From Zero to Hero – Crypto Could Rocket in 2023

2022 was not the best year for cryptocurrencies. Okay, let's not sugarcoat it. Last year was one of the harshest years for the crypto market. Calamitous market recessions, high inflation, political turmoil; many factors created ripples of havoc across markets & economies, which saw the price of leading crypto coins plummet relentlessly.

The market value and trading activity of Bitcoin (BTC), Ethereum (ETH) and other popular cryptocurrencies including stablecoins have fallen aggressively, devaluing the major players in the crypto world. Yet, prices and activity have recovered impressively in 2023.

The new year could might as well represent a champion of a year for crypto, as markets began to revitalize amid growing willingness of traders, businesses and nations to spend and invest. The road to recovery may be long and bumpy, but inevitable as most predict.

Global inflation and macropolitical tensions have hurt demand for traditional assets like stocks, bonds and precious metals, as well as cryptocurrencies and other digital assets. Hand-in-hand with the dynamism and evolution of needs within the crypto realm, there are some trends which may be prevalent in the new year.

Amid the rise of hacks and other forms of cybersecurity-breaching activities, more regulation is expected to be implemented in the world of crypto, with the goal of safeguarding the funds and data of crypto traders. This can come in the form of increasing scrutiny in 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, and other legal measures such as passing new laws which tackle money laundering and necessitating accurate & recurrent corporate reporting can achieve higher consumer protection.

Another imminent trend would be the rise of central bank digital currencies, more commonly known as CBDCs. 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.

Three countries have already developed CBDCs for regulated use in their domestic economies; Bahamas was the first, followed by the crypto-friendly Nigeria and Jamaica. Nations from all around the world, including China, Japan and The United Arab Emirates (UAE) are also doubling-up on research & development to find effective ways in which CBDCs can be adopted and utilized in everyday activity.

Now, these two trends aim at achieving one umbrella objective; centralization. At the same time, decentralization in its various forms has been on the rise since the beginning of crypto adoption.

Decentralized finance or DeFi is the backbone of cryptocurrencies, and may remain so for many traders and investors which seek to buy, sell, store and spend crypto through mechanisms which bolster fast transactions with high levels on anonymity.

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 different goals & outcomes, there could be rises in centralization and decentralization at the same time, but a true test of time would be to see which of the two will add more value.

As cryptocurrency activity is expected to recover in the medium-term, given global inflation cooling down, an incoming trend can be that more investments into stablecoins will occur.

Stablecoins like USDC and USDT represent an integral part in every crypto trader’s wallet, as they’re essential for the conversion of crypto assets into fiat-denominated digital assets which can be then transformed into local currencies.

Without stablecoins, it will be increasingly difficult for investors to realize their gains, and the importance of major stablecoins is expected to grow in the new chapter in which crypto is going into. However, not all digital assets may see the brighter side of day, which brings us to the everlasting conundrum of nonfungible tokens, or NFTs in short.

NFT were the hottest topic at some point. From the first quarter of 2020 to the first quarter of 2021, sales of NFTs from images & videos to in-game items skyrocketed 131 times, which recognized $2 billion in sales. It wasn’t all sunshine and rainbows however for the digital assets of crypto fanatics and collectors.

The NFT market sustained a heavy blow in 2022. NFT volume traded per week was hammered by over 80% from its year highs recorded in mid-May of 2022, but activity remained impressively steady in the first half of 2022, before dauntingly dwindling throughout the year’s remaining months.

A twist to the tale, NFTs devolved from an attractive asset to one that's arguably seen as a nuisance amid harsh market conditions which grew pessimism and skepticism towards NFTs. The conundrum of NFTs remains prevalent, as 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 transfers activity spiked in 2023 to levels unseen since mid-2022, showing great signs of growth since the end of last year. There has also been more focus from behemoth companies like Amazon and eBay towards NFTs, which may indicate that NFTs are here to stay.

Crypto could rocket in 2023, but before investing into cryptocurrencies, it is always advised to monitor prevailing market conditions on a micro and macro perspective, understand the risks of crypto trading and stay informed about the latest revelations.

— — — — — — — — — — — — — —

Ali Daylami

Head of Data Analytics at BITmarkets