What a year! As we move further into the digital age, the world of cryptocurrency continues to expand and evolve. After an unpredictable 2022, you might be hoping for a hint of stability this year. While it’s impossible to tell the future of the market with complete accuracy, experts have been making predictions about the trends we can expect to see in the coming year.
What’s in This Guide?
What Experts are Predicting About Trends in Crypto in 2023
With advancements in blockchain technology, regulatory developments, signs of recovery, and growing interest from institutional investors, the crypto market in 2023 is shaping up to be one of the most dynamic and exciting yet. In this article, we’ll take a closer look at some of the predicted trends in crypto for 2023 and what they could mean for investors and the industry as a whole.
1. Slow Recovery
2022 was a tough crypto winter, with over $2 trillion leaving the crypto market. Unfortunately for those hoping to see the signs of thawing, the recovery of the market will be slow and hampered by the fallout from FTX and Genesis going bankrupt, rumors about Binance and Tether, the collapse of several stablecoins, and any other bad news waiting in the shadow.
However, if the NASDAQ moves higher in Q1, we might see a bullish run for a few weeks in Q2. But unless the stream of bad news stops flowing, this won’t maintain itself. If it does, this might give the top coins a chance to start growing again.
Regardless, blue-chip coins such as Ethereum and Bitcoin should weather the storm and maintain prices. Other smaller coins may drop further in throughout 2023.
This has been looming over the space for quite some time, and we should see legislation such as the EU’s MiCA act and the US’s STABLE Act fully coming into place. This will impact how most companies can and will operate in the crypto space. Combined with the outcome of several major cases, there will be a real tightening up across the board. This will hopefully result in less damage being done to retail investors by fraudulent or mismanaged projects.
3. Legal Battles and Bankruptcies: The Fallout
Market confidence may be lower this year with headlines about legal trouble and bankruptcies dominating the news. The shockwaves of Genesis and FTX’s collapse will be felt well into the start of the year.
Both Ripple and the SEC have entered their final submissions, and the ruling, expected to come by the end of March, will help determine how the SEC deals with cryptocurrencies moving forward.
The outcome of cases like FTX, Genesis, and Ripple vs. SEC will shape how crypto companies, legislators, and VCs operate within the crypto industry in the future.
High energy costs and low Bitcoin prices mean we will see more miner bankruptcies in early 2023. We’ve already seen the bankruptcies of two major mining companies, Core Scientific in December and Compute North in September. With Argo Blockchain, Iris Energy, and Greenidge Generation all in trouble, this will have a knock-on effect on overall market confidence.
4. Embedded crypto finance
The budding embedded finance market is set to explode in the coming months. In 2021 it was valued at $43 billion, and its set to exceed $138 billion by 2026. This boom will spell good news for fintechs and projects involved in providing embedded crypto services like crypto investments for wealth management services and Buy Now, Pay Later options.
5. Growth in CBDCs
There will be significant growth in CBDCs, with central banks representing 20% of the world’s population likely to issue a general-purpose CBDC in the next three years. The European Commission plans to propose a bill for a digital euro in early 2023. This will all have a knock-on effect on the crypto market, primarily stablecoins.
Sourced from PwC
Centralized stablecoins will have to most to compete with when CBDCs become more popular. Institutional players may choose more “reliable” CBDCs in favor of mainstream stablecoins.
However, with many crypto users who prioritize privacy and decentralization, this will create a demand for decentralized stablecoins, with over-collateralized tokens representing a safer choice. This might provide the opportunity for a new stablecoin to succeed.
6. Blockchain in Government
While regulating crypto and DeFi will be a priority for governmental agencies in 2023, we’ll also see more adoption of blockchain technology, especially for CBDCs (Central Bank Digital Currencies).
In the upcoming year, the implementation of legislative acts such as the EU’s MiCA and the US’s STABLE Act is expected to impact many crypto companies significantly. This, coupled with several high-profile legal cases such as Ripple vs. the SEC, will likely result in a crackdown across the industry. It is hoped that such measures will reduce the harm caused to retail investors by unscrupulous or poorly managed projects.
Over 114 countries are exploring CBDCs, with China rolling out its pilot (involving over 260 million people) to most of the country. The Federal Reserve of New York is launching Project Cedar, a wholesale CBDCs project for cross-border payments. In the wake of international sanctions, Russia is also trialing a CBDC in April, which could help reduce its reliance on SWIFT.
However, the growth in CBDCs has been cause for concern, with the eNaira experiment in Nigeria being called a “very dark experiment” as the government restricted citizens’ access to cash. We’ll see the results of this and many other pilots in the next few months.
7. Enterprise Blockchain
With data breaches becoming a serious (and costly!) issue worldwide, many enterprises are turning to blockchain technology for solutions. The average cost of a data breach in 2022 was $4.35 million, which is set to grow in 2023. There will be a huge growth in private enterprise blockchains as a way to keep sensitive data secure.
According to CasperLabs, almost 90% of companies in the US, UK, and China are starting to use blockchain in some capacity. Of those companies, 42% use blockchain technology to manage data, and more are considering it.
