Arcane Research's 12 o'clock market forecast: Altcoins still strong, meme coins become history

Arcane Research, a blockchain data research company, released its annual summary for 2021 this week, along with its industry trend predictions for 2022, covering topics such as DeFi, meme coins, NFTs, derivative products, and more.

2021 Summary and 2022 Predictions

The report from Arcane Research is diverse, and this article picks out some of the more relevant summaries and predictions for investors.

1. Bitcoin Continues to Outperform S&P 500

In a market showing deflation, Bitcoin has outperformed the S&P 500. However, due to its high volatility, it is still considered a high-risk asset. It is expected that Bitcoin will continue to outperform the S&P 500 next year.

2. Increasing Correlation with VIX Fear Index

As Bitcoin gradually enters the mainstream financial market, its correlation with the fear index is increasing. When the fear index rises significantly, Bitcoin prices usually experience a decline. This also indicates that institutional traders view it as a risk asset, and in the coming year, Bitcoin prices will also be affected in the short term by mainstream market volatility.

3. XRP and ADA to Drop Out of Top 10 Market Cap Coins

While Bitcoin's performance in 2021 beat the S&P 500, it ranked last among the top three coins. The best-performing was BNB, with a staggering increase of 1344%. Additionally, XRP and ADA are not expected to perform well in the future and are predicted to drop out of the top 10 in market capitalization next year.

4. Small-Cap Coins to See the Most Astonishing Increases

Since the autumn NFT and Metaverse boom, Ethereum Gas Fees have surged, drawing attention to other Layer 1 blockchains. The native tokens of these Layer 1 blockchains are mostly classified as mid-cap and saw the highest growth in 2021. However, it is expected that the coins with the most growth next year will be small-cap coins.

5. Greed Index to Provide Buying Opportunity in 2022

2021 started with an extremely high greed index, but after mid-year fluctuations, the market's FOMO sentiment never reached the early levels and is currently relatively low. However, both greedy and fearful sentiments do not last for long periods, and it is expected that there will be good buying opportunities next year.

6. Altcoins to Remain Strong

For most altcoins, 2021 was a year of rapid development. Capital continued to flow into the altcoin market, and Bitcoin's dominance declined in the first half of the year. Unless there is a significant bear market next year, capital will continue to rotate in hot topics like public chains, GameFi, and the Metaverse.

7. Most Meme Coins to Disappear, Becoming Absurd Historical Relics

In 2021, meme coins created various wonders in the market. Whenever Elon Musk tweeted about Dogecoin, it would rapidly surge. Additionally, many similar dog meme coins emerged, and in October, several exchanges used Shiba Inu coin (SHIB) as a marketing tactic, creating a fierce battle between dog-themed coins.

However, most meme coins will disappear next year, becoming exclusive historical relics of 2021.

8. Funding Rates in Contract Markets Will Not Remain Positive Long-Term

In 2021, examining market funding rates remained a good indicator of market sentiment. However, as more traders realize the impact of funding rates on the market, it will be challenging to see long-term and extremely positive funding rates as in the first quarter of last year.

9. Binance Contract Market Dominance Threatened by FTX, Rise in Demand for Decentralized Contract Markets

The contract market was fiercely competitive in 2021, with many exchanges having similar market shares at the beginning of the year. However, Binance eventually pulled ahead, dominating the market with a share of around 28%. FTX's market share significantly increased towards the end of the year, and it is expected to become a strong competitor to Binance next year.

Furthermore, with increasing regulations on centralized exchanges globally, there will be a significant demand for decentralized derivative exchanges next year.

10. Deribit's Position in the Options Market Challenged by Traditional Financial Institutions

Deribit's share of the overall options market continues to rise and has now exceeded 90%. Options market data is increasingly significant for the overall market price, and various options indicators will help assess market trends.

However, with more traditional financial institutions entering the crypto space, Deribit's position will face challenges.

11. Bitcoin Lightning Network Capacity to Exceed 5,000 Coins

With El Salvador adopting Bitcoin as legal tender, several exchanges and Twitter using the Lightning Network, the usage is expected to continue to rise next year, with the number of Bitcoins in the Lightning Network exceeding 5,000.

12. ETF Holdings of Bitcoin to Surpass One Million Coins

Although the current U.S. market only has futures-based ETFs, as the market matures and regulations become more complete, spot-based ETFs will inevitably emerge. This will lead to a continuous increase in the number of Bitcoins held by ETFs, expected to surpass one million coins next year.