Enigma SecuritiesSummary List Placement
Fate loves irony. Just one day before the bitcoin bull run of 2017 topped out, one of South Korea's best professional esports players — Jeon "ikssu" Ik-soo — announced that he was retiring to become a full-time crypto trader.
As bitcoin entered into a multi-year bear market, Ik-soo had to quietly come back to pro-gaming. However, his shocking move put cryptocurrencies on the radar of many esports enthusiasts.
One of them is Joseph Edwards, who was a professional esports coach and analyst for several teams in North America and Brazil at the time. As he fell into the crypto rabbit hole, the Oxford grad decided to make a bold transition into another emerging industry.
Today, Edwards wears a very different hat as the head of research at Enigma Securities, a cryptocurrency firm in London focusing on liquidity and treasury solutions.
He is not the only one who naturally gravitates towards gaming and crypto. The 29-year-old FTX billionaire founder Sam Bankman-Fried has said that he is "(in)famous for playing League of Legends while on phone calls."
Edwards thinks there is a natural overlap between pro gaming and crypto. Whether it's the demand for adaptability, the young demographics, or the competition, hustlers in both industries have to go above and beyond.
"Crypto, just like esports, is an industry where there's no barrier of entry and there are like 100,000 people just behind you who want to do what you're doing better than you," Edwards said in an interview. "Adaptability and competitiveness, you have to be both of those things because if you're not, then somebody else will take it from you."Bitcoin's zig-zag path to $250,000
Having worked in the crypto industry for just about two years, Edwards has already found success forecasting bitcoin's price trajectory.
When bitcoin broke above $20,000 for the first time ever in mid-December last year, he issued a research note mapping out its path to $60,000 — a milestone it cleared in mid-March.
"If BTC reaches even 10% of the market cap of gold on a nominal basis, it implies a fully diluted valuation of $60,000 or 3x from current levels, 19x from the cycle nadir in 2019," he wrote in the Dec. 16 note.
Right now, as bitcoin trades just below $40,000 after a massive short squeeze sent it surging 22% in the past seven days, Edwards expects to see another short-term spike followed by more drawdowns in September.
The next leg-up is likely to be another mechanical move caused by a shift in the retail-driven crypto derivatives markets over the past two months, according to Edwards.
He explains that the collateral for crypto derivatives contracts has historically been held in bitcoin, but traders are increasingly using US dollars or stablecoin Tether as collateral, resulting in about 64% of all open interest being held in USD- or stablecoin-denominated derivatives.
"If you are holding bitcoin as collateral, your collateral is worth less over time as the price goes down, so you get liquidated more easily," he said. "Whereas on the upside, collateral price is going up, so it's a lot harder to get liquidated if you're shorting the market."
Edwards believes that the recent break to the upside has been assisted by the fact that all these collaterals are being held in US dollars, which caused the shorts to be liquidated and squeezed.
Another such squeeze could lift bitcoin to the $45,000 to $46,000 range in the next month, but bitcoin will likely grind lower as more regulatory actions are announced in September, he said.
In the long term, he is betting on bitcoin to hit $250,000 by 2025 as it reaches 20% to 25% of gold's market cap and the entire crypto market develops into a $10 trillion market.2 altcoins that could go up 10x to 20x
Unlike many bullish forecasters, Edwards thinks cryptocurrencies have already plunged into a bear market, but the end of that bear market is probably nearer in sight than people would expect.
"For the most part, what retail investors should probably be doing in crypto bear markets is stepping back for a few months," he said. "You can't really escape a crypto bear market by going into altcoins. If bitcoin does go down further, we will see further drawdowns across the board."
Solana, which is designed to facilitate the creation of decentralized applications, aims to improve scalability by introducing a hybrid of proof-of-history and proof-of-stake models. In some regards, it is cheaper, faster, and easier to use than ethereum.
"Do I think Solana is going to get to 30% to 40% of ethereum's market cap? It's not certain but there is definitely the potential," Edwards said. "Over the next five years, if it succeeds, Solana can easily go up 15 times to 20 times versus the rest of the ecosystem."
Algorand, which powers decentralized finance activities as ethereum does, similarly claims to enable faster transaction speeds, lower costs, and improved security compared to other blockchains. It is also committed to being environmentally green and efficient, which has become a lightning rod for the high-energy-consuming bitcoin.
The MIT computer science professor-founded protocol, which has a current market cap of $2.6 million, could go up at least 10 times over the next three to five years, according to Edwards.
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