2022 has become a difficult year for the cryptocurrency market and will be remembered by a number of negative events and trends: the onset of the “crypto winter”, the collapse of one of the world’s largest crypto exchanges FTX and the “suffocating hug” of regulators. Finam.ru collected the opinion of experts on how to evaluate the results of the year and the prospects for the next one – should we expect a market collapse or, on the contrary, will the “crypto winter” recede?
Let’s take a look at how the crypto market can perform in 2023.
The first half of 2022 has already been unsuccessful for the cryptocurrency market, recalls Aaron Chomsky, head of the investment department at ICB Fund. Bitcoin and Ethereum are down over 50% from their all-time highs at the end of 2021.
“As central banks reversed course, began to drain market liquidity and raise interest rates, speculative asset classes began to slow down. With higher interest rates, investors saw opportunities to invest with less risk and generate attractive returns. And when the prices of risky assets fell, the crypto market began to sell off. By the end of the second quarter of 2022, the cryptocurrency market capitalization had fallen by more than $1 trillion. This sell-off accelerated as leveraged positions began to close,” Chomsky explained the logic of events in a comment to Finam.ru.
New and interesting projects like Terra crashed as traders left the crypto markets. The stablecoin UST depegged to the US dollar, and investors lost billions of dollars due to the collapse of the UST, and the overall market came under even more pressure.
“Nevertheless, confidence in the cryptocurrency markets remained until the end of autumn 2022, when shocking revelations appeared around the FTX crypto exchange and its subsidiary Alameda Research. Binance CEO Changpeng Zhao has publicly raised concerns about FTX’s solvency, as well as its ability to support the exchange’s own FTT token. Traders began withdrawing funds from FTX, the price of the FTT token fell from about $26 to $1 in just a few days, and the crypto exchange suspended customer withdrawals,” Chomsky said.
In 2022, the correction was in full swing after updating the historical maximum at the end of 2021. Therefore, transformation and adaptation can be called the trend of the outgoing year, Nikita Zuborev, senior analyst at BestChange.ru, emphasized in turn. “Conceptually new products did not appear this year, but all existing ones began to receive practical application and take shape. For example, one of the interesting trends was the development of NFT among social media – it was in 2022 that the mass adoption of technology began to take place: Twitter, Reddit, OnlyFans, VK. Meta (recognized as an extremist and banned in the Russian Federation – approx. Finam.ru) and Youtube also announced imminent support, ”added Zuborev.
Prospects for Cryptocurrency in 2023
If we talk about what awaits us in 2023, it is worth noting that positive trends are quite likely, Chomsky believes. The setbacks and bankruptcies that occurred in 2022 prompted many to call for further regulation of cryptocurrencies. “Fraud, theft, and irresponsible lending and leveraged trading have created a difficult environment for investors that would not exist with proper government oversight and regulation,” he said.
In addition, according to the expert, it is worth noting Ethereum, which successfully upgraded in 2022, moving from a proof-of-work blockchain to a proof-of-stake blockchain. The Ethereum tokenomics has also changed significantly, which will benefit the platform ecosystem.
According to Zuborev, most likely, the “mass adoption” of cryptocurrencies in society will continue next year. In Russia, in particular, there will be an adaptation of legislation, more regulation is planned, but there are also risks of prohibitions. “And in the world as a whole, against the background of the expected thaw, the influx of investors to the market will resume. It is likely that the trend of 2023 will be the development of decentralized services, in particular DEX, as a more secure alternative to centralized exchanges,” the expert expects.
Market regulation may become one of the trends of 2023, predicts Zuborev. “We will see many more different restrictions and rules, but this will also bring advantages that are not obvious at first glance – thanks to increased control by regulators, the industry will receive more trust, which means an influx of investment, both private and institutional,” he is optimistic. .
What projects may be interesting in 2023
The projects that it makes sense to pay attention to next year were analyzed by Ivona Gutovich, COO of Green Crypto Processing.
She pointed out that each type of crypto investor has its own goals: to save funds, overtake the index, find new trends or “gems” that will show a multiple growth above the market in the next growth cycle.
“The most interesting categories to look at are layer 1 and 2 blockchains such as Avalanche, Polygon, Near, as well as their ecosystems, which have shown multiple growth in 2021-2022. This is a kind of copy of last year’s strategy, working on the hope that projects in this category (both existing and not yet on the market) will continue to set trends in 2023. The confirmation of the correctness of this scenario is now the Aptos blockchain, which shows good results and a reserve for the future,” Gutovich believes.
If we talk about current top players, then in connection with recent events in the market (including the collapse of FTX), Solana (SOL) should be treated with caution, the expert warned. “And not so much in terms of blockchain development, but with the speculative component of the token itself, since SOL has lost strong support in the person of the same SBF, the founder of FTX and Alameda, and may experience liquidity problems in the future,” she explained.
According to Gutovich, it is more correct to consider the potential of not the existing top projects themselves (no one excludes this, especially given their financial base), but the category as a whole, focusing on the search for new ones.
It is also worth paying attention to projects that earn and share profits with the community, the expert believes. “An example is the futures DEX exchange GMX. DEX exchanges are an old popular model that showed its growth back in 2020-2021. However, in this case, more attention should be paid to the fact that the project generates a profit that is shared with the community and users. Something similar was observed in 2021 in projects like Stepn (NFT sneakers), when profit generation was directly dependent on demand and users received a “reward” for participating in the project. But here it should not be “pyramidal” and obvious, but more serious. Therefore, in relation to trends, properly built tokenomics in projects will continue to be extremely important,” Gutovich believes.
No less interesting, in her opinion, are niche infrastructure solutions that develop the blockchain and make the use of cryptocurrency more convenient for the mass market. “These solutions include bridges between blockchains that allow transactions to be made seamlessly and ensure the migration of liquidity between blockchains. So far, this category looks like one of the mandatory items in the development of crypto services themselves, making them more convenient for end users and achieving cross-functionality between blockchains,” the expert believes.
Scaling and growth in transaction speed also occupy a special place – examples are the Optimism and Zk-sync projects (Layer 2 solutions for Ethereum), Gutovich added. “This category is rather obligatory for user-friendly development of blockchains, but due to technical specifics, it is unlikely to become a market growth driver and will gain popularity among users themselves, who already use end products,” the expert concluded. Previously popular trends, such as NFTs and metaverses, she still ignores, “focusing on the situation on where the market can go next.”
Will the price of bitcoin return to growth?
As Aaron Chomsky points out, no one can give accurate predictions, however, everything looks to the fact that cryptocurrency prices may fall even more before a sustainable recovery begins. “As for Bitcoin, its price can both successfully reach $28-30 thousand in case of good “bullish” movements, and fall to $10 thousand in case of sharp “bearish” sentiments,” he estimated.
According to Nikita Zuborev, if there are no global shocks that can turn the entire world economy upside down, then we can expect events to develop according to a previously defined model, according to which the direction of the crypto market trend changes approximately every 2 years. In this case, the reversal should occur as early as the second half of 2023. In the meantime, it remains only to observe and build forecasts.
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