Checking in on 23 of Messari’s Crypto Theses for 2021

Steven L. Miller
17 min readJun 1, 2021

I look forward to reading Ryan Selkis ‘s, founder of Messari, Crypto Theses report every year. Now that we are a few months into 2021. I thought I’d take a look back at his predictions to see how they are playing out using the Red, Amber, Green framework.

  • Green — On Track and/or already true
  • Amber — Still a chance
  • Red — Not Looking Good

This is not a comprehensive list of predictions from the report. These reflect the tidbits I found most noteworthy when I read it.

1. Bitcoin Price Target

I think we’ll hit $100k/BTC at least before the end of 2021, with crypto hitting $3 trillion in cumulative network value in this cycle’s top.

Status — Green

Bitcoin was 2/3 of the way to 100k before pulling back more recently. Cumulative network value has already doubled to over $2 Trillion since the start of the year.

Crypto hedge fund managers agree. Their median price target in a recent survey was 100k also.

2. Blue Chips: Real vs. Relative Value

even though most crypto assets are correlated, we’ve begun to see clear performance separation over time between sectors and assets with real economic models.

Status — Amber

Bit judgmental here on where to draw the line on the definition of a “blue chip” project. Since the start of April altcoins, in general, have been rallying against BTC. Ethereum’s performance, along with most of the Layer One projects looking to replace it, have risen in tandem YTD.

3. Most Liquid Bull Market Yet

The availability of on-chain collateralized credit in both DeFi and centralized services could seriously reduce selling pressure in the next uptrending market. That’s true for both retail and institutional investors alike. A shock that sparks cascading liquidations is always a doomsday scenario, but that seems like more of a risk later in the cycle than early on. It’s more likely the crypto credit market’s maturation makes this the most liquid bull run yet.

Status — Green/Amber

Clearly green for DeFi as liquidity flowing through the space continues to hit ATH almost daily. Simultaneously, while revenues remain robust. Liquidity appears to be moving away from centralized services as decentralized alternatives continue to enhance their attractiveness.

4. The Wizard Behind Ethereum’s Upgrades

Vitalik may be the face of Ethereum, but it’s Ethereum Foundation researcher Danny Ryan who has become the face of this year’s mammoth eth2 upgrade. From coordinating research across technical teams, to outlining updates for the community at large, to fielding countless interviews , and finally submitting the official EIP for the eth2 network upgrade, Ryan has been at the heart of arguably the most complex and critical network upgrade in crypto’s history. There isn’t much more to say than that, and it’s worth keeping your eyes and ears open whenever he speaks about eth2’s progress in 2021.

Status — Green

Danny Ryan is a must follow for anyone interested in understanding what’s going on with Ethereum.

5. Inflation Exceeds Issuance for Bitcoin and Ethereum

One of the most bullish aspects to this recent bull run is that it has resulted almost entirely from a winning macro narrative. BTC has thrived despite losing reserve status as an exchange quote currency since last cycle (stablecoins have taken its place); and ETH has survived despite losing its reserve status for ICOs and DeFi (again, thanks to stablecoins). It just so happens that both crypto commodities (BTC as digital gold and ETH as fuel for a new computing platform) hit major milestones that de-risked their investability from a store of value perspective.

With brief exceptions (March’s Black Thursday liquidity crisis), BTC has remained an uncorrelated investment with a good sharpe ratio. Its recent halving slashed inflation below the Fed’s target rate for the first time. Ethereum’s inflation will be similarly slashed with its eth2 migration, when value starts accruing to ETH holders: tens of millions of dollars in staking seigniorage and nearly as much burnt via transaction fees (gas).

Status — Green

Bitcoin’s issuance remains below accelerating inflation. Ethereum is on track to reduce its issuance rate below the inflation rate when the EIP 1559 upgrade is adopted in July.

6. Bitcoin: Bull Versus Bear

BTC Bull Case: Bitcoin is an unseizable form of private money that’s proven very hard to kill. It’s outperformed every major asset class over every relevant time period in its history, and it’s got perfect macro tailwinds and momentum. It’s getting “safe” to purchase from a legal and reputational standpoint as a professional money manager, and its supply will inflate less than the Fed’s target rate no matter what happens next year.

