The crypto market is off to a great start this year, hinting at redemption from the drawn-out winter. Established and promising cryptocurrencies have been reclaiming their value with gusto over the last few weeks.
Will they sustain the upward momentum?
That remains to be seen. Here are our top seven predictions for 2023.
1. The spawn-culture will decline
Native tokens offer an excellent way for projects to raise money and establish their independence. But the trend backfired last year, as we saw most projects fail to take off. They plummet within a few weeks of going live, dispiriting investors. What follows is a catastrophic descend that buries the token and the project in oblivion.
Instead, blockchain applications will turn to established cryptocurrencies like ETH, MATIC, and BTC to facilitate their payment and reward mechanisms this year. It will not only add credibility to the projects, but also reduce compliance and overhead costs.
In other words, the adoption of high-cap cryptos – crypto coins, in particular – will increase, boosting their value in the coming days.
We have been seeing signs of the shift since late 2022. It is paying off and green has embraced the crypto market again. To begin with, Bitcoin is priced at $22,615.25 at the time of writing, registering a 29.5% uptick on the two-week charts. Bitcoin halving may be a year away, but investors are upbeat about the coin. Blockchain assets like Ethereum, Cardano, Polkadot, XRP, and Avalanche have also had a good month so far.
Bitcoin 1-month price history, 25 Jan 2023, Source: CoinMarketCap
Blockchains are persistent in their efforts to strengthen their networks. Bitcoin recorded new hash rate all-time highs in 2022, ending in the 250-300 Exahashes per second range. The Shanghai upgrade of Ethereum is due for implementation in March. Once live, it will give access to funds previously devoted to Ethereum’s Beacon Chain and allow depositors to participate in validating transactions and earn rewards in newly-created Ethereum. It maintains the position as the dominant blockchain for developer activity, uncontested.
Ethereum layer-2 solution Polygon launched a zero-knowledge Ethereum Virtual Machine rollup, or zkEVM, to reduce Web3 transaction costs. And interoperability-centered Polkadot announced the release of the latest initiative that helps its ecosystem fight scams through security-minded individuals within the community. It would be realized by incentivizing members to continue to do the work with bounties paid in DOT. To give you more perspective, the total number of monthly active Web3 developers has increased by 5.4% to more than 23,300 over the last 12 months.
The Week On-Chain, the weekly newsletter of analytics firm Glassnode, opines that BTC’s recent surge in price action involved reclaiming multiple on-chain pricing models, which has historically signified a psychological shift in holder behavior patterns. The current market momentum is strong and likely sustainable.
Bitcoin: Investor & Delta Price Models, Source: Glassnode
“Analysis of cohort behavior shows that short-term holders and miners have been motivated by the opportunity to liquidate a portion of their holdings. On the contrary, the supply held by long-term holders continues to grow, which can be argued to be a signal of strength and conviction across this cohort. Given the effect of long-term holders on the macro trend, watching their spending is likely a key toolset to track over the coming weeks,” it adds in conclusion.
2. Compliance is going to get stronger
LUNA collapse and FTX bankruptcy have tarnished the crypto industry. As expected, governments are now more aggressive in their approach toward cryptocurrencies and blockchain projects. For example, the EU panel has voted on tighter crypto rules for banks, that would need them to allocate a punitive amount of capital to cover holdings of crypto assets. The EU’s executive European Commission should submit a report by June 2023 after analyzing the practicality of the amendments.
The Australian government, on the other hand, will introduce a framework for the licensing and regulation of crypto service providers in 2023, as per a recent announcement by the Treasury. It aims to revamp Australia’s financial system and develop appropriate custody and licensing settings to safeguard consumers. Authorities will assess the “digital assets that should be regulated by financial services laws” keeping in line with the “token mapping” efforts. The distinct feature of all digital assets in the country will be listed, including the type, code, and other defining technological traits.
While the crypto market has always treated regulations with apprehension, it is now more welcoming of government interference. The series of exploits and mismanagement in 2022 prove that the industry requires strong stances from the government. The persistent locking of horns between crypto companies and regulators is not a promising trend, however. That could undermine the confidence of the market. Regulations backed by poor research will discourage new projects and investors from trying their hands on crypto products.
3. Stablecoin adoption will pick up the pace
Stablecoins continue to be one of the best cryptocurrencies outside the investment spectrum. These cryptocurrencies pegged to the value of fiat currencies provide a hassle-free method for international payments. Since recorded on the blockchain, they feature better transparency as well.
In the coming months, their utility will expand outside the crypto market to traditional industries, especially with regulatory support. Many governments are likely to come forward to launch native stablecoins or central bank digital currencies to hold more control over their transactions.
For example, Pat Toomey used one of his last weeks as a Republican Senator before retiring from the U.S. Congress to introduce a new stablecoin bill. “Stablecoins are an exciting technological development that could transform money and payments. By digitizing the U.S. dollar and making it available on a global, instant, and nearly cost-free basis, stablecoins could be widely used across the physical economy in a variety of ways,” he says.
In the event the bill is passed, it would allow non-state and non-bank institutions to issue stablecoins. But they will have to get a federal license created and issued by the U.S. Office of the Comptroller of the Currency (OCC) and the stablecoins should be backed up by “high-quality liquid assets.” Moreover, issuers must keep in line with a new public disclosure standard and provide regular attestations from authorized accounting firms. The mainstream adoption of stablecoins will be one of the biggest trends in 2023.
4. Flow of funds from high-profile players
The flow of capital from venture capital firms will continue to be slow in early 2023, waiting for things to settle down. We need a few more weeks to understand if the current upturn marks the onset of a bull run, or is merely a bear market rally. The fate of crypto can’t be singled out from the macroeconomy either, which is facing risks of recession, unemployment, and hyperinflation.
