What’s next for crypto?

2023 has started strong for cryptocurrencies and other financial market assets, combatting headwinds with fierce force, and retaining hard-earned value. There are several trends of the current year and the ones to follow: more regulation, the rise of central bank digital currencies, the popularization of DeFi, more investments in stablecoins and the revitalization or deterioration of NFTs.

More Regulation

Identity verification strictness may increase as more cyberattacks and hacks have been noted recently. Increased regulation is intended to safeguard crypto traders’ funds and data. This can come in the form of increasing scrutiny of identity verification, which can bolster the effectiveness of regulatory frameworks set in place.

More than $2.1 billion worth of crypto assets were stolen in 2022. Other legal measures such as passing new laws which tackle money laundering and necessitating accurate & recurrent corporate reporting can achieve higher consumer protection.

Rise of CBDCs

Central banks from around the world are exploring ways to launch central bank digital currencies (CBDCs) in ways that can predominantly benefit the nation’s money flows. The implementation of government-monitored digital currencies on a national scale will boost protection from cyberattacks, at the expense of less anonymity and privacy for the everyday crypto trader.

Major CBDC developments are occurring in the United States. Other nations all around the world, including China, Japan, and The United Arab Emirates (UAE), are also doubling-up on research & development to find effective ways to adopt and use CBDCs in everyday life.

Popularization of DeFi

Decentralized Finance (DeFi) is the backbone of cryptocurrencies and may remain so for many traders, investors, and corporations in the crypto community. The rise of Web3 will be a driver to DeFi development as it carries the potential to leverage the capabilities of DeFi.

It is worth mentioning that the rise of DeFi would present a hurdle to implementing more regulation and launching CBDCs. This shows that not all initiatives strive for the same goals & outcomes. Since many corporations, protocols and projects are investing billions of dollars towards developing the new version of the internet, Web3, the capabilities of DeFi may increase in the years to come.

While both strive to achieve distinct end-results, there can be rises in centralization & decentralization at the same time, and only a test of time would reveal which of the two will add more aggregate benefit.

More Stablecoin Investments

Stablecoins have settled in the majority of crypto traders’ wallets, as they are needed for many reasons. Stablecoins present a hedge against inflation, promise stability in the value of digital assets, facilitate as a direct link to traditional markets, and act as a handy asset that can be easily converted to fiat and cash.

Without stablecoins, it’s increasingly difficult for investors and traders to cash out on gains. The importance of major stablecoins is expected to grow in the new chapter crypto is entering. If cryptocurrency market activity grows, so will stablecoins like Tether, USDC, Dai, and True USD. However, not all digital assets may see the bright side of the day, which brings us to the everlasting conundrum of nonfungible tokens, or NFTs in short.

NFTs – Are They Still Relevant?

NFTs were the hot topic one day. From the 1st quarter of 2020 to the first quarter of the following year, sales of NFTs from images & videos to in-game items skyrocketed 131 times, recognizing $2 billion in sales. However, it wasn’t all sunshine and rainbows for the digital assets of crypto fanatics and collectors.

NFT markets sustained a heavy blow in 2022, with volume traded per week hampered by more than an 80% decline from year highs hit in mid-May of 2022. Yet, NFT activity remained impressively steady in the first half of 2022 before slumping throughout the year’s remaining months.

Once an attractive asset, NFTs have devolved from an attractive asset to one that’s arguably seen as a nuisance amid harsh market conditions which grew attached to pessimism and skepticism towards NFTs. The NFT conundrum remains prevalent, but the trading volume of NFTs has been somewhat steady in 2023 amid the bullish rally of major cryptocurrencies.

According to NFTNDX.IO, authenticated NFT daily transfer activity surged in 2023 to levels unseen since mid-2022, showcasing signs of growth since the final months of 2022. NFTs have also enjoyed more attention from behemothic firms like Amazon & eBay, indicating that NFTs remain relevant.

2024 – Major bitcoin halving

Looking ahead into the horizons of 2024 and beyond, Bitcoin is set to undergo a periodic halving event which occurs every 4 years or 210,000 blocks on the Bitcoin blockchain. The initial block reward for BTC was 50 BTC, while the current block reward stands at 6.25 BTC, and the next block reward will be 3.125 BTC, and the halving continues.

This event, programmed into the Bitcoin code, slows down the rate at which Bitcoins are mined and generated. The main incentive behind this action is to limit the total supply of BTC, which shall be maxed out at 21,000,000 BTC.

By comparing the mechanisms of BTC with traditional financial systems, we see that printing fiat money, which increases supply, causes inflation, while reducing BTC supply – given strong demand – would boost its value. This makes Bitcoin similar to gold, which has limited supply that cannot be increased.

Last year, cryptocurrencies including Raven (RVN) and Dash (DASH) underwent a halving event, and in August of this year, it’s time for Litecoin (LTC) supply to be slashed by half. Such events keep cryptocurrency assets valuable through the simple forces of demand and supply.

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