Analyzing the Bear Market: A Focused Scan of the Nine Key Directions in the Digital Asset Industry

Under the influence of macroeconomic environments, a bear market is often the best window to discover high-quality projects and tracks. When the market returns to rationality and bubbles are squeezed out, truly promising blockchain projects and digital assets can surface. This article provides a panoramic scan of the nine main industry tracks to help investors establish a clear asset allocation mindset.

The Foundation of Digital Assets: Bitcoin and Store of Value

Bitcoin is the cornerstone of the entire blockchain industry, positioned as an “inflation-resistant store of value.” As a representative of Blockchain 1.0, Bitcoin creates a unique scarcity through halving mechanisms and limited supply.

A series of forked coins and scaling solutions have emerged around Bitcoin—such as LTC (Litecoin), which is dubbed “Silver to Bitcoin’s Gold,” BCH and BSV, which focus on scaling. However, industry practice has shown that these forks and scaling projects are gradually losing appeal. LTC’s attractiveness as a value reserve diminishes, and the scaling paths of BCH and BSV reveal a fundamental dilemma: Value storage and payment functions are hard to achieve simultaneously.

Over time, these Bitcoin-derived coins are expected to gradually lose market favor, and capital will continue to withdraw. Therefore, they should be avoided as much as possible in asset allocation.

The King of Public Chains: Ethereum’s Triple Halving Imagination

Ethereum, as the flagship project of Blockchain 2.0, currently ranks second in market capitalization and is highly anticipated. Compared to Bitcoin’s single function, Ethereum introduces smart contracts, enabling developers to build applications on its platform, ushering in a new era of blockchain applications.

The transition of Ethereum from proof-of-work (PoW) to proof-of-stake (PoS)—the “Merge”—is a major industry event. The biggest change brought by this upgrade is a sharp decrease in supply—community estimates suggest that post-merge, Ethereum’s issuance will decrease by about 90%, equivalent to three Bitcoin halvings occurring simultaneously, dubbed the “Triple Halving.”

Coupled with the EIP-1559 burn mechanism, as long as the network remains active, the burn rate will surpass the issuance growth, leading Ethereum into a deflationary phase. This supply-demand imbalance could significantly boost Ethereum’s long-term value.

Building Ecosystems: The Breakthrough Path for Public and Cross-Chain Chains

Public chains are the underlying infrastructure of the blockchain industry, like the foundation of a building. A mature public chain requires sufficient decentralization, security, excellent performance, and long-term stable operation.

However, behind these seemingly simple requirements lies a classic dilemma—the Impossible Triangle: scalability, security, and decentralization are difficult to achieve simultaneously. The 2017 CryptoKitties incident nearly paralyzed the Ethereum network, exposing this challenge.

At that time, the wave of public chains led to projects like EOS, NEO, TRX, and Qtum, but these projects gradually faded from the market due to their inability to solve the Impossible Triangle and develop ecosystems.

Today, the explosion of DeFi, NFT, GameFi applications presents both challenges and opportunities. On one hand, they cause congestion and high fees on Ethereum; on the other hand, they have spurred high-performance public chains like Avalanche, Solana, and Fantom. Meanwhile, multi-chain ecosystems such as Cosmos and Polkadot represent another breakthrough approach—achieving scalability through communication among multiple independent blockchains.

New Scaling Ideas: The Rise of Layer2

Layer2 refers to a series of off-chain scaling solutions that exist relative to Layer1 (the base layer blockchain). When Layer1 scaling hits bottlenecks, Layer2 solutions emerge.

Unlike directly modifying blockchain protocols, Layer2 interacts with Layer1 through on-chain smart contracts and off-chain data, providing new performance improvements without changing Layer1’s decentralization. In simple terms, transactions are executed on Layer2 first, then data is finally committed to Layer1.

The most mainstream Layer2 solutions are Rollups, divided into two categories: Optimistic Rollups (using fraud proofs) and ZK Rollups (using validity proofs).

Representatives of the former include Arbitrum and Optimism; the latter include ZKSync and StarkNet. These four projects are supported by leading institutions like a16z and Paradigm. Currently, Optimistic Rollups are more mature, with Arbitrum leading in total value locked (TVL), but ZK Rollups have greater potential for performance enhancement, though they lag in ecosystem development due to not natively supporting EVM.

