With 2022 definitely gone, what will 2023 bring to the crypto market?

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If 2022 was any kind of template for gauging what the crypto market might offer investors in the future, it has proven to be awfully difficult to predict. The space has seen a brutal shock to the global crypto market capitalization, which has fallen just over 60% from $2.2 trillion to around $797 billion since the start of the year. . It also saw the two largest cryptocurrencies by market capitalization, BTC and ETH, fall 64% and 67%, respectively, over the same time period, with the alt market also falling concurrently.

These price drops, combined with the demise of the FTX exchange, were not events that many, if any, anticipated. Additionally, the fallout from the FTX debacle is not yet over, as some crypto projects and venture capital funds have kept cash accounts on the exchange.

That said, if 2022 was indeed chaotic, then 2023 must offer something more positive, but growth should be slow in Q1 or even H1.

Will 2023 follow the same pattern?

Following the brutal events of 2022, there will inevitably be a period of adjustment, stabilization and refocusing, which will entail months of reflection and nervous reconviction before change manifests itself in the market.

The macroeconomic climate is also not expected to change significantly in the near term. The so-called crypto winter will persist for at least some time. But change will come. Whether it will be investor-led or corporate-led remains to be seen.

What seems obvious though, is that as the market matures – and confidence grows again – there should be a shift in a positive direction; therefore, it would not be surprising if risk-taking investors moved earlier in the year rather than later, which may seem counter-intuitive. Also, as you will read below, the predicted evolution of DeFi and NFTs.

Challenge in 2023Liquidity problems and the attraction of retail

With declining trading volume and liquidity in the crypto space, DeFi will continue to struggle with liquidity incentives and service startups. The methods for obtaining this passive liquidity have constantly evolved since the beginning of DeFi, from liquidity mining reward mechanisms to newer concepts such as protocol-owned liquidity. Yet this problem persists and will need to be addressed in the new year for DeFi to succeed as a scalable alternative to centralized financial services.

Token rewards have proven to be an unsustainable incentive for trading and market making, often leading to sham trading or agricultural dumping of platform assets. Most retail users do not have the time or ability to optimally execute and manage their positions. This complexity can be a significant deterrent for retail investors to commit capital to the DeFi space.

In 2023, there should be a move towards more structured product offerings. I spoke with IceCreamMan – a founding member of JONES – which is a Layer 2 Arbitrum protocol project. When discussing their structured offerings, he said, for example, that jUSDC is a neutral delta-gamma stablecoin vault, earning blue-chip returns by lending to other Jones structured products in a secure manner. and transparent, enforced through smart contracts. And while this highlights the inherent complexities of the DeFi market for the retail user, it also shows that many people are trying to simplify the process and make the space (and its benefits) more accessible to the retail user. retail.

Regulatory issues and attracting institutional use

With regulation in the spotlight at the end of 2022 and the uncertainty that comes with it, many institutions are reluctant to purchase decentralized ledger technologies. The idea of ​​a licensed DeFi might just provide the solution to help institutions overcome regulatory difficulties.

In November 2022, we saw JP Morgan and DBS Bank conduct foreign bond transactions on the Polygon blockchain under a new scheme that also supports on-chain verifiable credentials. I believe this is an early example of a major bank using tokenized deposits on a public blockchain. In 2023, I expect to see a growing number of government-led (if not supported) initiatives collaborating and exploring DeFi adoption in partnership with various industry leaders.

While authorized DeFi is not decentralized in nature, it remains to be seen how far institutions will go in pursuing client interests and how much power, if any, they are willing to give up in pursuit of decentralization and decentralized finance. Most likely, there will be tension between users choosing true crypto-native platforms – such as XGo – to help bridge and support a customer’s DeFi experience and traditional financial institutions trying to leverage the benefits. Challenges for its customers.

NFTs in 2023The convergence of gaming, the metaverse and NFTs

As an industry, NFT profile image projects have tended to move towards interoperable metaverse integration. Evidence of this has increased significantly through 2022, and this trend is expected to continue into 2023.

Otherdeed, Cooltopia, and Spacedoodles are pouring large amounts of energy and funding into their parent collection treasuries and are still just the tip of the gamification iceberg to come. The question remains whether this will be a catalyst for mass adoption, and even if it does, it remains to be seen if the impending metaverse(s) will truly be decentralized.

The current trend towards stability and durability in Web3 games, resulting in many ways from the problems of Axie Infinity and its Pay-to-Earn model, will spawn a wave of other products with built-in stability.

Additionally, the early ecosystems of 2023 risk overreacting and being designed to insulate themselves from the burgeoning dynamic nature of much crypto speculation. There is a risk of creating a seamless and silent player experience, which feels like a copycat version of existing traditional video games.

Even still, we have yet to see a Metaverse come close to Minecraft. The coming year will show that tokenomics, gamification and exposure to speculation will need to be used in a healthy and responsible manner. Additionally, mass adoption will be achieved by platforms that produce games using NFTs and cryptocurrency without this feature being their entire sales pitch. Players should engage with these technologies without even being aware of them.

Moreover, a battle is ready as 2023 approaches. There are two emerging approaches to web3 game development: crypto companies getting into gaming versus gaming companies getting into crypto. The latter is led by companies such as Limit Break, which is a new company with former Machine Zone CEO Gabriel Leydon (the company that had Kate Upton, Mariah Carey and Arnold Schwarzenegger on all our TV screens) building Web3 Massively Multiplayer Online Games.

Leydon said: People talk about Web3 gaming as a futuristic inevitability, before adding that it’s not. People have to design it and build it right. Limit Break intends to incorporate Web3 elements into the free-to-play model, another stark departure from the crypto-native approach of 2022. The reality is, typically, no more than 5% of gamers mobile games actually pay for anything. , and therefore for mass adoption, these people must be included.

As I’m a stakeholder in both projects, I can’t wait to see how the first $450 million in NFTs raised by Yuga Labs (coupled with the stunts of Eminem and Snoop Dogg) stack up to the first $200 million in gaming raised by Limit Break (coupled with its announced $6.5 million SuperBowl ad in 2023).

Final Thoughts

With all of the above in mind, it’s hard to be specific about a predictable outcome for 2023, but what’s certain is that it will be different and positively interesting. With a positive outlook in mind and an ambitious roadmap for the entire space, 2023 is shaping up to be exciting. Will DeFi manage to win over the general public, and do blockchain-based games have the ability to appeal to the masses? This year will reveal the answers to many big crypto questions, so stay tuned.

Presentation Digi516:

Digi516 is a longtime crypto researcher and NFT enthusiast. After working in fraud prevention and data/business analytics, they have accumulated 6 years of trading experience and over 4 years of active community management. They now operate as Lists and Community Manager at XGo.

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