By the second half of 2023, we can expect funds to pour in from investors in the crypto and non-crypto spaces, including high-profile VC enterprises, angel investors, and big brands like Meta, Google, Nike, Samsung, and Microsoft. Projects and communities will be more receptive towards investments from the traditional sectors, having realized that outside money is essential to the sustainable growth of the industry. Retail investments can’t alone shoulder the capital required to build Web3 infrastructure in the coming phases.
5. A pronounced shift from play-to-earn to play-and-earn
Although many gaming cryptos slumped last year, gaming continues to attract people, aided by the integration of metaverse, NFT, and crypto incentivization. The DappRadar x BGA Games Report notes that blockchain games and metaverse projects raised $1.3 billion during Q3 2022. To throw more light on the topic, gaming activities accounted for almost half of all blockchain activity tracked by DappRadar across 50 networks.
The recent rally of play-to-earn tokens like AXS, SAND, and MANA demonstrates the large growth potential of the sector. The comeback of AXS, which has climbed close to 32.08% in the last seven days and currently ranks #44 in the global crypto market, is a pleasant shock. If a simple, sub-par project like Axie Infinity has managed to build a large community, high-end games have a bright road ahead.
Axie Infinity 1-month price history, 25 Jan 2023, Source: CoinMarketCap
That said, the future of blockchain gaming is in jeopardy if projects continue to emphasize the earning aspect, while giving cold shoulders to the gameplay. Gamers are here for the gameplay, ultimately. Crypto incentivization is merely a means to win their trust and instill a sense of belongingness. A game can’t sustain with the support of investors alone.
The widespread reception of emerging projects like Meta Masters Guild (MMG) makes it clear that the industry is shifting from play-to-earn to play-and-earn. MMG is currently hosting the early-stage funding rounds of MEMAG tokens. It is heading for an early sell-out, fuelled by both crypto and non-crypto communities. The first three titles in the gaming ecosystem show what Web3 is capable of when it raises the bar to match traditional games.
- Meta Kart Racers – A mobile-first PVP racing game where you must compete against other players in the Meta Kart Championship to earn crypto rewards.
- Raid NFT – A turn-based fantasy fighting game where you should choose between several warrior classes and battle it out against other players.
- Meta Masters World – A cutting-edge metaverse where you can explore games and experiences, collect resources, enter competitions, and much more.
Web3 games can also take note of MMG’s guild system, which facilitates the free flow of assets between investors and gamers, thus building a sustainable gaming community. The reception of MMG is well-founded, judging by the whitepaper and roadmap. The $MEMAG public presale is divided into seven stages, with a gradual price hike.
In 2023, we can also expect more Web2 games to embrace Web3 and take advantage of crypto incentivization, in-game asset tokenization, and global participation.
6. The market will welcome fresh narratives
The predominant narrative around crypto revolves around cash-grab tokens and absurd NFT art collectibles now. New crypto sectors should emerge with fresh frameworks that explore real consumer use cases, bringing in millions of new users and value to the market. We’re seeing early signs of the shift already, triggered by the hard lessons learned last year.
The new wave of applications will carve out a new niche, drawing inspiration from its traditional alternatives and building upon them using blockchain principles. A good example of this is the move-to-earn sector, which put forward a compelling alternative to traditional gyms and fitness applications. STEPN was one of the earliest projects to introduce the concept. The novel narrative was received well, taking the token on a bull run on exchange listing. It currently ranks #107 on CoinMarketCap. Relatively new projects like Sweat Economy have also built big communities, with the support of traditional users.
The latest move-to-earn project that has won a large audience is Fight Out, which is building a blockchain fitness app and a high-end gym chain anchored by advanced move-to-earn mechanisms.
The Fight Out Mobile Companion App
The Fight Out Companion App is like a virtual trainer that gives you workouts customized to your goals and ability. The metaverse integration of the project will manifest the age-old dream of working out in the virtual world.
What gives Fight Out an edge against previous move-to-earn platforms? It has lower entry barriers and a diverse range of gamification tools. Its metaverse-powered user acquisition strategy tackles the problem of user retention that most move-to-earn platforms have been struggling with. If the Fight Out ecosystem unfolds as laid out in the whitepaper, $FGHT could become one of the first cryptocurrencies to enter the $1B club in 2023. The ongoing $FGHT public presale is one of the biggest this year.
7. The term ‘community’ will be redefined
Crypto communities evoke the image of a group of deranged speculators who hoard hollow tokens, balloon them up by scamming Twitter and Telegram, and then run for their lives at the first sight of a deflection. As stereotypical as it is, crypto communities have been mostly unreliable in the past. They spend their attention and money on flimsy projects that don’t have any robust technology or business model supporting their value, apart from hype.
The harsh winter of 2022 has purged malicious and sub-par projects from the market, urging crypto communities to focus on nurturing sustainable value and driving innovation, rather than making quick money. Stepping into 2023, we will see a positive shift in decentralized communities. They will join forces through DAOs to support disruptive ideas and talents.
Conclusion
The ups and downs in the crypto market tell little about the scope of blockchain. The technology is awaiting mainstream adoption across industries in the coming years. It can transform health to education and agriculture to banking through better transparency and decentralization. What we witnessed last year can be interpreted as a much-needed price correction that weeded out the soil for 2023.
As governments take more effort to understand the technology that lies beneath the assets and hardware technologies keep pace, Web3 adoption will pick up this year. The rapid penetration in the play-and-earn and move-to-earn spaces will accelerate the trend.