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Grayscale’s Bullish Forecast: The Top 20 Crypto To Watch In Q4

Crypto asset manager Grayscale has published an in-depth report outlining sectors poised for bullish growth in the final quarter of the year amid a notable recovery in the cryptocurrency market, particularly for major players such as Bitcoin (BTC) and various altcoins, which have reached price levels not seen in over two months.

Grayscale Highlights Key Trends In Crypto

In its Thursday report, Grayscale updated its Crypto Sectors Indexes, showcasing emerging themes within the digital asset industry. Key trends include the rise of decentralized artificial intelligence (AI) platforms, efforts to tokenize traditional assets, and the growing popularity of memecoins. 

Notably, Bitcoin and the cryptocurrency sector have outperformed other market segments in 2024, likely due to the successful launch of spot Bitcoin exchange-traded products (ETPs) in the US earlier this year and favorable macroeconomic conditions following the Federal Reserve’s (Fed) interest rate cut on 18 September.

While gaining 13% this year, Ethereum has underperformed Bitcoin but still surpassed many other cryptocurrencies. Grayscale’s Crypto Sectors Market Index (CSMI) has seen a slight decline of about 1% year-to-date, with the Smart Contract Platforms Crypto Sector Index down approximately 11%, making Ethereum’s performance relatively stronger than its peers. 

Despite its challenges, the asset manager finds that Ethereum remains the Smart Contract Platforms sector leader, boasting the highest number of applications, developers, and fee revenue.

Top 20 Cryptocurrencies For Upcoming Quarter

In producing its quarterly Top 20 list of cryptocurrencies, Grayscale thoroughly analyzes hundreds of digital assets. This list represents a diversified selection of assets with high potential for the upcoming quarter. 

Among those highlighted by the firm are standout performers such as Sui (SUI), Bittensor (TAO), Optimism (OP), Helium (HNT), Celo (CELO) and the UMA Protocol (UMA). However, below is the full list with other assets beyond these to which Grayscale pays particular attention. 

Crypto

Sui, a third-generation blockchain created by former Meta engineers, has made waves following a recent network upgrade that enhanced its transaction speed by 80%, surpassing Solana’s capabilities. 

Optimism, an Ethereum Layer 2 solution, plays a critical role in scaling the Ethereum network. It has developed a framework called the “Superchain,” which is utilized by platforms like Coinbase’s Layer 2 BASE.

Celo and UMA are capitalizing on unique trends, with Celo focusing on stablecoin use and payment solutions in developing regions, particularly in Africa. The platform recently surpassed Tron in stablecoin usage, while UMA serves as an oracle network for decentralized applications like Polymarket.

Helium’s inclusion in the Top 20 reflects Grayscale’s preference for category leaders with sustainable revenue models. The project has established itself as a leader in decentralized physical infrastructure networks (DePIN), growing its network to over one million hotspots and generating significant fee revenues.

Bittensor, which focuses on the intersection of AI and crypto, has recently gained recognition within Grayscale’s framework due to improvements in market structure, offering a decentralized platform for AI innovation.

In this quarter’s adjustments, Grayscale has rotated out several assets, including Render, Mantle, ThorChain, Pendle, Illuvium, and Raydium. While Grayscale sees value in these projects, the revised Top 20 list aims to offer more compelling risk-adjusted returns for investors in the coming months.

Crypto

At the time of writing, the biggest winner across all time frames in Grayscale’s top 20 list is Bittensor’s TAO token, which has seen gains of 86% over the fourteen-day time frame and a substantial 841% year-to-date, resulting in a current trading price of $536. 

Featured image from DALL-E, chart from TradingView.com 

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Grayscale Battling Outflows And Lower-Cost ETFs, Q1 Revenue Stays Flat At $156M

Grayscale Investments, the issuer of one of the recently approved spot Bitcoin exchange-traded funds (ETFs) in the US, saw flat revenues in the first quarter of the year due to its decision to maintain fees on its flagship Grayscale Bitcoin Trust ETF (GBTC). 

Grayscale Exceeds Expectations Despite Outflows

According to a shareholder letter from its parent company, Digital Currency Group (DCG), the operator of the Grayscale Bitcoin Trust recorded $156 million in revenue, showing little change from the previous quarter.

Since the GBTC trust’s conversion to an ETF in January, Grayscale has seen outflows of about $17.4 billion as investors appear to have shifted their assets to new, lower-cost funds offered by BlackRock and Fidelity, the leaders in the US ETF race in terms of inflows recorded since January. 

