The Highest Valued NFT In History at $80m

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February 21, 2022

Will Be BTC Price In Bottom? 5 Things To Watch In Bitcoin This Week

Large and smaller hodlers alike are seizing the chance to stack, figures show, as on-chain data hints that the bottom is in at $38,000.

Bitcoin (BTC) heads into the last week of February lower but showing signs of strength as a key support level holds.

After a nervous few days on macro and crypto markets alike, BTC/USD is below $40,000, but signs are already there that a comeback could be what starts the week off in the right direction.

The situation is far from easy — concerns over inflation, United States monetary policy and geopolitical tensions are all in play, and with them, the potential for stocks to continue suffering.

Further cues from the Federal Reserve will be hot property in the short term, with March expected to be when the first key interest rate hike is announced and delivered.

Could it all be a storm in a teacup for Bitcoin, which on a technical basis is stronger than ever?

Cointelegraph presents five factors which could influence price action in the coming days as storm clouds remain over the global economy.

Stocks lead gloomy macro week

The main story for Bitcoin traders this week comes from outside — the post-Covid economic outlook and worries over relations with Russia.

The first comes in the form of how the Fed will respond to soaring inflation, and more specifically whether its hinted interest rate hikes will start in March as anticipated.

Such hikes are bad news for booming equities, which have had two years of unbridled gains thanks to the giant liquidity program from the Fed to counter another Covid-era demon: lockdowns and unprecedented controls on economic activity.

With the “easy money” soon to start drying up, something of a reality check could be in store for everyone.

In terms of rate hikes, too many too soon risk recession — a topic already under discussion as a potential “necessary evil” for other countries — while a light touch could on the contrary fail to reduce the highest inflation in 40 years.

Coupled with that, the situation with Russia and its alleged plans for Ukraine is further worrying equities.

Commodities such as oil have been conversely profiting from fears over outright war, these so far being misplaced as diplomacy limps on this week.

Overall, however, the short-term view is one of considerable uncertainty, while optimism remains for a comeback for both risk assets such as crypto and traditional stocks by the end of 2022.

There is, however, no hiding the numbers.

“Global stocks have lost another $1.3tn in mkt cap this week on heightened Russia/Ukraine risk & the potential for continual Fed rate hikes this year,” markets commentator Holger Zschaepitz summarized Sunday.

“The latter expected to halt growth & trigger a recession by 2023H1 in the US. Stocks now worth $114tn, equal to 134% of global GDP.”

*S&P 500 1-day candle chart. Source: TradingView*

Wall Street trading begins on Tuesday this week due to a U.S. public holiday.

BTC price takes aim at CME futures gap

With that, it’s been tough for the average Bitcoin day trader this month.

February has afforded only around two weeks of easy gains, with macro influences putting an end to the party the week before last.

Since then, BTC/USD has lost $40,000 support and threatened a full retracement of this month’s newly-won ground.

In the event, however, $38,000 — a level previously highlighted as essential to hold for bulls — remained intact.

The weekly close, while the lowest in several weeks, was accompanied by a fresh relative strength index (RSI) breakout on the 4-hour chart, a classic signal preceding short-term price bounces.

True to form, Bitcoin then inched higher, holding around $39,200 at the time of writing.

#Bitcoin 4 hour RSI brokeout with the close

Waiting for the MACD to confirm: pic.twitter.com/J7rPoYISlU
— Matthew Hyland (@MatthewHyland_) February 21, 2022

Weekends on BTC/USD tend to be disregarded by seasoned traders due to the lack of volume exacerbating any given move. As such, the $38,000 dip could itself be something of an exaggeration of market sentiment.

What’s more, a rebound has clear targets — $40,000 as a support/resistance flip, but also Friday’s CME futures closing price of $39,860, this being above the main portion of the dip that occurred Saturday.

Watching this

Clear the lows and return back to CME close price.#Bitcoin pic.twitter.com/L6uMfhO4kO
— Livercoin (@Livercoin) February 20, 2022

Bitcoin has a habit of closing these “gaps” in the CME chart, often within days or even hours once the new week’s trading gets underway.

*CME Bitcoin futures 1-hour candle chart. Source: TradingView*

Who’s buying while you’re selling?

Amid disbelief that some are choosing to sell their BTC now after holding through several months of downside, data shows that big players are smelling a bargain.

Some of the largest Bitcoin wallets out there are putting their money where their mouth is — and have been doing so throughout 2022 and even before.

