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Dear Bankless Nation,

Despite the relentless regulatory charge against crypto, ETH and BTC continue to pump. The question is whether these market movements are just another blip on the radar or are a sign that another bull market could be around the corner.

Today, we dig into five distinct sectors within crypto that are showing major momentum and promise.

- Bankless team

5 Crypto Sectors Giving Bull Market Energy

Bankless Writer: Ben Giove

Uhhh, are we back? It’s been an eventful start to 2023. With bank crises, a crackdown on CEXs, and a seemingly endless supply of regulatory FUD -- it feels like every day we’ve been hit by a new piece of bad news.

Yet crypto markets have shrugged off these concerns (much to the chagrin of Gary Gensler and Elizabeth Warren).  BTC and ETH have soared in the first few months of the year, up 69.1% and 57.8% YTD respectively while outperforming every other major asset class in the world. Furthermore, a variety of sectors within crypto are continuing to show strong signs of growth.

Historically, secular crypto bull markets have not just only been led by BTC + ETH numbers going up, they have also been catalyzed in large part by applications, with use cases that trigger blockspace demand such as the advent of smart contracts and ICOs in 2016-2017 and DeFi/NFTs in 2020-2021.

Which application verticals are flashing bullish signals today and showing strong signs of breaking into the mainstream? Let’s dig in below:

💧 Liquid Staking

Liquid staking derivatives (LSD) has been all the rage lately as we approach Shanghai, the highly anticipated Ethereum upgrade that is set to go live on April 12 and enable withdrawals from ETH staking. LSD deposits have already surged 21.3% so far this year from 4.9M to 6.0M, despite Shanghai having yet to be implemented.

The impact of the upgrade on the price of ETH in the short-term is unclear.

However, what appears more certain is that by removing technical implementation risk, the upgrade is likely to initiate a “Staking Supercycle” which refers to a multi-year period in which the ETH staking rate is set to rise from its current level of 15% to one closer to the roughly 60% average for PoS networks.

The anticipation of this Staking Supercycle has led to significant rallies in the governance tokens of LSD issuers, like Lido (LDO), Rocket Pool (RPL), StakeWise (SWISE), Frax (FXS), and Stader (SD) who have all outperformed to begin the year on the expectation that they will capture these inflows.

LSD Tokens YTD Performance - Source: TradingView

In addition, assets providing staking infrastructure are benefiting from the growth of LSDs, such as SSV Network, a distributed validator technology (DVT) protocol and [Redacted] Cartel (BTRFLY), a liquidity bribe marketplace operator (and rumored entrant into the LSD space).

Along with an increase in the number of their deposits, LSDs should also see significant growth in their top-lines as a result of appreciation in the price of ETH, the asset in which their revenues are denominated.

🖼️ NFT-Fi

NFT-Fi (DeFi for NFTs) is another area that has grown considerably in 2023, and one that is already beginning to shake up the competitive dynamics of the sector.

The NFT marketplace landscape has changed dramatically in 2023 following the rise of Blur. Fueled by a novel incentive program and a token launch, Blur has surpassed OpenSea as the leading marketplace and aggregator in the space. Though there are some questions around its sustainability once incentives run out, Blur has brought considerable liquidity into the NFT ecosystem, with popular collections like Bored Apes having more than $61.9M in total bid-value.

Other marketplaces, such as AMMs like SudoSwap and Caviar, are also providing innovative solutions to deepen liquidity for the asset class, though they have yet to significantly penetrate the market.

Lending has been another sub-sector of NFT-Fi that has experienced significant growth.

Weekly NFT Loan Originations - Source: Dune Analytics

Loan originations in Q1 2023 surged from $95.4M to $436.5M (357.5% Q/Q), fueled in large part by the growth of platforms such as NFTfi, Arcade, and BendDAO which have provided NFT degens with the means to access liquidity on or lever up on their JPEGs.

While NFT prices have risen minimally in ETH terms to begin the year -- Nansen’s Blue-Chip 10 index is up just 8.5% -- this NFT-Fi fueled increase in liquidity and leverage should pay dividends in the long run by leading to a maturity in the market structure of the asset class. NFT-Fi should continue to grow as interest in JPEGs, and alternative use cases like gaming, returns.


