Metaverse: ETMarkets Smart Talk: Corrective phase in cryptos will continue; NFTs are gateway to Metaverse: Priya Suhag

Following the recent correction in the crypto market, investors’ wealth nosedived about 60 per cent from its peak. However, the supporters of the digital token market see this as a healthy and mature trend, akin to other financial markets. One among them is Priya Suhag, Head of Strategic Development at CrossTower, a Web 3.0 company.

In an interview with ETMarkets, Suhag discusses the latest fiasco on Terra’s Luna, its stablecoin UST and its impact on the market and regulatory decisions, along with the emerging trends in NFTs and metaverse space, which apparently have taken a back seat for now. “High gas fees and scalability issues are the top concerns of creators, buyers and marketplaces,” said Suhag.

Edited excerpts:

What is your take on the latest crypto market crash? Do you see more pain coming in? When do you expect markets to stabilise and rebound?
A confluence of factors including inflation, rising interest rates, the Ukraine-Russia conflict, volatility in stable coins, and the recent crash of the Terra ecosystem has caused many investors to panic and their portfolios to take a beating.

However, the significant drop in cryptocurrency prices attests to the fact that the crypto and traditional financial markets are both experiencing a correction at the same time, which suggests that cryptocurrency is maturing – like any market, crypto has a bull and bear run, and we are currently in the latter phase.

For now, crypto markets will continue to suffer. We see this as a corrective phase. However, this will eventually offer a buying opportunity for those who have a long-term perspective on the markets. It is almost in line with the old adage of “Sell in May and go away” referring to historically weaker performance of stocks from May to October compared with the other half of the year.

With the recent crash and volatility in the crypto space, there have been enough questions pointing over the survival of the industry. What is your take on it? Do you think there is a survival scare for a few assets, if not industry as a whole?
In the second week of May 2022, Bitcoin plunged brutally, briefly dipping below $30,000 for the first time since July 2021. Bitcoin’s equivalent falls have also been seen in cryptocurrencies such as Ethereum (ETH) and Binance Coin (BNB), while trading volumes have also decreased. In other industries, prices are often a lagging indicator of performance.

However, in crypto they are a leading indicator. Sheer number drives interest thereby propelling ideas, activity, innovation and the actual build. There is a quote in the industry for this phenomenon called the feedback loop of the “the price-innovation cycle”. This industry has gone through several of these loops since the early days.

It is interesting to note that not all cryptocurrency assets will survive and rightly so as we are going through the teething phase similar to any new industry or asset class where some survive and those that do – thrive. Clear winner thus far has been BTC and ETH.

However, ETH faces some serious competition in the Web 3.0 despite the domination. Blockchains like Solana, Polygon, BNB Chain, Avalanche, Ripple, Alogrand and Fantom are eyeing the developer community at the grassroots level with the aim of building on their own blockchain, thereby, growing their own ecosystem.

Cryptos have also been criticized for being a highly risky, volatile and vulnerable asset class by the government across the globe, who are making the frameworks over regulating the asset class. The recent $40-billion wipe out by Terra (LUNA) has firmed this motion. Do you think this massacre will impact the crypto regulations across various countries as the governments may go harsh on this asset class?
Regulatory clarity regarding digital assets will be a welcomed change by the community, especially, institutional investors. Some regulatory bodies have been decidedly slow to regulate, some have been decidedly sceptical. Some have completely embraced this asset class.

Any new innovation, sector or asset class needs guardrails to act in the best interest of the people in its ecosystem and the investors. Thus far, we have been working with a fragmented global regulatory landscape thereby stifling aspects of this innovative space.

After the Terra (LUNA) event, we have seen some significant statements come out from the US and UK Treasury Secretary Janet Yellen called for comprehensive frameworks to address the gaps.

The Queen of England blessed crypto and the UK Treasury representative revealed that legislation to regulate stablecoins, when used as a means of payment, will be included in the Financial Services and Markets Bill. Lastly, Global market regulators are likely to launch a joint body within the next year to better coordinate cryptocurrency rules.