BTC Bear Case: The “final boss” to beat is the state. For years, countries have regulated bitcoin as a peer-to-peer payment network. Authorities have focused on regulating network edges (exchanges) and monitoring flows (payments).

Status — Green

Bitcoin continues its strong run of performance while regulatory noise in the background grows louder.

7. A Microstrategy of Central Banks Will Emerge

In a world of unrestrained spending and central-bank debt monetization (QE), many smaller fiat currencies could begin to wobble in 2021 and 2022. Some of the more creative central banks may follow the corporate playbooks out of desperation and turn to BTC as a lifeline. We’ll see a MicroStrategy-esque move into BTC by at least one small central bank in 2021.

Status — Amber

On a three year time horizon I’d feel comfortable classifying this prediction as green. On a one year horizon I’m not so sure it happens this year.

It’s hard to predict because due to legitimate concerns regarding front-running. When the announcement happens it will be to communicate a central bank has already purchased Bitcoin for its reserves. Not that it intends to.

8. Taproot Soft Fork

There’s actually a bit to be excited about in 2021, starting with “Taproot.” The proposed soft fork aggregates three primary BIPs (340, 341, 342, nerds) to improve privacy on bitcoin through something called Schnorr signatures. Schnorr is fun to say, and also provides greater privacy (and efficiency) for broadcast transactions by batching signatures so multi-sig and single-sig transactions are indistinguishable. The big use case here is aggregating signatures for transactions that flow through mixers like CoinJoin,

Status — Amber

Taproot did not receive the 90% signaling required by miners to activate the soft fork for November during its first voting round. Voting continues though and it most likely will pass. The Amber status reflects the possibility voting won’t pass the 90% threshold in time for 2021 implementation.

9. Ethereum seized Lightning’s Market Opportunity

There have been some meaningful UX improvements (liquidity and privacy) in Lightning, but honestly, it increasingly looks like Lightning has been lapped and then some by Ethereum stablecoin payment applications.

Status — Green

As Metallica would say Sad, but True.

10. Miners are Starting to Manage Electricity Costs via Derivatives

the liquidity of bitcoin derivatives markets and the commonality of local energy contract negotiations make it easier than ever to manage the unit economics of the mining business if you have sufficient scale and a strong supply chain.

Status — Green

Institutional adoption, which appears to be driving Bitcoin’s price action as retail rotates into alts, reinforces this dynamic. Institutions are more likely to use derivatives for their exposure than the retail crowd.

11. ETH will Never Eclipse BTC

here are ten reasons ETH is not money, why it will never eclipse BTC, and why its 2017 flirtation of a “flippening” was a one-time anomaly: 2. Reserve Rotation 3. Institutional Mirage: “Smart money” demand for ETH is overstated. 4. Narrative Complexity 5. Wrapped Assets 6. Strong Hands 7. Sub-token Leakage 8. Alt-token Leakage 9. DeFi-token Leakage 10. Cumulative Demonetization

Status — Amber

It’s always dicey to bet against the lead monetary horse given network effects. But, during it’s latest rally, ETH was approaching 50% of BTCs market cap. A flippening should at least be considered plausible even if your perspective is it remains unlikely.

Personally, I believe their is a strong chance of the flippening occurring. I’m sympathetic to the counterpoints to the arguments above by TBI’s colleagues Watkins and Wilson. Outlined in their white paper ETH 2.0: The Next Evolution of the Cryptoeconomy.

12. Window of Opportunity for Ethereum Competitors

Ethereum has such a tremendous infrastructure advantage vs. other Layer 1 projects today that it’s hard to fathom competitors siphoning away material market share. But a 3–5 year head start doesn’t strike me as insurmountable given that the eth1 to eth1.5+rollups migration isn’t too dissimilar from bridging eth1 to an entirely new protocol like Cosmos, PolkaDot, Algorand, Cardano, etc. If you’re forced to incur switching costs as an app developer or infrastructure provider, wouldn’t you take the opportunity to broaden your protocol support, anyway? For many, the answer will be “maybe,” and layer 1’s will likely leverage their massive treasuries and community funds to subsidize infrastructure work to turn those maybes to yesses. The opening for competitors to beg, borrow, and steal Ethereum users is now, in the early phases of the eth2 network upgrade, while gas costs on eth1 are outrageously high for certain apps. I hate to break your hearts, but given Ethereum’s current dominance of the smart contract realm, and this report’s length already, we’ll stick with analysis of the smart contract platform market leader and gloss over platform by platform scoring.