8. AI in Blockchain
AI is already becoming an integral part of our digital lives, and 2023 will be no different. Web3 has embraced the possibilities it offers with AI-powered NFTs and games. We’re also going to see AI forming a major part of crypto’s defense against fraudulent behavior and illegal activity.
Major crypto security companies like Chainalysis are already using AI to monitor on-chain activity. It’ll also play a significant role in the SEC’s clampdown on DeFi and crypto. They’ve announced a partnership with AnChain.ai to try regulating the DeFi industry.
9. Web3 in Fashion
High fashion brands have seized on the possibilities of the metaverse and NFTs. Morgan Stanley predicts revenue from the digital luxury market to grow to $50 billion by 2030. 2023 sees many major ventures in the pipeline, such as:
- Prada will be dropping monthly phygital NFT collections consisting of a limited-edition shirt and an NFT.
- Emperia, a metaverse-as-a-service digital store creator, has raised $10 million in their series A funding. Previously they’ve partnered with Dior, Burberry, and Lacoste, among others.
Following the success of the first with 108,000 visitors, Metaverse Fashion Week is returning to Decentraland in 2023.
10. Blockchain Development
Blockchain technology has spurred a new era of development in recent years. While cryptocurrencies have been the most well-known application, we’re seeing the technology being adopted by a variety of industries, including healthcare and supply chain management.
There has been a surge of investments in Web3, AI, and the Internet of Things aimed at creating a powerful and interconnected network of smart devices and tools. Crypto projects that are innovating in this space have huge potential in the coming months.
Finally, we should see a focus on the development of sustainable blockchain solutions. As awareness grows of the environmental impact of cryptocurrency mining, we should see carbon-neutral cryptocurrencies like Algorand increasing in popularity. Regenerative Finance (ReFi) is poised to become a prominent topic as it aims to fix many of the environmental and social problems caused by market forces.
11. Interoperability Blockchains
Interoperability is the ability of different blockchains to interact and share data. Originally most blockchain networks were independent silos, but over time many interoperable blockchains were developed. As the private sector embraces blockchain technology for data sharing and protection, this will, in turn, result in a demand for more interoperable blockchains like Algorand, Polygon, and Cosmos.
Decentralized Autonomous Organizations (DAOs) are growing in popularity as a form of empowered social communities that can choose their own path. So much so that 2023 has been called “The Year of the DAO.” We should see DAOs proliferating in real estate, the art world, investment management, and various other industries.
However, they will face increased scrutiny as pressure grows to regulate Decentralized Finance (DeFi). 2022 saw the sanction of Ooki DAO by the Commodity Futures Trading Commission due to illegal activity.
The uptick in illegal activity through DAOs has brought about new calls for regulation of this relatively unregulated space, especially as there is over $13.5 billion currently held by DAOs worldwide. Although some states have a framework in place for DAOs, many people are unaware or do not engage with the law. This could all change in the coming months as the regulatory crackdown intensifies.
13. Blockchain Investments
2022 has been a tough year for blockchain investments, with a 95% drop in money coming into the space. The inflow totaled only $433 million, the lowest since 2018. This isn’t going to magically change overnight, so we expect to see only a small increase as the market recovers slowly.
Memecoins and other non-utility-focused cryptocurrencies have fallen out of favor as investors choose more reliable tokens. Projects and assets that can provide real utility may benefit from this more cautious market. Investors with a good intuition for potential and a knack for research can capitalize on this wave.
14. Security Tokens
The tokenization of investments, real estate, art, and other assets has grown hugely over the past few years. In fact, the blockchain securitization and payments sector is set to grow to $433 billion by 2023.
The financial industry has embraced security tokens, and we should see new offerings within the sector. The private securities industry has already started making headway, with private wealth giant KKR & Co. announcing a partnership with Avalanche (AVAX) to tokenize one of their equity funds. This sector is going to expand massively, with 77% of capital market participants expecting traditional securities to be digitized in the next 5-10 years.
There is still a lot of confusion in the digital securities industry. We’ll see the outcome of the drawn-out battle between the SEC and the crypto industry over what actually constitutes a security. With looming cases like Ripple vs. the SEC set to reach their conclusion, the industry will have to adapt fast to changes in what exchanges and other platforms can do. Although some are resistant to the idea of any regulation, this should pave a clearer path forward for those offering digital securities.
15. Crypto against Inflation
In the past, we’ve seen people turn to gold as a hedge against inflation. Some Bitcoin proponents have touted the token as a new way to store value and protect their assets against inflation. However, over the last year, we’ve seen the price of crypto fall as inflation rises.
The general public doesn’t seem to hold as much stock in the ideas of Bitcoin maximalists. Even in recent weeks, as inflation rose sharper than expected, Bitcoin’s price experienced a slight drop. While there will always be investors seeking a hedge against inflation (gold, crypto, or anything else), this will often be a vocal majority rather than the larger market.
16. Blockchain Consortium
Blockchain consortiums are becoming a popular way to share information and assets between organizations. A blockchain consortium is a group of organizations that run a blockchain network together. They’re often more centralized and structured than standard blockchains. They allow organizations to share permissioned data at a lower cost and higher scalability than using individual blockchains or platforms.