Do you think the crypto business, or the projects will be impacted due to recent price correction? Do you see institutions getting cautious or picking away from the buzz themes such as metaverse and non-fungible tokens (NFTs)? What are their futures? Is it still as bright as earlier?
We are seeing a momentary dip in the NFT market. However, from a 30,000 feet perspective, the industry is unfazed and continues to build. We will see pivots and evolving use cases within the industry. Web 2.0 vs. Web 3.0 take rates vary greatly with Web 3.0 offering fairer economic terms.

NFT and metaverse use cases will continue to evolve from pure JPEGs to real estate titles, new ways of continued fan engagement, marketing and branding perks, influencing, advertisements, retail and fashion, film financing, lending, events and ticketing and digital identity.

The projects that have evolved use cases and utility associated will continue to gain traction. Interestingly, the social component of web3 and NFT will be a trendsetter in 2022, wherein, people will be able to gather, chat and flaunt their NFTs. These NFTs are nothing but a gateway to Metaverse where ownership is everything.

NFTs seem to be at the heart of this transformation of the entertainment universe. They give their holders access to a more interactive fan experience and also signal a new era where the fans are in the driver’s seat of entertainment operations. They can be in theatres, metaverse or in IRL (in real life) all experienced, traded, and redeemed with NFTs.

The Coachella music festival is another great example. Performances from the event were live-streamed millions of times around the world, showing that there is a demand even from those who couldn’t attend in person. Imagine then if these millions of people could buy a virtual ticket and attend the festival in the metaverse. The potential is limitless.

Majority of the crypto and NFT work has been driven into the gaming segment only. Do you think with recent dampened sentiments being hurt, do you see multi chain capabilities within space gaining traction and success in the near future?
Ans: We believe, majority of NFT work has been driven into both the art and gaming segment. Gaming or play-to-earn model has been one of the dominating spaces within NFT alongside art, music and sports. We will see new use cases such as stream-to-earn start to emerge.

High gas fees and scalability issues are among the top concerns of creators, buyers and marketplaces. Which is why the conversation is shifting towards two items: interoperability and multi-chain capabilities. Interoperability is brought to fruition by creating a “bridge” to transfer assets from one blockchain to another, as well as “layer 2” technologies, such as optimistic rollups and zero-knowledge rollups, which aim to lower costs by expanding available block-space.

NFT projects are typically minted and developed on one or two blockchains at the most leading to several constraints such as a lack of interoperability. The industry is moving to NFT multi-chain platforms to address these. Thereby, removing restrictions in the NFT space.

An example of limitation
Ethereum network is the most popular network on NFT platforms with the limitation that one can only use Ether (the native currency of Ethereum) to buy NFTs. Also, Ethereum is notorious for its over-inflated gas fees (transaction fees), leading to users spending a substantial amount of their NFT budgets on transaction fees alone. This is where multi-chain NFT platforms can help.

With the recent muted sentiments, do you think new projects in the NFT space may take a hit for the near term? With so much volatility, do you think NFTs are getting enough liquidity in the markets? Also, what would be the next big themes emerging in the NFT space?
It is important to note that despite the declining prices for some NFT projects, the NFT market in April recorded a month-over-month increase in trading volume of nearly 45 per cent. In 2022, NFT market has already recorded sales totalling $16 billion in volume on track to beat 2021’s total of $25 billion.

We will see a slowdown in sales of NFTs momentarily as the ecosystem gets built out. However, the overall web 3 economy is expected to grow at a compounded annual growth rate (CAGR) of approximately 40.3% encompassing all components of web3, metaverse and NFTs. Collectible NFTs continue to be the most popular category. Virtual real estate has also been a competitive space with virtual land being bought for exorbitant prices.

Some emerging use cases of NFT include brand engagement, gaming and music NFT – Audible Digital Ownership. One the most noteworthy potential for NFTs lies in the concept of branded economies. This could really trigger a paradigm shift in customer loyalty as the loyalty system right now benefits the companies more than the customers.

This news is republished from another source. You can check the original article here.

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