Status — Green

As opposed to stealing. Competitors, especially Binance Smart Chain, which isn’t mentioned in the report so maybe this should be amber. Capitalized on the fact the newly baptized are priced out of opportunities in Ethereum due to gas costs.

13. DeFi Continues to Rocket Higher

In 2020, everyone has been clamoring to have their tokens classified as a “DeFi.” Because words matter, our analysts developed a more rigorous definition for what we consider DeFi. Those protocols and their assets must satisfy the following requirements:

* Financial use: explicitly geared towards financial applications such as lending, exchange, derivative / synthetic asset issuance, asset management, etc.

* Permissionless: open-source; anyone can use or build on top of the projects without asking permission from a third party

* Pseudonymous: no need for people to reveal their identities to use the protocols

* Non-custodial: not reliant on third-party facilitators

* Decentralized governance: decisions and administrative privileges are not held by a single entity or a credible path exists towards removing them

Mostly, we’re here to help you make sense of this chart:

DeFi is hardly a flash in the crypto pan. Its rebound this past month following a 75% correction, was ferocious in terms of both speed and liquidity (volumes). Still, the fledgling sector trades in aggregate at just a $7 billion market cap, about equivalent to bitcoin also-ran BCH. My money is on DeFi rerating and continuing to rocket higher in the year ahead.

Status — Green

I think it’s safe to say this prediction is on track. Uniswap alone is worth almost as much as BCH and the top 10 projects are now worth more than 2x its value.

TVL is up 4x Year to Date and at its peak in early May was up 6x.

14. DEX Market Share Will 2x

There’s already been some unbundling of Uniswap, as each AMM protocol provides their own liquidity mined token incentives, and aims to tighten spreads and improve the quality and strength of the DEX ecosystem vs. its centralized competitors. DEX market share , and AMM protocol’s market share in particular, will 2x again this year to a sustainable 2% of total global volumes, which sounds small only because the institutional driven rally for BTC and ETH will happen on traditional venues. For ERC-20s below $100 million in market cap, DEX market share will climb to 10%. And for ERC-20 microcaps, DEX’s will extend their early lead as the only market makers in town.

Status — Amber

Coingecko estimates 6% of volume is taking place on DEXs when compared to the volume of centralized exchanges. .

One factor most likely absent from the 2% prediction is the massive volume added from user adoption of DEXs on Binance Smart Chain (BSC). Pancake Swap, a Uniswap fork for Binance Smart Chain, has over 2x the volume Uniswap.

In aggregate, volumes on BSC DEXs are nearing equivalence with Ethereum DEXs.

Absent the launch of BSC. DEX volumes would be around 3% of the global total, a mere 50% higher than the 2% prediction as opposed to the 3x volume seen currently.

With 2000+ tokens available on Uniswap and hundreds more offered via other DEXs. It’s clear DEXs are and will most certainly remain the only market makers for long tail tokens.

15. Proliferation of Crypto Dollars

nearly a billion dollars of USDC was created to satisfy the hockey stick growth in DeFi demand. The project was also given a blessing by regulators via the OCC’s interpretive letter on banking support for stablecoin issuers, which drastically lowered perceived regulatory risk vs. its larger, shadowy competitor, and fueled USDC’s boom in exchange support… China has DCEP. The U.S. will have a proliferation of non-bank financial crypto dollars years before we ever see an iota of progress on a similar scale central-bank digital currency.

Status — Amber

As one of his first initiatives. New head of the OCC, Michael Hsu, announced a review of the OCC’s crypto-friendly banking guidance initiated under his predecessor Brian Brooks. At this point it appears regulatory status quo is the best that can be hoped for in the US.

In the meantime China’s DCEP continues its march forward.

