like to mention that there is an alternative that uses the Lightning Network. And, you know, that runs over a network that’s basically decentralized.

Pantera on expanding NFTs

This is its least controversial version. Veradittakit believes that “NFTs will continue to grow tremendously in popularity in the coming year”. He explains:

“NFT projects in 2022 will demonstrate significantly more diversity in use cases and will more broadly reconfigure the way we interact with and think about digital media ownership.”

However, Paraphrasing Vitalik, NFTs must go through a bear market before they can be considered a success. Will there be a bear market in 2022? Probably not. So Pantera’s prediction stands.

Veraditta Kit on Decentralized Autonomous Organizations

This prediction is also quite undisputed:

“Given their increased prominence, I expect DAOs to become a mainstream vehicle for online organization and collective action, helping individuals around the world become actively involved in causes they care about.”

And the Pantera investor follows up with this one:

“As DAO operations become more complex, I expect to see even more projects in 2022 building out DAO tooling and infrastructure.”

More DAOs and tools to manage them? That sounds about right.

Related literature | Solana: a short look back and look ahead

Pantera on DeFi Security

This prediction starts with chilling statistics:

“More than $610 million was stolen through DeFi exploits in 2021 (a staggering eightfold increase from $77 million in 2020), and another $704 million in funds were stolen and later returned by white hat hackers, such as those behind the $600 Million PolyNetwork Exploit.”

Since 2021 was DeFi’s year, this should come as no surprise. Criminals follow success and attention. In any case, look at those numbers and extrapolate them to what they would be if DeFi reached mainstream status.

“In 2022, I expect security to become a huge focus for DeFi projects, and anticipate the launch of several more projects around better smart contract control, accurate runtime monitoring, and consumer protection.”

The question here is: is that enough? Or are smart contracts a security risk by definition? Can anyone build an unhackable DeFi protocol? Who will win this race?

Featured image by JohannaIris on Pixabay | Charts by Trading Display

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