New Forms of Finance: The Diversification of DeFi Applications

Decentralized Finance (DeFi) has been the core driver of the crypto market since 2020. Through smart contracts and blockchain technology, DeFi allows users to access lending, trading, derivatives, and other financial services without trusting centralized institutions.

DeFi applications have expanded into lending, payments, stablecoins, decentralized exchanges, derivatives, insurance, and more. Top DeFi tokens include UNI, LINK, AAVE, MKR, RUNE, among others.

UNI — Uniswap is the leader in decentralized exchanges, with UNI as its governance token. Similar projects include SUSHI, CRV, 1inch, etc.

LINK — Chainlink is the leading oracle project, serving as a bridge between blockchain and the real world, providing verifiable real-world data for smart contracts.

AAVE — An Ethereum-based non-custodial lending protocol, allowing users to choose between variable and stable interest rates. Similar projects include COMP and MKR.

Digital Ownership: New Possibilities in the NFT Market

Non-fungible tokens (NFTs) represent unique, irreplaceable digital assets, fundamentally different from interchangeable assets like Bitcoin or Ethereum.

Early NFT applications include digital art, collectibles, videos, music, and gaming gear. Currently, top NFT-related tokens include APE, FLOW, SAND, THETA, CHZ, ENJ, MANA, etc. Note that these tokens are not NFTs themselves but native assets of NFT platforms or ecosystems.

FLOW — Developed by Dapper Labs, originating from the 2017 CryptoKitties project. Flow is designed for scalability; NBA Top Shot generated over $700 million in transaction volume within six months of launch.

SAND — The native asset of The Sandbox virtual world, where players can buy digital land, NFTs, create content, and profit.

APE — ApeCoin, originating from the popular Bored Ape Yacht Club project, is the governance token of the APE ecosystem, used for community building and incentives.

CHZ — Chiliz aims to enhance fan engagement in sports, providing official fan tokens for clubs like Barcelona and Juventus.

MANA — The governance token of Decentraland, a virtual platform, held by Grayscale Trust.

Community-Driven: The Cultural Phenomenon of Meme Coins

Meme coins are issued by online communities around a certain “meme,” fully decentralized, community-governed, with no fundraising or team allocation, distributed fairly by the community. Their biggest feature is strong interaction and cultural DNA, making them more accessible to young users.

Dogecoin (DOGE) is the earliest Meme coin, which once surged due to Elon Musk’s promotion. Many imitators followed, including SHIB (Shiba Inu), AKITA (Akita Inu), etc. These animal coins are characterized by large issuance, very low prices, and low investment thresholds.

However, most of these coins lack practical application scenarios, born out of FOMO, prone to skyrocketing / surge and crash. When everyone rushes in to push prices higher, any negative news can cause rapid exits, forming typical speculative markets.

The Fusion of Gaming and Finance: The New Ecosystem of GameFi

GameFi combines decentralized finance with gaming, gamifying DeFi rules and tokenizing game assets as NFTs. The core feature is that user assets become in-game equipment or tools, and participants can earn rewards during gameplay.

Mainstream GameFi gameplay includes role-playing, virtual spaces, breeding and battles, multiplayer building, etc. Compared to traditional liquidity mining, GameFi projects are more interactive, immersive, and fun, attracting new users into the crypto ecosystem.

Infrastructure: Web3 Empowered by Distributed Storage

Distributed storage integrates disk space from servers worldwide into a virtual storage network, with data dispersed across nodes—an essential infrastructure for Web3.

Filecoin (FIL) — The leading project, built on the IPFS protocol with an incentive layer. Founded by Juan in 2014, IPFS aims to create a more open, fast, and secure internet. Supported by Sequoia Capital, Stanford University, YC, and others, it is currently the leader in distributed storage.

Arweave — Aiming for permanent data storage (webpages, emails, photos, etc.), using a Proof of Access (PoA) consensus mechanism, establishing a profit-sharing community model.

Storj — A decentralized cloud storage platform, comparable to Amazon S3, providing similar services while ensuring decentralization, privacy, and low cost.

Strategic Thinking on Digital Asset Allocation

The blockchain industry has developed over ten years, forming dozens of tracks. From a calm bear market perspective, the nine major tracks outlined above represent the industry’s main directions. Each track contains high-quality projects worth in-depth research, but before investing, it’s essential to understand their basic logic, technological innovation, and market prospects.

A good digital asset allocation strategy is not about chasing short-term hot spots but about identifying long-term valuable tracks and projects at market bottoms, reserving sufficient chips for the next bull run.