There are many examples, with on-chain monitoring resource BitInfoCharts showing the “up only” trend of one entity in particular.

Monday alone saw its balance increase by 150 BTC, and it’s not alone — others have been scooping up coins during this weekend’s local low.

When you panic sell your #Bitcoin, this guy buys it all.

Today, this guy bought 6 times already, $BTC worth $20 million. pic.twitter.com/8fIgCvsmpK
— C15Capital ⚡️🇺🇸 (@Capital15C) February 20, 2022

Small-volume holders aren’t necessarily weak hands, however. The latest figures from on-chain analytics firm Glassnode show that the number of wallets holding at least 0.01 BTC ($393) is now at an all-time high of 9.4 million.

*Bitcoin addresses with a balance of 0.01 BTC or more. Source: Glassnode/ Twitter*

The last peak was in fact in late January before Bitcoin’s latest uptick to $45,500.

As Cointelegraph further reported at the weekend, the BTC supply is becoming increasingly illiquid overall, with the proportion dormant for at least one year approaching record highs.

Coin days destroyed hints at possible bottom

Those looking for signs that $38,000 was the local floor need not in fact look too far.

Thanks to on-chain data analysis, it can now be seen that long-term Bitcoin investors repeated behavior over the weekend which accompanied the July 2021 and September 2021 BTC price bottoms.

The data set governs “coin days destroyed” — the cumulative number of days since each BTC last moved on a given day.

The weekend saw a significant number of “older” coins on the move, thus “destroying” the largest number of dormant days since the July 2021 bottom below $30,000.

In terms of raw numbers, CDD was the highest since July 2019 — although the event at that time accompanied a local top, rather than a bottom.

*Bitcoin coin days destroyed (CDD) chart. Source: CryptoQuant*

The phenomenon was noted by CryptoQuant contributor IT Tech, who also highlighted another on-chain metric governing hodlers flagging a price downmove.

#Bitcoin I found something really interesting. Before price pullback some of Long Term HODLers moved their $BTC because LTH-SOPR spiked twice today. Each time after this event price go down. CDD showed also big spike. 💡🧠 What is CDD and LTH-SOPR – read tweets below. 👇 pic.twitter.com/HaPLgbkUjh
— IT Tech (@IT_Tech_PL) February 20, 2022

Reacting, popular Twitter account PlanC suggested that the two could form a leading indicator for Bitcoin going forward.

“Extreme fear” is back

With all the influencing factors, it is arguably no surprise that crypto market participants do not know quite how to feel about the outlook.

The Crypto Fear & Greed Index, the popular sentiment gauge which attempts to quantify the market’s emotions, agrees.

Bouncing around under $40,000, overall sentiment has been flirting with a return to the “extreme fear” zone, only to reenter it even as Bitcoin spot price action actually ticked higher.

As of Monday, the Index measures 25/100 — the “highest” possible extreme fear reading, but one which is over 50% lower than the “neutral” level seen just four days ago.

Fear & Greed has seen much deeper floors this year, and a definitive reversal was throughout to have entered in January when it neared historic lows of 9/100.

*Crypto Fear & Greed Index (screenshot). Source: Alternative.me*

Web3 May Be Right Around The Corner But As Crypto’s Key To The Mainstream Market

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February 20, 2022

Web3 May Be Right Around The Corner But As Crypto’s Key To The Mainstream Market

Decentralization vs. centralization: Web3 may be right around the corner, but the race for central crypto regulation is also speeding up.

2021 has been a significant year for crypto with no fungible token (NFT) being awarded word of the year, decentralized finance (DeFi) trending in the mainstream media and crypto companies making headlines for a variety of announcements. This is, no doubt, in part due to the effects that COVID-19 has had on the economy, with many looking for new ways to diversify their finances and a move to working from home giving people the free time to research new interests. And, many chose to get involved in crypto.

As conversations began to move on from Bitcoin (BTC) to other larger crypto projects like Ethereum network upgrades and central bank digital currencies, or CBDCs, news coverage would suggest that the mainstream adoption of crypto is already well underway. However, there is one project which could have the ability to catapult crypto well and truly into everyone’s day-to-day lives: Web3.

What is Web3?

With an emphasis on community, Web3 represents the future of the internet where users operate in a decentralized way rather than relying on large private businesses or centralized government bodies.