16. Single Employee Unicorn via yVault’s

We already covered Yearn and other DeFi assets at length, but it’s worth noting another one of the special products in the family: yVaults, two sided marketplaces that match liquidity providers with “strategy creators.” yVaults allow farmers to deposit funds of their choice and let the yVault strategy do its work generating good yield, and limiting brain damage tied to actually crafting strategies in a market of exponentially increasing complexity.

YFI currently charges a 5% performance fee and a 0.5% withdrawal fee on yVaults, then sends 10% of that to strategy creators and the remainder to its community governed treasury (which can also be staked to YFI pools to further juice returns). But the system parameters are always subject to change based on token-holder voting, and yVault strategy creation may soon be one of the fastest ways to reap rewards usually reserved for passive index managers, as many of the vaults have already accumulated $50–100 million in locked value. It’s TBD on how much yVault AUM is sticky, and how much revenue actually accrues to creators in the long-term. But in the near-term, yVault fees are about to hike 4x (up to a 2% management fee and 20% performance), which makes the headline numbers look juicy: a $100 million pool that yields 10% will generate $2 million in management fees (straight to the protocol) and $2 million in performance fees off of the $10 million in yield, split 50–50 between YFI holders and strategy creators. There is a LOT of upside for creating winning strategies that accumulate billions of dollars of AUM. Could we see our first single employee unicorn via yVault’s strategy creation mechanism? At $10 billion of “assets under strategy” (Grayscale’s AUM today), an individual creator with a 10% yield strategy would net a $100 million annual performance fee. That’s as alpha as it gets for young quants, if they bet early and right on this market.

Status — Amber

The AuM needed for this prediction to prove accurate is trending green. The stickiness factor alluded to is the challenge.

Right now, stickiness is low. The chart below for the most popular vault, yCRV, is representative of the challenge all vaults face retaining their AUM.

17. Synthetic Securities Are More Interesting Than Security Tokens

Synthetic securities that bring better global accessibility to existing exchange-traded stocks are more interesting than security token offerings

Status — Amber

The market disagrees. At least for the highest profile projects in the respective spaces. Poly (Polymath) for security tokens vs. SNX (Synthetics) for synthetic securities. It was especially surprising to see limited price action in April for SNX when it successfully launched synthetics on the FAANG stocks.

18. Exchanges Remain at the Center of the Crypto Universe

Exchanges remain at the center of the crypto universe for three reasons: 1) they make all the money in an industry fueled by trading fees; 2) they haven’t yet been forced to unbundle certain functions for technical and regulatory reasons; and 3) most users are lazy, and trust exchanges as de facto custodians regardless of the warnings against that practice… Still, exchange dominance is not a foregone conclusion. This is a great chart for “be your own bank”-ers, but a concerning one if you’re an exchange operator. Exchange bitcoin reserves are down 25% since March:

Status — Green

Coinbase is already using the proceeds of its IPO to expand into adjacent areas like asset management and prime brokerage. Its recently launched wallet could easily surpass Metamask’s 5 million users. If it becomes the default option for Coinbase’s customers to explore DeFi.

In the mean time. BSC, presuming the recent hiccups are growing pains, is rapidly evolving into a credible alternative to Ethereum and for now remains firmly under the control of Binance.


If Institutions continue expanding their allocations to cryptoassets. Centralized Exchanges will have a place at the table given limits on institutions ability to self-custody their holdings.

19. There’s Always Money in the (Digital) Banana Stand

If NFTs are securitized digital IP, the marketplaces are the investment banks. These platforms do the securitization work, govern the rules of the marketplaces, and collect their vig any time an asset is produced, traded, or tweaked… * Digital art marketplaces and collections… The AI Generated Nude Portrait #1 sold for ~$14,000 this year,

Status — Green

and then Beeple sold his collection for $69 million. While the markets have pulled back from the heights of their Q1 fervor. A sustainable uptrend is in place as signaled by retail and institutional interest alike in nifty market places. Along with expanding interest in issuance from sports leagues like the NFL given the success of NBA top shot.

