If 2022 was some kind of template for assessing what the crypto market might offer investors in the future, it turned out to be terrifyingly difficult to predict. Space saw a brutal impact globally. crypto market capitalization, which fell just over 60%, from $2.2 trillion to about $797 billion year to date. It also saw the two largest cryptocurrencies by market cap, BTC and ETH, drop by 64% and 67%, respectively, over the same time period, with the simultaneous drop in the alt market as well.
These price drops, combined with the demise of the FTX exchange, were not events that many, if any, foresaw. Furthermore, the fallout from the FTX debacle is not over yet, as some crypto projects and venture funds have retained treasury accounts on the exchange.
That said, if 2022 was really messy, then 2023 has to offer something more positive, but growth is likely to be slow in the first quarter, if not the first half, of the year.
Will 2023 follow the same pattern?
After the brutal events of 2022, there will inevitably be a period of adjustment, settling in and refocusing, all of which will lead to months of nervous reflection and reconviction before change manifests itself in the marketplace.
The macroeconomic climate is unlikely to change significantly in the short term as well. The so-called โcrypto winterโ will persist at least for a while. But the change will come. Still, it remains to be seen whether it will be run by investors or by companies.
However, what seems clear is that as the market matures, and confidence grows again, there should be a shift in a positive direction; therefore, it would not be a surprise if risk-taking investors moved early in the year rather than later, which may seem counter-intuitive. Also, as you will read below, the planned development in DeFi and NFT.
I defined in 2023
Liquidity problems and attraction of retail use
With trading volume and liquidity falling 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 the liquidity mining reward mechanics to newer concepts such as proprietary liquidity of the protocol. Still, this problem persists and will need to be resolved 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 trade laundering or โfarm dumpingโ 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 huge 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 project on the layer 2 Arbitrum protocol. During discussion of his structured offerings, he said, "for example, jUSDC is a delta-gamma neutral stablecoin vault, earning top-tier returns through lending to other Jones structured products in a secure and transparent manner, applied through smart contracts. And while this highlights the inherent complexities of the DeFi market for the retail user, it also shows that there are many people trying to simplify the process and make the space (and its benefits) more accessible to the retail user.
Regulatory aspects and attraction Institutional use
With regulation in the spotlight at the end of 2022, and the uncertainty that comes with it, many institutions are hesitant to purchase decentralized distributed ledger technologies. The idea of โโ'Authorized DeFi' could provide the solution to help institutions overcome regulatory problems.
In November 2022, we saw JP Morgan and DBS Bank transact foreign bonds on the Polygon blockchain under a new scheme that also supported on-chain verifiable credentials. I think this is an early example of a major bank using tokenized deposits on a public blockchain. In 2023, I expect to see an increasing number of government-led initiatives (if not supported) collaborating and exploring DeFi adoption in partnership with various industry leaders.
Although 'permissioned DeFi' is not decentralized by nature, it remains to be seen how far institutions will go to pursue the interests of clients and how much power, if any, they are willing to cede in the pursuit of decentralization and decentralization. Finance. Most likely there will be tension between users who choose true native crypto platforms such as XGo - help unite and support a customer's DeFi experience and traditional financial institutions trying to harness the benefits of DeFi for their customer base.
NFTs in 2023
The convergence of games, the metaverse and NFTs
As an industry, NFT profile picture projects have tended to transition to interoperable metaverse integration. Evidence for this has been growing significantly through 2022, and this trend is likely to continue through 2023.
Otherdeed, Cooltopia, and Spacedoodles are all committing massive amounts of energy and funding to their core collection treasures and still represent just the tip of the gamification iceberg to come. The question remains whether this will be a catalyst for mass adoption, and even if this is the case, it remains to be seen if the impending metaverses will be truly decentralized.
The current trend towards stability and sustainability in Web3 games, in many ways a result of the problems with Axie Infinity and its Pay-to-Earn model, will spawn a wave of other products with built-in stability.
Furthermore, early 2023 ecosystems are in danger of overreacting and being designed to insulate themselves from the dynamic boom-and-bust nature of most crypto speculation. There is a risk of creating a muted and homogeneous player experience that feels like a copied version of existing traditional video games.
Still, we have yet to see a metaverse that comes close to the likes of Minecraft. The coming year will show that tokenomics, gamification and exposure to speculation will have to be used in a healthy and responsible way. Furthermore, platforms that produce games using NFTs and cryptocurrencies will achieve mass adoption without that feature being their entire selling point. Players should get involved with these technologies without even being aware of it.
Also, a battle looms as we head into 2023. There are two emerging approaches to Web3 game development: crypto companies moving into gaming vs. game companies moving into cryptocurrency. The latter is being led by companies like 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, โPeople talk about Web3 gaming as a futuristic inevitability,โ before adding, โit's not. It requires people to design and build it properly.โ Limit Break intends to incorporate Web3 elements into the "free-to-play" game model, another stark difference from 2022's crypto-native-first approach. The reality is typically no more than 5% of mobile game players really do pay for anything, so for mass adoption, these people need to be included.
As I'm a stakeholder in both projects, I look forward to seeing how the first $450M NFT raised by Yuga Labs (along with Eminem and Snoop Dogg stunts) aligns with the first $200M Gaming raised by Limit Break. (along with his $6.5 million SuperBowl ad announced in 2023).
final thoughts
With all of the above in mind, it's hard to be exact about a predictable result for 2023, but the truth is that it will be different and positively interesting. With a positive outlook in mind and an ambitious roadmap for space as a whole, 2023 is sure to be an exciting one. Will DeFi succeed in taking over the mainstream and does blockchain-based gaming have the ability to appeal to the masses? This year will reveal the answers to many of the big questions about crypto, so stay tuned.
Digi516's publicity note:
digi516 is a long-time crypto researcher and NFT enthusiast. After working in anti-fraud and business/data analytics, he amassed 6 years of business experience and 4+ years of active community management. They now operate as the head of listings and community at XGo.
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