To many, this seems like the next logical step for the internet, where the concept is partially built on the shortcomings of Web 1.0 and 2.0 such as the concentration of power within centralized entities and issues relating to privacy.

We’ve already seen examples of this within the crypto and DeFi spaces such as the MakerDAO project, which seeks to build an unbiased global financial system run by the community. As DeFi popularity grew in 2021, more projects and protocols made their way onto the market, all vying to bring the benefits of DeFi to as many people as possible. Similarly, protocols such as Nereus have been designed to address issues of fair governance and user experience, both of which mirror the existing issues of Web 2.0.

While it may seem like Web3 and DeFi protocols are separate projects (which they are), these protocols are laying the groundwork for Web3 and its adoption. We’re still some way away from seeing Web3 become a reality, but the DeFi protocols coming onto the market not only offer a taste of what the next iteration of the web might be like but also provide opportunities for feedback and tweaking to help make sure Web3 truly serves everyone to the best of its abilities. So, would this mean that crypto would be truly mainstream?

Arguably, yes. As of Jan. 2021, there were around 4.66 billion active internet users around the world, and if Web3 became the default, every one of those users would end up using blockchain and crypto technology on a daily basis, even if they weren’t aware of it. However, the main issue lies in what Web3 would even look like. And, as a community project, it means there isn’t always one single direction for the next phase of our internet. As such, some have argued that widespread adoption would be difficult due to technical gatekeeping and a lack of clear direction.

Can mainstream adoption happen without Web3?

While crypto use has been on the rise since the pandemic, the increase in new wallet holders has started to slow down. This would suggest there’s something blocking the next step of mainstream adoption. While it’s possible that waiting for the implementation of Web3 could be the reason, government regulation could be another factor to help drive crypto into the mainstream.

Previously, crypto hasn’t been seen as easily accessible to the mass market due to its complexity and perception of volatility. Opinions have started to change as more accessible crypto products come onto the market such as stablecoins, crypto-enabled debit cards or DeFi products.

Despite the multitude of benefits crypto and DeFi can offer, some people remain skeptical due to lack of government oversight, which is a very understandable stance. Would crypto move into the mainstream then if governments began to set out guidelines?

Based on the evidence we’ve seen, the answer is surely a resounding yes. Arguably, crypto is already “mainstream” in countries with comprehensive regulation such as Singapore or countries with governments strongly in favor of cryptocurrencies, such as El Salvador and, most recently, Tonga. It only remains on the sidelines in countries still drawing up frameworks and deciding on their stances on crypto.

The next steps

While it’s possible that government regulation and the dawn of Web3 could bring crypto into the mainstream, they both potentially have the power to shape the future of crypto and DeFi and decide where the movement goes next.

With Web3 the emphasis is on decentralization, moving data away from central powers and using AI power to make the internet completely accessible to all without having to rely on big businesses. The current structure of our internet has received criticism due to surveillance and exploitative advertising. For those who extol privacy and anonymity as the main benefits of crypto, the integration of Web3 would make these values more synonymous with day-to-day life. Many have claimed that this was the original goal when Bitcoin was first created — to allow users to operate free from central control.

In contrast, if more governments decide to establish frameworks and regulations for crypto, it is likely there would be more of an emphasis on centralization. Several countries have recently made announcements regarding CBDCs, which would establish a cryptocurrency that would be under the control of a central government.

The United Kingdom, for example, seems to have taken its plans a step further with the creation of the new Crypto and Digital Assets Group to ensure that the U.K. cultivates innovation within the crypto sector while establishing regulation. While this would allow even more people to have easy access to the benefits of crypto such as faster transaction speeds and lower costs (while also mitigating volatility), it would move the emphasis of crypto away from sovereignty and decentralization.

The crypto space is currently at a crossroads and the race between Web3 and central regulation will shape what the future of the industry looks like.

Will Bitcoin (BTC) Price Falling Continue This Week?

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February 20, 2022

Will Bitcoin (BTC) Price Falling Continue This Week?

Following a warning from the US that a Russian invasion of Ukraine is impending, crypto prices have fallen this week, matching losses in larger markets.

Early this year, the market capitalization of cryptocurrency fell by 30% to $1.5 trillion, owing to fears of inflation and interest rate hikes in the United States.

Over the last 24 hours, the market has seen a bearish trend. The BTC/USD price has dropped below $40,000, a psychological level that may be difficult to surpass in the foreseeable future.

More Downtrend For BTC Price?