They’ve become popular in areas such as:
- Supply chain management between different organizations, e.g., Aura is a consortium with members such as Louis Vuitton, Christian Dior, and Tiffany & Co.
- Financial transactions and cross-border payments between financial institutions, e.g., R3 with over 400 institutions.
- Open source tools and software development, e.g., Hyperledger led by Linux.
With this form of inter-organizational collaboration gaining popularity, we should see more investment in this sector across the board.
17. Alternative Asset Class
With traditional markets struggling, some predict a move into alternative asset classes. As discussed, we’ll see a move towards the tokenization of alternative assets like hedge funds and real estate. In 2022, for the first time, alternative assets consisted of almost a fifth of the total asset market. As this trend continues, expect growth in the security tokens sector.
18. DeFi Platforms
Decentralized Finance (DeFi) platforms may have a tough legal year as the SEC aims to shutdown staking services in many US-based exchanges. However, broader market outlook is positive, with Nasdaq releasing an article in just November entitled “Decentralized Finance is the Future.” In the article, it dicusses the power of distributed ledger technology to reshape the financial industry as we know it.
We will see many organizations combining TradFi and DeFi, Web2 and Web3, mixing and matching to find the right combination for their market niche. Rather than one winner, both may succeed in 2023.
19. Internet of Things
A big trend of 2023 will be the combination of the Internet of Things (IoT) and blockchain technology. The network of interconnected devices is set to reach over 15 billion devices in 2023, and there are growing concerns over security and the potential for hackers to gain access to these devices.
Distributed ledger technology (DLT) can offer a viable solution. Platforms like VeChain are already using DLT to manage RFID sensors and supply chains. According to PwC, blockchain tracking and tracing has the potential to add $961 billion to the global economy by 2030.
20. NFT Trends 2023
NFTs are set to have a big year in the world of gaming and AI. There’s a shift toward AI-powered NFTs as part of the current AI craze. Projects such as Alathea.ai allow you to buy an NFT with a personal AI that you can customize and personalize. Many of these AI-powered NFTs will be used in games and across dApps. As you’ll see below, the year looks promising for Web3 gaming projects. So expect a growth in gaming NFTs in both Web3 and traditional gaming.
NFT ticketing is also a growing sector and may prove a promising use case for soulbound tokens. Although soulbound tokens have been slow to take off, 2023 will see a move toward utility-focused NFTs, and soulbound tokens are a prime example.
Brands are hopping on the NFT wagon with ventures in the metaverse and as part of customer loyalty programs. Starbucks is making a major play with its new NFT loyalty community, Odyssey. The program is an extension of their current reward system, and customers can unlock real-world gifts and experiences by earning NFTs.
Phygital NFTs are also growing in popularity, often in the form of wearable items or art with an NFT as proof of ownership. Many fashion brands have embraced the “phygital” concept with open arms. Overall, one of the main driving forces of NFTs in 2023 will be brands seeking a new way to connect with their customers.
21. Crypto in Gaming
2023 will be a big year for Web3 gaming, with many exciting projects set to launch, including:
- Metacade: This Web3 take on the traditional arcade has raised over $1.12 million in their beta presale phase, selling out its MCADE tokens. Many are excited about its focus on building a community that rewards participation through creator funds and competitions.
- Meta Masters Guild: A mobile-native game, Meta Masters Guild is targeted at the 3 billion mobile gamers worldwide. They’ve already raised more than $4 million in funding and generated significant interest from mainstream publications.
- Delysium: This new game combines AI and Web3 to create NPCs with individual AIs that can participate in the game and have non-scripted conversations with players.
There will also be continued growth in huge metaverse games like Roblox and Fortnite. Following the announcement of a successful Q4, Roblox’s stock jumped 25%, which is great news for the metaverse, which has struggled to get off the ground at times. They now boast an average of 52 million daily active users.
The nascent Blockchain-as-a-Service (BaaS) industry includes third-party provision and creation of cloud-based blockchain services. It has been a major force in driving mainstream adoption of blockchains by enterprises. Major players include Amazon, Microsoft, and IBM. As the Internet of Things industry grows, we’ll see more companies relying on BaaS providers to provide solutions for supply chains and data protection.
23. Tough Year for Altcoins?
The past year has knocked the wind out of hundreds of altcoins, and we expect the trend to continue as investors look for safety in more reputable coins like Bitcoin, Solana, and Ethereum. Meme coins and other altcoins will have a challenging year as people look for more serious investments. Projects with genuine functions and uses will be the only ones to get off the ground and succeed. The market looks primed to move away from its speculative nature to a more utility-based approach.
As the market becomes less saturated and weak projects are weeded out, retail traders with a keen eye for promising projects have an opportunity to find promising projects and capitalize upon them.
Look to the Future
Overall, the crypto landscape is undergoing a transformation, as there is a renewed focus on utility and enterprise solutions. For those interested in projects with real potential, there’s an opportunity to be seized. Crypto is here to stay, and more people are going to be buying, investing, and spending it than ever before.
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