What Surprises will 2023 Bring to the Crypto Market?
Here’s Why 2023 holds something big and exciting for the crypto market now that 2022 has passed
If 2022 was any indication of what the crypto market might offer investors in the future, it proved to be extremely difficult to predict. The global crypto market capitalization has dropped by more than 60% year to date, from $2.2 trillion to around $797 billion.
During the same time period, the two largest cryptocurrency by market cap, BTC and ETH, fell by 64% and 67%, respectively, with the alt market also falling. These price drops, along with the demise of the FTX exchange, were not anticipated by many, if any. Furthermore, the FTX debacle has not yet been resolved, as some crypto projects and venture funds have retained treasury accounts on the exchange. However, if 2022 was indeed chaotic, then 2023 must be more promising, though growth is likely to be slow in the first quarter if not the first half of the year.
Following the calamitous events of 2022, there will undoubtedly be a period of adjustment, settling, and refocusing, all of which will necessitate months of reflection and nervous reconviction before change manifests in the market. The macroeconomic environment is also unlikely to change significantly in the near term.
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The so-called “crypto winter” will last at least a little while longer. That remains to be seen. What does appear clear is that as the market matures and confidence returns – there should be a positive shift; therefore, it would be no surprise if risk-taking investors moved earlier in the year rather than later. Furthermore, as you will see below, the forecast development in DeFi and NFTs.
Liquidity issues and attracting retail use in 2023
DeFi will continue to struggle with liquidity incentives and the bootstrapping of services as trading volume and liquidity fall across the crypto space. Since the beginning of DeFi, methods for obtaining this passive liquidity have been constantly evolving, ranging from liquidity mining reward mechanics to newer concepts such as This issue, however, persists and will need to be resolved in the coming year in order for DeFi to succeed as a scalable alternative to centralised financial services. Token rewards have proven to be an unsustainable motivator for trading and market making, frequently leading to wash trading or “farm-dumping” of platform assets. Most retail users lack the time and expertise to execute optimally and manage their positions. a significant deterrent to retail investors committing capital to the DeFi space.
Regulatory concerns and attracting institutional interest
With regulation looming at the end of 2022, and the uncertainty that entails, many institutions are hesitant to invest in decentralized distributed ledger technologies. The concept of “permitted DeFi” may just be the solution to help institutions overcome regulatory pains. JP Morgan and DBS Bank conducted foreign bond transactions on the Polygon blockchain in November 2022 under a new scheme that also supported on-chain verifiable credentials. This, I believe, is the first instance of a major bank using tokenized deposits on a public blockchain.
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In 2023, I anticipate an increase in the number of government-led (if not supported) initiatives that collaborate and investigate DeFi adoption in collaboration with various industry leaders.
Though ‘permissioned DeFi’ is not inherently decentralized, it remains to be seen how far institutions will go to protect customers’ interests and how much power, if any, they are willing to give up in the pursuit of decentralization and decentralized Finance. Most likely, there will be a conflict between users who choose true crypto-native platforms – such as XGo – to bridge and support a customer’s DeFi experience and traditional financial institutions attempting to leverage DeFi’s benefits for their customer base.
In 2023, NFTs
Gaming, the metaverse, and NFTs are all coming together. NFT profile picture projects have tended to migrate to interoperable metaverse integration as a sector. Through 2022, evidence for this has grown significantly, and this trend is expected to continue into 2023. Otherdeed, Cooltopia, and Spacedoodles are committing significant amounts of energy and funding from their parent collections’ treasuries, but they are still only the tip of the gamification iceberg.
If this is true, it remains to be seen whether the upcoming metaverse(s) will be truly decentralised.
The current trend toward stability and sustainability in Web3 games, which is largely a result of the problems with Axie Infinity and its Pay-to-Earn model, will spawn a slew of other products with built-in stability. Furthermore, the early 2023 ecosystems risk overreacting and being designed to protect themselves from the volatile boom-and-bust nature of most crypto speculation.
There is a risk of creating a uniform, muted player experience that feels like a knockoff of existing traditional video games.
Last thoughts
With all of this in mind, it is difficult to predict the outcome for 2023, but one thing is certain: it will be different and positively interesting. With a positive outlook and an ambitious roadmap for the space in general, Will DeFi be able to break into the mainstream, and can blockchain-based games entice the masses? Stay tuned this year as we learn the answers to many of crypto’s big questions.