The asset had risen from its recent lows of $42,000 and was now challenging $45,000. Before the situation worsened on Thursday and Friday, the bears returned to the scene and gradually pushed BTC south to roughly $44,000.

The current stability of the Bitcoin price above $40,000 at the time of writing is expected to be a crucial component of the rise that could occur in the next positive move.

However, the bulls may be put to the test if BTC returns to the $42,000 resistance level, which was the coin’s next target. However, that resistance of $43,000 appears to be an impossibility right now.

The crucial support, on the other hand, is developed at a psychological cost of $38,000.

Altcoins Trade in red

Alternative coins have mostly followed BTC’s recent performance, which means that they are all in the red today. Ethereum is a good example of this. Earlier this week, it was above $3,200, but it has since fallen below $2,800. Since yesterday, Solana, Cardano, Avalanche, Shiba Inu, and MATIC have all dropped by similar percentages.

For the time being, a necessary rebound may be required in order to allow for a short-term buying spree.

Solana (SOL) Price Looks Up For $135.0

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February 13, 2022

Solana’s (SOL) price remains consolidated in today’s session. SOL witnessed a bounce back from the recent consolidation. However, the upside was stopped due to a stiff resistance barrier that resulted in a minor pullback. SOL bulls are in control of the trend as gathering the momentum near the current levels.

Solana’s price locks in modest gains on Saturday.
Price slips below the crucial 50-day SMA near $203.50
Momentum oscillators warn of aggressive bids.

Solana keeps eye on 50-day SMA

On the daily chart, the Solana price observed a correction of nearly 11% after attacking the $115.51 to $152 supply zone for the second time. The downside momentum found support at the $80.0 barrier and formed the base for a fresh round of buying.

A renewed buying pressure will pursue the next course of action to tag the higher level. This time around, investors can expect the SOL price to test the upper trend line of the downside channel at $125 followed by the ultimate target of $135. This also coincides with the placement of the 50-day Simple Moving Average (SMA).

This would mark an ascent of 56% from the lows of $110.03, where the recent downside is capped for the SOL. Bulls need to deploy extra strength to carry the current upside momentum further to a higher level.

On the other hand, if the price continued to move inside the downward channel then a break could lead to a retest of the $80.0 barrier. This movement would provide another chance for bulls to pull up around $100. However, a failure would take the control off from the buyers.

Furthermore, a daily candlestick below $92.0 will invalidate the bullish outlook for the pair. In that scenario, SOL could revisit the daily demand zone placed near $50.0 to $80.0.

Metaverse is Flourishing

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February 13, 2022

Real estate may be forever revolutionized, thanks to decentralized technologies. As the Metaverse grows — so does digital real estate.

Mark Zuckerberg might claim the Metaverse is the future — but in the eyes of others, the future has already begun. Science fiction author Neal Stephenson coined the term “Metaverse” back in his 1994 novel, Snow Crash. Within the pages, the main character, Hiro Protagonist, navigates through the virtual world.

Since 2003, millions have also worked, played and socialized in the Metaverse within the online Second Life world. While the game, with a heyday in the first decade of the 2000s and featuring some blocky graphics is a far cry from the modern Metaverse vision laid out by companies like Meta and Microsoft, the idea of a virtual metaverse where people interact is not a new idea.

Currently, Decentraland is arguably the most well-known modern-day metaverse, incentivizing a global network of users to buy and sell digital real estate, explore, interact and play games. The Decentraland Foundation came into existence in 2015 and the project’s initial coin offering (ICO) in 2017 netted about $26 million at the time. While Decentraland is expansive and features plenty to do, the platform has drawn many eyes to the lucrative, and ever-growing digital real estate industry.

On Nov. 25, media reports revealed the nonfungible token (NFT)-based Metaverse Group real estate company bought a plot of Decentraland “land” for $2.43 million to help with plans to get into the digital fashion industry.

Metaverse monetization shaking up the real estate industry

It’s becoming increasingly clear that commercial real estate in the metaverse is going to play a huge part in the global real estate industry in the years to come. In fall 2021, Tokens.com inked a letter of intent to buy a 50% stake in a digital real estate portfolio owned by Metaverse Group, which then plans to market the offerings as the first REIT for digital real estate. The Metaverse Group believes that a public listing could come in 2022 or 2023.

