NYDIG, a company that offers crypto services, says the number of investable bitcoin opportunities is shrinking. Greg Cipolaro, the head of research, said in a recent research note that the market is maturing and focusing on a limited range of applications, mostly those that bring traditional banking to blockchain infrastructure.
This change differs from what people thought would happen: that blockchain would be used across many industries. Instead, capital is focusing on core financial use cases, which might make established assets stronger but limit the overall size of the crypto market.
Cipolaro said that blockchain projects that can make money are not as broad as the early stories made them out to be. He added, “The investable universe of crypto is narrowing to applications or services that extend traditional finance products onto blockchain infrastructure.”
Bitcoin as a monetary asset, tokenised real-world assets, stablecoins for payments and settlements, certain decentralized finance (DeFi) infrastructure, and a few general-purpose blockchains like Ethereum are still there. These take advantage of blockchain’s main benefits: it doesn’t require trust, doesn’t require permission, and can’t be censored. These are good for financial and money-related tasks.
On the other hand, verticals unrelated to money have done worse. Gaming, social networking, and metaverse projects have not been able to compete effectively with centralized options, which are better for most consumer and business needs because they are faster, cheaper, and more efficient.
Cipolaro said, “Most real-world uses don’t need global, permissionless state machines with unchangeable ledgers.” Consolidation has occurred because these sectors haven’t been able to hold people’s interest.
This cycle, Bitcoin has attracted increasing attention and investment, even though its price hasn’t been as high as many expected. There haven’t been many new stories about cryptocurrencies that have lasted; investors have turned to Bitcoin and to financially stable businesses.
Cipolaro added, “A more sober market, based on monetary and financial utility rather than broad ‘web3’ ambition, may ultimately strengthen core assets.” But this growth also indicates that the entire addressable market for crypto “could be much smaller than previously thought.”
The narrowing could lead to good things, like making it easier to find long-term winners and less speculation. But it means there are fewer opportunities for broad diversification, since resources are going into established categories rather than new ones.
This evaluation aligns with prevailing industry trends toward institutional use and financial utility, as evidenced by advancements such as tokenized assets and the expansion of stablecoins. For investors, it shows how important it is to invest in companies that have already proven they can turn a profit rather than risky projects that don’t.
