While 2022 was a turbulent year for the entire global market, crypto was one of the hardest-hit sectors.
The market leaders Bitcoin and Ethereum triggered a massive downturn, wiping off billions from the market. This also led to a significant decline in the price of other major cryptocurrencies. It’s been a year of dead bounces, liquidations, and meltdowns that have kept investors on the sidelines.
Despite negative sentiments in the market, crypto continues to be a hot topic in terms of development and innovation. The popularity is mainly driven by institutions that have woken up to the potential of this emerging technology. However, it’s still early days for the industry, and no one can predict the extent of this evolution.
With 2023 knocking at the door, experts believe there may be further sell-off before any sustainable growth. It’s tricky to forecast how long the crypto winter will last, but we can gauge market depth based on the events that unfolded this year. Let’s dig a little deeper to understand better!
The need for regulations!
Regulations in the crypto space sound like an oxymoron, but they may be the need of the hour. The shocking collapse of the Terra ecosystem earlier this year shook the crypto world when the stablecoin was crushed to death after losing its dollar peg. This event triggered a market freefall, as many investors lost significant money in a few days.
In recent months, we came across some reputed crypto companies filing for bankruptcy. Big names like Celsius, Three Arrows Capital, FTX, and BlockFi have gone down like ninepins. These events have exposed the dark side of DeFi lending, and one can expect stringent regulations in 2023.
It will be good for the industry if it operates under sensible regulations. This will not only protect investors from volatility but also prevent fraudulent activities. Crypto prices may go for swing after regulatory announcements, but people will feel safe and confident to invest.
Going into 2023, institutions will continue to play a significant role in driving mass crypto adoption. Fintech companies like Square and Paypal are betting on crypto, while many merchants have started accepting crypto as a form of payment. Experts believe the industry may propel in the coming months if big global corporations and banks get into the act. This will create a domino effect that might change the crypto landscape forever. Investing in tokens with “real-world” use cases will be the key.
Resurgence of DeFi
DeFi rose to popularity in 2020 as an alternative financial technology that eliminates the need for intermediaries like banks and financial institutions. As good as it sounds, the sector is still in its infancy, and there will be many hiccups along the way.
This year has shown us the possible loopholes in the DeFi landscape and how the absence of a regulatory framework can be dreadful for investors. All this can quickly change in 2023 with institutional adoption. While scams may continue to plague the sector, it will take a while for the DeFi ecosystem to integrate with the centralized world.
NFTs — A novel technology or just a fad?
Non-fungible tokens (NFTs) amassed massive popularity in 2021, which drew the attention of renowned companies and celebrities. However, the experts are divided into two camps regarding the future of this technology. NFT sales have declined to an all-time low in 2022, which may be the trend in the coming months.
Digital ownership of intangible items may be a thing of substance in communities, but the broader application of NFTs is yet to materialize. Savvy investors believe in staying away from NFTs in 2023 because it is even riskier than investing in crypto.
What the future holds for Bitcoin and Ethereum?
There’s no denying that crypto prices move in sync with Bitcoin and Ethereum. The two fundamental market drivers had a rough year amid fears of recession, rising interest rates, surging inflation, and unexpected events. Bitcoin has dipped below the all-time high of the last market cycle, while Ethereum failed to make an impact with the much-anticipated upgrade.
Despite a massive downfall, experts still need to be more confident about calling it a bottom. Some analysts believe Bitcoin may go down as low as $10000 in 2023 before any chance for a sustained recovery. In the grand scheme, Bitcoin will continue to be the mainstay of the industry alongside Ethereum. Those who play a steady long game will eventually be rewarded handsome returns.
The Bottom Line
The underlying blockchain technology is a groundbreaking innovation that will slowly go mainstream over the next decade. This transition will inject immense value into the crypto industry. Big players’ involvement will determine how good a speculative investment is.
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