The popularity of buying and selling digital property means companies like the Metaverse Group work, for the most part, on the same type of tasks related to buying, selling and marketing as a traditional real estate company. As prices rise and buyers seem frenzied over virtual land — some express skepticism that investing in digital real estate will prove to be prudent down the road.

Yet despite the high prices, interest in metaverse real estate continues to grow, especially as the coronavirus pandemic has driven more people online and made them more apt to virtually socialize. Those interested in metaverse real estate also have competition, namely celebrities who have not been shy about touting their digital real estate activity.

In late September, The Sandbox announced a partnership with legendary rapper Snoop Dogg to set up his mansion and NFT collection in the metaverse. In the next month, Paris Hilton struck a partnership with Decentraland and Genies to serve as one of the main artists of the first Metaverse Festival that took place in late October.

How real estate investors are pivoting to virtual properties

The attention and interest given to the Metaverse have not escaped other companies besides Meta, formerly Facebook, and Microsoft, who are also eager to jump in on the action.

Like traditional real estate which often maintains value even during tough economic times, metaverse properties continue to boom despite ebbs and flows with Bitcoin (BTC) and other cryptocurrencies.

The popularity of NFTs coupled with increased interest in online environments contrasts with the limited amount of land in virtual worlds within the metaverse — keeping prices high. For example, Decentraland has only 90,000 land pockets.

Investment firms are even dipping their toes into the Metaverse and continue to learn more about how they can get involved. High prices, popularity and the ease of buying and selling virtual land (in contrast to traditional real estate) mean the Metaverse will be more than a buzzword. Like the domain name scramble during the early ages of the internet, savvy investors and buyers who snap up properties in prime locations will look very smart as more and more people jump into the metaverse.

As the Metaverse continues to grow and expand — so will digital real estate. Savvy buyers and investors would be smart to stay ahead of the curve and assume the metaverse real estate boom is here to stay.

‘Profit Taking’ Made Some Market Movements/ Bitcoin Price Analysis

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February 13, 2022

'Profit Taking' Made Some Market Movements/ Bitcoin Price Analysis

The Bitcoin price range has become significantly more subtle over the last several years as it has grown in popularity as a cryptocurrency. It is currently valued at $42,398.83 as of Sunday.

On Saturday, the BTC/USD exchange rate increased by 7.07%. Bitcoin ended the day at $42 414, up 3.54% from Wednesday’s low.

According to analysts, investors are in profit taking mode this week, rapidly eroding daily gains and capping the market at around the 45K level.

Bitcoin fell to an intraday low of $43,917.4 Saturday morning before recovering. Late in the day, a new high of $48,598 was set, surpassing the previous high of $43,284 set earlier in the day.

Despite concerns about the global economy and rising inflation, investors are attracted to Bitcoin’s (BTC) price movement.

Quick Bitcoin Price Analysis

Bitcoin would have to avoid a break below the pivot level of $45,841 in order to activate the first major resistance level at $48,765.

The crypto would require broad market support to break out of this new swing high of $48,945. Unless there is a sustained crypto rally, any upside is likely to be limited by the first major resistance level at $50,000.

If the pivot level at $46,841 is breached, the first major support level at $45,084 comes into play.

However, barring a prolonged crypto sell-off, Bitcoin should avoid falling below $45,000.

BTC/USD price at $42258 on the daily chart | Source: TradingView.com

The world’s most popular crypto would require broad market support in order to overcome the recent swing high of $48,945.

The first critical barrier level and resistance at $50,000 is likely to prevent further gains until crypto assets experience a sustained rise.

In the event of a prolonged crypto rally, Bitcoin may test the second major resistance level at $51,522. If the pivot point at $46,841 is breached, the first significant support level at $45,084 will be tested.

On the other hand, unless there is a significant crypto sell-off, Bitcoin should avoid falling below $45,000. The $42,161 mark is the second significant level of support.

Bitcoin Forecast

Though Bitcoin appears to be recovering, it is still a long way from its November all-time high of $68,000. Despite the recent price decline, Bitcoin remains more than twice the value it was just a few years ago.

Meanwhile, despite the volatility and recent price drops, many analysts believe it will eventually surpass the $100,000 mark.

However, there are divergent views on when and how this event would occur. When it comes to bitcoin, experts advise novice investors to exercise caution when deciding whether to invest a percentage of their assets in cryptocurrency.

Bitcoin’s price has risen at a similar rate to that of other cryptocurrencies over the last several years. How much Bitcoin’s value will increase over time is a legitimate concern for investors.

