Top 5 Crypto Stories to Watch for in 2023

The year 2022 will certainly go down in history as one of the toughest years for the digital asset industry, from a hawkish Fed to idiosyncratic risks that have left crypto giants like Three Arrows Capital and FTX biting the dust. But for those who have been around for some time, you probably understand that it’s times like these that as an investor you need to regroup, digest and position yourself for an eventual turnaround.

Now, more than one month into the new year, the question on investors’ minds is what trends will pick up in 2023. So far, the market has bounced back, up more than 40% since the year opened, while some other assets have posted even more impressive gains. Most importantly, derivative tokens like and have more than doubled in price.

1. Builders are back at work

It’s hard to get swallowed up by the depths of the crypto bear markets, but worth noting is how builders are weathering the ‘cold winter’ as they develop the next game-changing innovations in the crypto ecosystem. But as always, it’s hard to find the trends worth noticing in the noise and figuring out which themes have a tangible value proposition from those that are more speculatively based is a difficult task.

For this reason, I have decided to outline some sub-niches that I think will thrive in 2023 and potentially win sectors of an emerging bull market. Let’s dive right in:

2. DeFi: Still knocking it out of the park

As much as 2022 was a rollercoaster for the entire crypto market, it is hard to ignore the fundamental developments that took place in the DeFi market. For starters, the number of daily active users (DAUs) increased by 2% to 641,510, according to DappRadar. Although this growth is a drop in the ocean compared to 2020 and 2021, the growth we saw last year should be an indication of how well the sector can thrive in improved market conditions.

So what exactly is the play here? At the very least, more crypto-natives will gravitate to decentralized platforms given the events that unfolded last year; some of the most trusted custody platforms have gone under, with billions of dollars of clients’ funds. The shift is already happening, with decentralized exchanges recording a 93% month-on-month increase in November 2022 following the collapse of FTX exchange.

In addition to the growth in adoption, 2023 is likely to be the year we see the integration of DeFi protocols with traditional financial instruments. MakerDAO, one of the major players in the DeFi lending space, recently approved a proposal to invest in US Treasuries and corporate bonds, as well as form partnerships with traditional banks to provide loans backed by liquidity from real assets (RWAs ) is backed up.

Finally, several traditional financial institutions are set to debut in the DeFi space; JPMorgan has already set the pace with its first DeFi transaction in 2022. This introduces a likelihood that permissioned DeFi protocols will emerge to serve the growing demand from TradFi companies looking to tap into decentralized markets while on the regulators’ book play.

3. NFTs and the Metaverse: GameFi on the Rise

A cross between finance and gaming environments, GameFi is another niche that crypto stakeholders should be on the lookout for. Last year, blockchain-oriented games accounted for 49% of active DApp usage. There has also been a growing interest from VCs, with notable players such as Andreessen Horowitz (a16z) and Sequoia Capital expanding their footprint in the NFT and Metaverse ecosystems.

As 2023 unfolds, signs on the wall show that GameFi is poised for more growth, both in terms of adoption and infrastructure advancement. Innovators in this space are already taking on the challenge of developing more engaging games instead of just focusing on ecosystem rewards. But more importantly, traditional game publishers are integrating their established infrastructure with the metaverse; Atari recently introduced a series of experiences in The Sandbox.

Well, that’s just the tip of the iceberg. Gamification trends through NFT technology are also being adopted by other industries. For example, we have emerging DApps like Fashion League, which uses NFTs to allow players to design personalized 3D fashion NFTs and compete with other participants in the ecosystem. Although still a nascent space of innovation, the gamification of traditional industries is definitely one of the trends to watch this year.

What’s even more fascinating is that international companies such as Gucci, Nike (NYSE: ), McDonald’s (NYSE: ), and Campbell (NYSE: ) have already pioneered digital collectibles as a promotional strategy to increase interest in their offerings. It is clear that NFTs are changing the landscape of how businesses interact with consumers in the digital age and will continue to do so for the foreseeable future.

4. Ethereum’s Shanghai Upgrade

For Ethereum diehard fans, the long-awaited Shanghai Upgrade (EIP-4895) is the talk of the town. This enhancement proposal will introduce a withdrawal feature, allowing ETH validators to remove their funds locked in the beacon chain. The event will especially affect the supply and demand of ETH, as stakeholders will be able to liquidate their locked ETH, while at the same time it will be much easier for more crypto users to opt in and out of ETH staking.

According to the latest update from Ethereum’s developers, the Shanghai upgrade is scheduled for March 2023, and the story already seems to be fueling the price action of liquid derivative tokens like $LDO and $RPL. But more significantly, both of these ETH staking platforms have gained massive traction, with LIDO leading the pack with a total value locked (TVL) of $8.9 billion, while RPL enjoys slightly less than $1 billion according to DeFiLlama statistics.

If this upgrade is successful, it is likely that the associated signs will experience drastic fluctuations, either up or down. All in all, it is remarkable to see Ethereum’s gradual transition from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus. Whether ETH’s market cap will challenge BTC’s dominance this year remains to be seen; it may be too ambitious for now.

Asset Tokenization: A New Era of Financial Possibilities

The tokenization of real assets is another important theme that is likely to shape the outlook for the digital asset industry in 2023. BCG estimates that the tokenization market will deploy a $16 trillion ecosystem by 2030. Although this figure may seem excessive, other leading investment companies are also of the opinion that asset tokenization will be a focus area for financial institutions this year. VanEck predicts that nearly $25 billion in off-chain assets will be signed this year.

So far, Singapore’s central bank has already partnered with JPMorgan to launch a blockchain pilot called ‘Project Guardian’, an initiative that seeks to underwrite bonds and deposits, using smart contracts to to facilitate trade executions. While we are still early in the year, asset tokenization is clearly an important theme for institutions looking to improve the efficiency and accessibility of their market instruments.

Larry Fink, CEO of BlackRock – the world’s largest asset manager, said:

“The next generation for markets and next generation for securities will be tokenization of securities.”

5. Central Bank Digital Currencies (CBDCs)

More than 100 central banks around the world are currently investigating the feasibility of CBDCs, some are in the research phase while others have already been launched. However, the big question is whether CBDCs will take off, co-exist with crypto or replace the entire ecosystem.

According to a recent report by the People’s Bank of China (PBoC), the digital yuan accounted for 0.13% of the total circulation of the Chinese renminbi in 2022. Meanwhile, Nigeria’s eNaira usage is only 0.5% of the country’s population. Still, a drop in the ocean compared to the circulation of fiat currencies in both jurisdictions.

That said, the bottom line remains that we will likely see more CBDC initiatives in 2023. The European Central Bank (ECB) is in the exploratory phase of the digital euro, with an implementation bill proposed this year. Meanwhile, India recently launched two digital rupee pilots, one for the wholesale market and another for the retail market.

Based on these trends, the CBDC theme will continue to be an important topic of discussion in 2023. It comes as no surprise that CBDCs were identified as the key technology innovation challenge in last year’s G20 TechSprint.

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