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📈 Perpetuals DEXs

Perpetuals DEXs, where users can trade perpetual futures (futures contracts without an expiration date), were touted by many as big winners following the collapse of FTX, with many expecting trading activity for the most popular type of derivative in crypto to move on-chain.

While CEXs still account for the vast majority of volume and open interest, perps DEXs managed to see significant growth in Q1 2023 as the markets rebounded. Per Token Terminal, volumes in this period for perps-only DEXs grew 77.3% Q/Q from $92.6B to $164.3B when compared to Q4 2022.

This growth has led to outperformance in the governance tokens for a variety of the leading perps protocols, with DEXs like dYdX (DYDX), GMX (GMX), Gains Network (GNS), Kwenta (KWENTA) outperforming ETH to begin the year.

Perps DEX Tokens YTD Performance - Source: TradingView

These DEXs appear set to continue to grow over the coming months should prices continue to stabilize -- and as liquidity flows back into the markets. In addition, GMX, GNS, and KWENTA in particular should benefit from the increased adoption of Layer 2s and the proliferation of ARB and OP incentives. If used properly, these tokens should be able to deepen liquidity and stimulate trading activity on these platforms.

🎮 Gaming

Gaming is one of the crypto use cases with the highest probability of bringing new users and capital into the space.

Although it has not received the attention of other verticals on this list, the sector has shows strong potential so far in 2023, with console tokens such as MAGIC, IMX, RON, and GALA outperforming ETH so far this year.

Gaming tokens YTD performance - TradingView

There have numerous positive catalysts within the gaming sector that have likely contributed to this outperformance, such as the Arbitrum token launch in the case of Treasure, the announcement of Immutable’s zkEVM, and the launch of RON staking.

Other events like the GDC (Game Developers Conference) and Epic Games' announcement that they support 20 games with crypto elements, have likely contributed to the growing enthusiasm around the sector.

Gaming is set to continue to build on this positive momentum, with highly anticipated titles such as trading card game Parallel, auto-battler RPG Illuvium, first-person shooters Deaddrop and Shrapnel, and fully on-chain MMOs Realm and Influence set to continue rolling out their launches in 2023. These, along with future tournaments and UX improvements like account abstraction, are likely to help gaming continue its slow and steady progression over the coming months.

💵 On-Chain Treasuries

DeFi summer began in 2020 against the backdrop of a zero-interest rate environment, with quoted double, triple, quadruple, and even quintuple digit returns serving as an oasis in a yield-starved world. While these yields were a mirage and eventually revealed themselves to be unsustainable, they brought capital flowing into DeFi in an attempt to realize them.

Now, DeFi faces the opposite problem with interest rates on US Treasuries in meatspace now exceeding (on a risk-adjusted basis) the yields that can be earned from farming in the safest protocols. Furthermore, large stablecoins like USDT, USDC, and DAI do not pay any interest back to holders, increasing the opportunity cost of holding cash on-chain.

Several solutions have emerged to attempt to solve this problem, with protocols like Ondo Finance (and more recently Open Eden) providing access to tokenized US Treasuries from within DeFi.

Ondo Finance TVL - Source: DeFi Llama

While accessing these products requires jumping through KYC/AML hoops, and is restricted to high-net-worth investors, they have nonetheless found product market fit. Ondo’s OUSG has already attracted $65.2M in TVL.

Should interest rates remain above 0%, and stablecoins continue to withhold yield, the tokenized treasury market will likely continue its blistering growth trajectory and penetration of the worlds largest financial market.


It may be majors szn, but there are still a variety of sectors in crypto that are worth paying close attention to. Liquid staking, crypto gaming, NFT-Fi, perpetuals DEXs, and on-chain Treasuries are just some of the subsectors showing promising signs of growth to begin 2023.

Yes, the year is young, and the trajectory of the markets is uncertain – a lot can and will change. But, now is the time to start paying attention. Crypto is about to get fun again.

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