‘profit-taking’ Zone of Bitcoin Price With a Ceiling at $45K

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February 12, 2022

‘profit-taking’ Zone of Bitcoin Price With a Ceiling at $45K

BTC bulls want to confirm this week’s trend reversal, but analysts warn that Bitcoin price is in a “profit-taking” zone where $45,000 is expected to stand as resistance.

The price action for Bitcoin (BTC) continues to tantalize investors and once again, concerns over the state of the global economy and rising inflation have prompted warnings that the Fed’s upcoming interest rate hikes could do more damage then good to the state of the market.

Data shows that the price of BTC has hovered near the $43,000 support level in trading on Feb. 11 after rallying 20% from the $37,000 leve over the past week.

*BTC/USDT 1-day chart. Source: TradingView*

Here’s a look at what analysts expect next for BTC and the wider cryptocurrency market.

“Expecting a move to $40,000”

Insight into the bullish and bearish scenarios related to Bitcoin price was offered by crypto trader and pseudonymous Twitter analyst ‘Crypto_Ed_NL’, who posted the following chart outlining two possible BTC price trajectories.

*BTC/USDT 4-hour chart. Source: Twitter*

Crypto_Ed_NL said,

“Checking my latest chart with the current situation. Nothing changed. Expecting a move towards $40,000. Bullish scenario indicates a bounce to $48,000. Bearish comes in play when we break $40,000.”

A confluence of resistance levels for BTC

Bitcoin now finds itself trading in an increasingly tighter rage at these current levels in large part due to “the sharp $12,000 move off the lows” of Feb. 4, according to a recent report from Delphi Digital, which noted that BTC is now “heading into resistance on multiple timeframes.”

As the price action for BTC heads toward a confluence of daily, weekly and monthly resistance, Delphi Digital analysts suggest that “market participants of all kinds will be looking at this as a potential price ceiling” and that it represents “a logical place to expect profit-taking/risk reduction activity due to the confluence of resistance zones and the speed and magnitude of the move off recent lows.”

*BTC/USD 8-hour chart. Source: Delphi Digital*

As for the key areas to keep an eye on moving forward, Delphi Digital highlighted a significant amount of support for BTC in the $40,000 to $41,000 range with the next level of support below that at $38,500.

When it comes to the possibility of a move higher for BTC, Delphi Digital listed the zone from $46,000 to $48,000 as a heavy resistance area.

The report noted that,

“This is the daily, weekly and monthly supply zones that will likely be a heavy level of resistance. Above this level and we likely see a squeeze towards $50,000.”

On a positive note, Delphi Digital also highlighted the recent uptick in institutional flows over the past couple of weeks “as the market started to stage a comeback.”

*Monthly fund flows for select digital asset investment product groups. Source: Delphi Digital*

According to Delphi Digital, Grayscale is the biggest player in the institutional game with “roughly 65% of Institutional AUM,” but there are signs emerging that sentiment is beginning to shift.

Delphi Digital said,

“Excluding BTC and ETH, Binance Coin (BNB), and BNB-based products, have continued to attract the most AUM, but institutional sentiment is starting to favor alternative names like SOL.”

Bulls could exploit this classic trading pattern

A final bullish perspective for BTC moving forward was offered by crypto analyst and pseudonymous Twitter user ‘IamCryptoWolf’, who posted the following chart outlining one possible Bitcoin price trajectory.

IamCryptoWolf said,

“Everyone calling for $46,000, what if $50K –> $46K –> $60K, printing an inverse head and shoulders?”

The overall cryptocurrency market cap now stands at $1.97 trillion and Bitcoin’s dominance rate is 41.9%.

DAOs in 2022

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February 12, 2022

The formation of DAOs and a look ahead to 2022 and how DAOs are on a path towards mainstream adoption.

In 2021, crypto has been one of the biggest trends shaping tech and finance, and according to mainstream news headlines, decentralized autonomous organizations (DAOs) are set to be a force to be reckoned with in crypto in 2022. Mark Cuban called them the “ultimate combination of capitalism and progressivism.” Yet, while DAOs are relatively easy to understand conceptually, they’re a segment of the crypto market in a state of rapid flux, with many innovative use cases emerging. However, setting up and running a DAO also comes with its own set of unique challenges, which are also changing and developing over time.

What is a DAO?