20. Solving the Cold Start Problem

Here’s the problem: starting any “big data” project from scratch gives you a cold start problem-there’s not enough data, and when there is, it doesn’t have much “gravity.” Marginal data is less valuable to a crypto network than it is to a tech monopoly, so even if we’re splitting the spoils with users, it won’t be much.

There’s three potential ways that crypto might be able to scale miscellaneous big data markets though. The first is on providing data to user-centric platforms: think Gmail… The second is through the use of data marketplaces, like Ocean’s, that have built automated market makers for data sets, and created markets for otherwise illiquid (but valuable!) data sets like self-driving cardata, genomics data, or browsing data. The third might be something that revolves around data competitions. Numerai’s Erasure does implicit quality assurance on its platform’s data sets, by introducing encryption and something better than a money-back guarantee: “slashing” for bad data.

Status — Green

The problem is understood and acknowledged by the top players in the space. Ocean especially is looking to expand its liquidity from pooling initiatives like Singularity DAOs DynaSets.

21. China Will Replace Dollar Hegemony

In the meantime, we need to believe China when its leaders tell us they are going to replace dollar hegemony by winning the CBDC market and replacing the U.S. in massive global trade deals.

Status — Amber

While China is clearly ahead of the US in the CBDC space and is likely to remain so for the foreseeable future. Current US Dollar hegemony is driven by demand for dollars outside the US.

A similar dynamic appears to be developing in crypto markets. Where stablecoin volumes are dominated by USD. While governmental issuance and acceptance of CBDC is well behind China in the US. USD stablecoin issuance and transaction volumes are well ahead of the issuance and volume of the digital yuan.

While criticisms of US regulatory policy in the crypto space are more than fair. For now USD remains more accessible via the traditional banking system than the Yuan or Euro. Unless, until this changes, USD stablecoins will most likely continue to dominate the ecosystem regardless of Fed policies from the accessibility of dollars alone.

22. Crypto’s Legal Status in the West

As long as there are good machines like Ray Dalio, who remain blissfully unconcerned about the rise of the surveillance state, I’ll be concerned about crypto’s legal status in the West, too. There are generally five attack vectors where we need to shore up our defenses around crypto “bans”: private transactions, self-custody, banking integrations, network participation (i.e., staking and node operation), and synthetic usage. I’ll look at each of these in turn, but first a bit of good news: I am encouraged by the emergence of the “crypto insurgency” in D.C., and I view a Biden administration with a divided U.S. government as a goldilocks scenario for Bitcoin’s ability to continue hiding in plain sight and grinding out progress in our decades long turf war. A divided Congress limits potential legislative damage, while regulators at the OCC (Brooks), SEC (Peirce), and CFTC (Talbert) ensure that crypto-friendly voices will remain prominent at the relevant regulatory agencies.

Status — Amber

While not as onerous as some feared. Regulatory requirements for self custody seem almost certain to expand.

The industry will be lucky to maintain the progress on banking integration in 2021. Michael Hsu, the recently appointed less crypto-friendly head of the OCC. Has indicated one of his top priorities is to review the positive guidance on the topic in 2020 by his predecessor Brooks.

While it's a positive Gensler, as the new SEC chair, has more than a passing familiarity with crypto. He’s signaling tougher oversight of crypto than his predecessor Peirce. Initially focusing on establishing the same protections for investors on crypto exchanges vs. their traditional counterparts.

The goldilocks scenario did not play out. Democrats emerged with full control of the government in January. Even if it had. It’s clear Bitcoin would not be hiding in plain sight in a Biden administration.

As numerous recently appointed officials have highlighted it during their initial statements to the public. While the establishment of an inter-agency task force to work on crypto issues appears imminent.

23. in five years it will be illegal for an American citizen to transact in Bitcoin outside of a federally registered exchange and without a federally registered account — Ben Hunt

Status — Green


Score Card

12 Green and 12 Amber

50% of predictions are on track to be accurate. While another 50% have a chance to end up being fulfilled by year-end and none are definitively inaccurate yet. Given the turbulence of crypto markets year to date that’s a solid record for Two Bit Idiot et al at Messari.

Thank you for Reading

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Steven L. Miller

Helping investors hack through the weeds to find the crypto gems at Musings at