While GBTC charges a 1.5% management fee, many of its competitors charge less than 0.3%, leading to outflows. In response, Grayscale announced plans in March to seek approval from the Securities and Exchange Commission (SEC) to spin off some of Grayscale’s assets into a new, lower-fee “Bitcoin Mini Trust.” 

Despite the outflows, the Q1 revenue attributable to GBTC exceeded Grayscale’s expectations. The firm had previously anticipated outflows due to increased competition under the ETF wrapper. Grayscale previously charged a 2% sponsorship fee before the trust was converted. 

The flat revenue was also attributed to higher average Bitcoin and Ethereum prices and a decrease in assets under management (AUM).

In contrast to Grayscale’s performance, all US spot Bitcoin ETFs have witnessed a total net inflow of over $11 billion thus far. However, demand for these ETFs has recently declined amidst tightening financial conditions in the US, where the Federal Reserve (Fed) faces the challenge of addressing persistent inflation.

DCG Reports 11% Q1 Revenue Increase

Digital Currency Group, founded by Barry Silbert and the parent company of Grayscale, reported an 11% quarter-over-quarter increase in Q1 revenue to $229 million, primarily due to higher asset prices. 

However, revenue growth lagged behind Bitcoin’s price appreciation, which rose more than 60% during the same period. In its letter, DCG attributed this disparity to lower GBTC sponsor fees, redemptions, and steady mining revenues at its Foundry subsidiary.

Foundry, DCG’s mining subsidiary, experienced a sequential revenue increase of 35%, propelled by staking and equipment sales revenue. Meanwhile, Luno, the company’s crypto exchange subsidiary, witnessed a 46% quarter-over-quarter sales boost, driven by a significant surge in trading volume.

Grayscale

At press time, Bitcoin is trading at $62,100 and has recently encountered significant price volatility. These price swings have failed to establish a stable position above crucial price thresholds.

Featured image from Shutterstock, chart from TradingView.com 

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Grayscale Report Shows The Good, The Bad, And The Ugly Of The Cardano Network

Cardano featured in the latest release of the Grayscale Building Blocks, a monthly publication from one of the leading crypto funds in the world. The report focused solely on the third-largest cryptocurrency by market cap. An exposé of sorts. The report went through various aspects of Cardano, including its creation, leadership, community, and so forth.

Cardano is the third-largest holding of Grayscale in its GDLC Fund (Grayscale Digital Large Cap Fund). This is why the asset manager has taken a vested interest in the asset and is educating its investors on one of its largest crypto holdings. In the report, the pros and cons of the network are outlined. Along with the upgrades which are being carried out on the network to put it in a favorable position to compete with other large cryptocurrencies in the market.

Competing With The Market

As time went on, the way the Cardano network was structured had unveiled a flaw in its design. Once decentralized finance gained popularity, it became obvious that the blockchain would not be able to compete on the same level as Ethereum due to its lack of smart contracts capability. Developers had then begun to work on launching smart contracts capability on the network, which became a reality on September 12th, 2021. But it came years behind other leading smart contracts networks.

Related Reading | Charles Hoskinson To Launch Three-Time Grammy Nominee Paul Oakenfold’s Album On Cardano

With smart contracts capability present in the Cardano ecosystem, the question becomes if users will adopt it. There already exist blockchains with booming decentralized finance markets. So they would need a compelling reason to move over to Cardano.

“The trade-off of Cardano’s approach has also resulted in its biggest weaknesses, which include: a historical lack of smart contract capabilities, an unproven track-record for how well dApps will function, a still maturing third-party developer ecosystem, lack of widespread mainnet dApps, ad lower transaction fee revenue.”

ADA price maintains position above $2 | Source: ADAUSD on TradingView.com

Since the network is yet to be tested, there is still skepticism in the community as to how well decentralized applications will work on the blockchain. Developers obviously have their work cut out for them.

Cardano Competitive Advantages

The Grayscale report also outlines the advantages of the blockchain over others. Its leadership remains one of the strongest components of the project. The Cardano community has always remained loyal to founder Charles Hoskinson, who has continued to share his vision for the project with the community at every turn. As such, inspires continued support for the asset no matter how the price may be doing.

Decentralization is also an important feature of the Cardano blockchain. A fully open-source project, the Shelly upgrade had spread the core network consensus amongst thousands of participants. Its native token, ADA, is held by millions of people around the world and can easily be bought and sold on exchanges both big and small.

Related Reading | FinTech Behind Cardano’s First Stablecoin Launches Bank Accounts And Visa Debit Cards

Last but not least, the blockchain has strong funding sources. Its treasury balances currently sit at $1.6 billion, giving the network a competitive advantage when it comes to growing and upgrading its ecosystem as technology in the crypto space changes.

Featured image from CryptoPotato, chart from TradingView.com