The purest definition of a DAO is inherent in the name. An organization is a group of people and entities with a common goal or idea. It’s decentralized, so there is no CEO or board of executives responsible for decision-making, and it’s autonomous, meaning it’s self-governing. Self-governing means that there are governance rules programmed into blockchain-based smart contracts, and members of the DAO vote on matters affecting the DAO according to those rules.

One of the earliest DAOs, a project called The DAO, illustrates one of the most straightforward use cases of a DAO and also happens to be pivotal in the history of DAOs. The Genesis DAO, as it was also known, was an investment contract allowing Ether (ETH) holders to deposit their funds. Projects could apply to The DAO for funding, and if DAO token holders agreed to the investment terms, the smart contract would disburse funds. However, in June 2016, within weeks of launch, a hacker found a bug in the underlying smart contract code and managed to drain The DAO of around $70 million worth of ETH.

At the time, the incident wreaked havoc in the Ethereum community, and as a result, DAOs made little progress over the subsequent two or three years. However, once the touch paper of the DeFi movement was lit, the idea of DAOs took off once again.

DeFi and the return of DAOs

DeFi emerged from the desire among the blockchain community to create an open, permissionless, decentralized financial system. As such, DAOs offered an attractive way for projects to demonstrate their commitment to decentralization through community governance.

As a result, during 2020, when DeFi began to gain rapid ground, governance tokens became vastly popular. Flagship DeFi apps including Compound (COMP), Uniswap (UNI) and Aave (AAVE) launched tokens allowing users to participate in decentralized governance, while newcomer DeFi projects have taken to launching their governance tokens from the start.

Current and emerging trends

So why are DAOs now making such a splash even among mainstream news outlets? Part of the reason is the surge in popularity of nonfungible tokens (NFTs), which are set to play a more significant role in DAO governance and who gets to participate.

In September, Andreessen Horowitz invested $5 million into “Friends with Benefits,” a Discord chat comprised of various crypto enthusiasts, artists and NFT collectors. The group raised a total of $10 million when it decided to operate as a DAO, demonstrating the value to be generated from the vast online communities that have formed — even without economic incentives — on platforms like Facebook and Telegram.

In November, things took an even more intriguing turn when “ConstitutionDAO” raised more than $40 million to bid on the rights to acquire an official copy of the U.S. constitution document in a Sotheby’s auction. It was the first time Sotheby’s had worked with a DAO, which had managed to gather support from over 17,000 donors in advance of the auction. Although ConstitutionDAO was ultimately outbid by Citadel CEO, Ken Griffin, the experiment itself was arguably a success in that it demonstrated its intended concept.

Another emerging trend is investment DAOs, as some believe that DAOs are set to disrupt the traditional VC model of funding entirely. These DAOs are allowing groups of Web3 natives to pool and deploy capital in such a way that now allows individuals to compete with traditional finance entities.

So it’s understandable that with such a wide range of applications out there, DAOs are causing considerable excitement and could prove to be as big as NFTs have been in 2021. However, there will be challenges along the way.

The path to DAO adoption isn’t smooth

Firstly, education is still a considerable gap. Even within the cryptocurrency community, the DAO concept is still gaining traction, and implementation is far from advanced. There are still relatively few “user interfaces” for DAO governance, although more and more tools are coming online to help organize and overcome the challenges that traditional organization structures have wrestled with for years.

Regulation can be another challenge that DAOs will have to grapple with as they transition into the mainstream. Laws around incorporation and tax structuring are ambiguous and often outdated, leaving DAOs to make their interpretation to fill in the gaps.

It’s also worth noting that decentralization is a spectrum and not binary. Although DAO governance tokens allow users to participate in decentralized governance, most projects still operate with a degree of centralization.

Finally, decentralized governance is hard, particularly at scale. It’s a large challenge with multiple obstacles that have plagued blockchain developers since the early days. How do you keep voters engaged once the community becomes large enough, and votes need to be conducted with increasing frequency?

How do you stop wealthy whales from buying their way to power by scooping up a majority of tokens? To what extent should code be law, and shouldn’t there be fail-safes in place in case a malicious entity manages to wrest majority control? If so, who controls the fail-safes?

There are no easy answers to these questions, but now that crypto, NFTs and DeFi have found a foothold to reach the mainstream consciousness, it seems natural that DAOs will follow. Furthermore, as they become more mainstream, it should become easier to identify smother means by which communities can decentralize governance.

Somthing To Do in a Crypto Bear Market

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February 12, 2022