Cracking the Web3 Investments: A Simple Overview of What's Available

GM investors!

I’m excited that many of you reached out to me and shared amazing feedback to get the most value out of this newsletter.

I took the feedback and decided to:

1. Focus on Web3 - there’s enough content on regular market updates pretty much everywhere anyway.

2. Start with basics - while the majority of you are already Web3 PROs and OGs, there are those that started exploring the frontier just now, and that’s great!

3. Create a Web3 Starter pack - a guide to help you with the basic concepts of Web3.

   1. Next week I’ll share the investment starter pack as well 🌟

Should you have more to share, reach out to me on LinkedIn or Twitter.

So… This week we explore:

1. 📈 Highlights —> What’s moving the market?

2. 🔎 What we can invest in Web3 —> Reduce the complex landscape to 4 core areas

Let’s dive in

1. New DappRadar Industry report is here (report).

   1. Web3 apps see 7.97% more users in Q2’23 compared to Q1’23.

   2. 37% of users are in gaming (compared to 45% last quarter), but thanks to CEX user outflow, DeFi is rising to close second with 32% (from 23% last Q).

   3. Fyi: a great chart of users per industry.

   4. Bitcoin Ordinals might be more than just hype. +2834% from Q1 in trading volume.

2. Something strange just happened… “First crypto intelligence platform” is not as good as people think?

   1. I recently discovered Arkham. Didn’t like it, yet got persuaded to check it out.

   2. I thought they were using bounties to “doxx” people around: connecting your personal information with your wallets.

   3. I was assured this is not the case.

   4. Yet… Seems like your email is shared even in the referral itself as m4gicpotato shares on Twitter.

3. GDPR, now in your Metaverse? (article).

   1. As per CoinDesk, someone leaked a European Commission strategy paper.

   2. The good thing is, it seems like the EU wants to support the new innovations, like DAOs, not blocking them (right US?).

   3. They plan to come up with some pilot regulatory sandboxes to test short-term projects under a lighter regime while preserving EU values and fundamental rights (here the GDPR).

4. Binance is losing its executives (article, article, article)

   1. Do you remember how Jack Ma disappeared in 2020? Well, this one is a mystery as well. Suddenly Binance compliance team decided to spend more time with families or lose weight.

   2. Chief Strategy Officer wants to spend more time with family, the Senior VP of Compliance needs to lose weight, and General Counsel just left.

   3. In crypto when something starts to go bad, it usually ends up very bad.

5. Token unlocks (tool)

My take on all of this?

DeFi inflow was expected, both because of the Shanghai upgrade on ETH and the adoption of LSDs, but also because of the tightening regulations in the US. Still, UAW isn’t the best and most accurate metric and we don’t have 2m real daily users of dApps.

I explored LSDs more and created a guide I’ll be sharing in a few days on my Twitter.

EU regulation seems like positive news to me since they don’t plan to block the innovation, but it’s still far away from happening. MiCa is more relevant as of now.

Binance is starting to be dangerous. I don’t panic yet, but I’ll explore other exchanges in the near term.

Token unlocks - IMX 1,5% unlock isn’t enough to move the needle for me, APE has a significant portion of token unlocks for treasury (47%), but is still very inflationary and will even increase (monthly +15m, 17th of September +40m APE). The games are coming, and they should bring demand for the token. I ape in and DCA weekly.

What can I invest in Web3?

Investing in Web3 is not the same as traditional investing. While platforms like Robinhood or eToro have made investing in stocks easy and accessible to the masses, the world of Web3 investing is still very complex to most of us.

The rules are different here: speed is accelerated of both success and failures, the innovations are powerful enough to create brand new markets overnight while making the previous irrelevant, and the learning curve has just begun for all of us.

Let’s simplify the journey so we don’t get lost.

The 4 core areas we can explore and invest in are:

1. Infrastructure

2. DeFi

3. NFTs

4. Gaming & Metaverse

Infrastructure

Infrastructure refers to the foundational blockchain technologies that enable all other applications to run.

This includes major cryptocurrencies like Bitcoin and Ethereum, layer 2 scalability solutions such as Polygon and zkSync, interoperability projects like Cosmos and Polkadot, and many more.

Investing in web3 infrastructure is similar to investing in the Internet's infrastructure during the late 1990s. It's a bet on the underlying technology and the belief that it will be widely adopted in the future.

Investors can buy and hold tokens, stake, and even participate in network governance.

DeFi

DeFi is reshaping financial systems on the blockchain. It includes everything from decentralized exchanges (DEXs) to lending and borrowing platforms (P2P loans), stablecoins, and yield farming.

It’s basically what your bank allows you to do - earn a yield on the money you’re not currently using, finance your loan on a house, car, or business, make international payments, invest, etc.

But this version is without the bank. Using transparent code that is reviewed not only by the creators but also by the community, to ensure it’s reliable and bug-free.

Investors can provide liquidity, stake their tokens, lend or borrow assets, and earn returns via yield farming.

NFTs

NFTs represent a way to own unique digital assets. These can be anything from digital art and music to virtual real estate and in-game items.

Investing in NFTs can be likened to investing in art or collectibles, as the value is primarily derived from their uniqueness and the demand within their community.

Investors can buy and hold NFTs, stake them (lock the NFT to get a reward), rent them, participate in auctions, or create and sell their own collections.

Diving a little deeper to better explain the NFTs.

Non-Fungible Tokens (NFTs) are unique and distinguishable from one another. Each NFT represents ownership of a unique item or piece of content and is stored on the blockchain, providing verifiable proof of ownership.

Example: NFT can be a ticket to a seated concert. Each is unique and represents a single seat where the holder of the ticket can sit.

Semi-Fungible Tokens (SFTs) are a hybrid type. They are fungible within individual classes or categories but unique across different categories.

Example: SFT can be a ticket to a concert where you stand in Gold area or Regular area. Each is unique and limited in a way, but each holder has the same rights - access to a concert and either to the Gold area or the Regular area.

Gaming & Metaverse

The gaming and metaverse sectors are where users can immerse themselves in virtual worlds, playing games, and owning digital assets.

Investments here can be in the form of buying game tokens, in-game items, virtual land, investing in game development companies themselves, or investing in gaming teams.

The lines between Gaming & Metaverse, NFTs, and DeFi often blur, creating a complex, dynamic, and potentially rewarding investment landscape.

Next week we’ll take a closer look into the investment strategies any investor can implement across these areas.

Until then,

Matt.