Despite the sharp price correction in recent weeks – and the expected consolidation of smaller players in the coming quarters – Zhang still views the current conditions as more of a soft patch in the ongoing story of the broader acceptance of cryptocurrency as an investment.

“The total market cap is going to grow much higher, because cryptocurrency is gradually being recognised by the [financial] institutions,” she says, adding that she expects to see 10 times the market cap of the whole sector.

“So it will be slightly slimmer in terms of how many types of choices [of cryptocurrencies], but bigger in terms of market cap.”

Zhang’s forecast is based on a three-year outlook, with the expectation that cryptocurrencies will continue to draw interest from the conventional asset management community.

“We have already seen that institutions have been recognising cryptocurrency as an investable asset,” Zhang notes.

The possible future of bitcoin

In the near future, there could be a gradual levelling of the playing field in terms of market cap of the major cryptocurrencies. Bitcoin’s market cap, currently around US$726 billion, is likely to continue to rise, yet shrink relative to those of rival coins, according to Zhang.

She predicts its dominance will gradually recede, eventually establishing a “stable” market cap that represents less than 50 per cent of the funds invested in the sector.

However, Zhang believes bitcoin’s appeal will continue to grow as a hedge against inflation – and also as a form of insurance in the event of natural disasters or social instability.

“Nowadays, no one is using bitcoin as a currency because the volatility of its price is just not suitable, or because of the confirmation time for one transaction,” she says. “So it’s not really appropriate to use it [as a peer-to-peer currency].”

Reshaping the crypto landscape

There will be plenty of fuel for the coming wave of M&A, with more than 3,000 crypto applications currently being tracked by cryptocurrency data portal CoinMarketCap.

Among the major public blockchain platforms, Zhang foresees a battle pitting ethereum against its rivals for protocol dominance. She notes that bitcoin is not in direct competition with them.

“They’re competing with each other – which one has the better capacity, which one has faster transactions per second to support the applications built on top. So there won’t be that many, because interoperability in the future will be a problem,” she says, adding that EOS, Cardano, Solana and Tron are among the rivals that could pose a threat to ethereum.

Zhang considers competition between the platforms as “healthy and welcome”, because they will ultimately support the next generation of financial services. These include innovations that will contribute to a new blockchain-based financial ecosystem that has become known as decentralised finance, or DeFi for short.

During the next phase of development for the sector, among the challenges will be reducing the level of speculative trading activity.

Zhang says better investor guidance is needed in areas such as risk management to help tamp down speculative excess. This is because crypto-exchanges have a relatively light regulatory footprint, unlike domestic stock markets that are bound by local securities regulators.

“It’s very hard because, for example, in a decentralised exchange, people can put money in without any framework or regimes of regulation,” she says. “They first need to be properly educated in terms of investments, financial management and risk management.”

Tips for cryptocurrency newbies

So then, what advice does Zhang have for new investors who are considering taking the plunge into cryptocurrencies?

She recommends steering away from making a direct investment – at least initially. Instead, she suggests that newcomers to the cryptocurrency space build up their knowledge to start, by becoming a participant in the technology ecosystems underpinning its alternative payment systems.

“A healthier way than immediately putting money in would be to participate in the whole blockchain development, getting a node running and seeing how you can contribute to the decentralised technology,” Zhang says. “Learn about it, read about it, be a user of the applications that have already been built or are already in use.”

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