Institutional predictions for 2023: Ethereum, BTC, L2, NFT

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No less than three renowned crypto institutions have recently given their predictions for the coming year 2023 – and there seems to be a favorite: Ethereum. Other major themes for Coinbase, Darma Capital, and Cumberland include the migration of investors to quality projects, budding innovation from creative destruction, and some fundamental reforms for the crypto industry as a whole.

Largest US cryptocurrency exchange, Coinbase, believes crypto markets will not yet decouple from traditional financial markets in early 2023 as investors focus on quality projects with sustainable tokenomics and mature ecosystems with cash.

Coinbase predicts the Ethereum ecosystem will flourish

Coinbase also predicts that the market for Ethereum’s layer 1 competitors is oversaturated and that the coming year could be the year of layer 2 blockchains. So, Ethereum’s competitors will have a tough time, according to Coinbase. While ETH and Binance Smart Chain (BSC) will hold up well, TVL will migrate to Layer 2 solutions such as Polygon, Optimism, and Arbitrum.

Coinbase also predicts another boom for NFTs, which will see a move towards integration with personalized IDs, ticketing, subscriptions, real-world asset (RWA) tokenization, and supply chain logistics. Additionally, more companies will integrate NFTs for brand building and customer engagement.

Due to human error in the demise of FTX and other projects in 2022, the US exchange expects regulatory clarity to be key for the next cycle. Perhaps surprisingly to some, Coinbase also says that institutional lending will sprout and thrive in 2023 with improved due diligence processes – once bottoming out.

As for the largest cryptocurrency by market capitalization, Bitcoin, Coinbase predicts that the distribution of Mt Gox will not be the big event in 2023, as some analysts claim. Those who wanted to sell have already sold. In addition, the distributions will be staggered.

Regarding Ethereum, Coinbase shares a bullish outlook due to the merger. ETH is able to be more efficient due to the move to proof-of-stake and is also deflationary. Additionally, the US exchange predicts that the amount of liquid ETH will continue to decline once withdrawals from the deposit agreement become possible after the Shanghai hard fork.

Darma Capital predicts that ETH will outperform Bitcoin

Just like Coinbase, Darma Capital sees the Ethereum merger as a key development that will have a positive impact on the price of ETH. The same goes for the Shanghai hard fork, which will lead to an increase in ETH staking.

On the technical side, Darma sees proto-danksharding as a game-changer for ETH, as it awaits innovations from Lido Finance and Obol Network. Basically, Darma predicts that L2s will be key to adoption by the next wave of consumer apps, citing Arbitrum, Optimism, and Immutable.

“Vaporwave chains” like EOS and Cardano will die out as they lose mainstream interest due to lack of on-chain adoption, Darma says.

The predictions for Bitcoin are not rosy either. According to the institution, BTC will lose market share to altcoins while Ethereum will complete the “turnaround”. According to Darma Capital, this could be responsible for a lack of utility, ESG concerns and “failure as digital gold”.

Broadly, the digital asset risk advisor expects the macroeconomic situation to result in a freeze on interest rate hikes by the US Federal Reserve until the second quarter of 2023. As a result, the crypto market will see a further rise in the third quarter of 2023.

Three Emerging Narratives

Cumberland DRW LLC expects challenging market conditions and clear regulatory frameworks in 2023 that will drive innovative solutions. With this in mind, retail investors will focus on exchanges that can mark with transparency, spot trading without pre-funding, ISDAs and CSAs, according to the institution.

As three emerging narratives, the company identifies Bitcoin and Ethereum as reserve currencies, NFTs for IP tokenization, loyalty programs, and customer engagement, specifically citing MATIC, LOOKS, XMON, and GameFi.

At press time, the Ethereum (ETH) price stands at $1,218.

ETH price, 4 hour chart

Featured image by Moritz Knoringer / Unsplash, chart from TradingView.com

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