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2022 is a historical year for all of us. We witnessed the collapse of several mega institutions and projects, experiencing great adverse impacts in the crypto industry. Moreover, we have not yet fully welcomed 2023 and analysts are already predicting a year still marked by challenges and junctures for the global economy that may impact the digital currencies.
Therefore, identifying the trends that will be a priority throughout the year will allow us to structure a clearer picture of the path that the crypto ecosystem will take, as well as to recognize investment opportunities in this context of winter and volatility.
1. Regulations
The recent collapse of two important companies has once again demonstrated that the regulation and transparency of centralized cryptocurrency exchanges is a fundamental step towards the construction of a secure and sustainable market. Therefore, one of the narratives of the year will be focused on promoting legislation around the ecosystem.
In this regard, the FATF, the EU, and other regulatory institutions have demonstrated their willingness to strengthen controls over the work of CEXs. These controls are around regulatory acts, financial licensing and investor protection, etc. Such a decision is fully justifiable because these frameworks make us more accountable, instill trust with our customers, and will ultimately accelerate mainstream crypto adoption.
2. Recover of BTC and ETH
Although it is very risky to talk about an accelerated recovery, the performance of the main cryptocurrencies in our opinion could be as follow for the coming months:
Bitcoin: In the next 1-3 months, after BTC completes its pullback from $21,000, it still has the potential to continue to rise. On the weekly chart, important resistance levels are around $25,000, $31,000, and $35,000. If these resistance levels can be effectively broken, the short-term wealth effect and upward space for various sectors will be opened, and the overall environment will be very favorable for users and project parties. In the long-term, for 10 months or more, affected by the BTC halving and the Federal Reserve's interest rate cut expectations, the buying pressure of BTC will gradually increase, BTC's market capitalization share (BTC.D) will continue to rise. If the halving continues to take effect, the market is expected to see a stronger rise in 2024, with the target being above $48,000.
Ethereum: The impact of external risk events is gradually decreasing. In the short term, ETH will have a relatively good rebound. In the medium and long terms, it will depend on the changes in OTC liquidity and overall market recovery to a greater extent. In the short-term, the Shanghai upgrade scheduled for March of 2023 can push the price of ETH to grow in the next 1-3 months. It is expected that there will be a certain short-term price fluctuation and most users will deposit ETH at a price of over $2,000 after the upgrade is completed in March. But it will probably break through the key psychological barrier of $2,000 after the fluctuations subside. In the long-term, for 10 months or more, on the other hand, we expect that investors on and off the market will gradually have optimistic future liquidity expectations. At the same time, cryptocurrency market capital inflows will begin to increase with the impact of superimposed Bitcoin halving expectations. On a weekly chart, ETH is expected to reach a strong resistance range of $2,400 to $3,500.
3. Winning sectors
In contrast to previous periods of economic volatility in which digital currencies had demonstrated their strength as investment tools by maintaining stability or even improving value versus their traditional counterparts, they are today facing a period of low attractiveness among investors.
But we still have good news. A lot, I would say. Some sectors are showing themselves solid in this bear market and got massive adoption in the past year. For example:
• Blue-chip NFT —— Celebrities love blue-chip NFT. Since Stephen Curry bought and changed his Twitter avatar to a crypto money, the NFT starts to go to the moon. People formed the community based on which NFT they have. NFT makes people closer. In 2022, several major film studios and music labels had already released their own NFTs, and this trend will continue in 2023.
• On-chain games / GameFi —— StepN is a move-to-earn Dapp that went viral earlier this year. By onboarding millions of users and encouraging them to run to earn money to live a healthier life, StepN definitely created social values in a distinct way that differentiated them from Web2. Currently, the number of on-chain games / GameFi users is still small, and the number of independent addresses is only hundreds of thousands, which is about 400,000. It is too early to predict the truly popular games in the future market, and they may not appear yet.
• DAO(Decentralized autonomous organization) —— People love to work, play, and talk with people who have the same interests and beliefs. Based on this, the total number of DAOs and their participation rates have grown significantly. In the form of DAO, the community shares knowledge/works on the same project/does research, etc. They are the very unity of crypto builders who make the ecosystem better.
The foundation laid in 2022 will be the starting point for many important projects and innovations to use. Given this, 2022 can be considered an extremely useful (though hard) year for the blockchain industry, which allowed the market to learn important lessons to enter a new phase.
4. Currencies and categories to pay attention
The crypto market will continue to be quite volatile, but I believe there is a bright future for all those investors willing to bet on a resilient and continuously developing industry. Among all cryptocurrencies I believe GMX and ATOM are some of them that investors should pay special attention to for 2023. :
GMX:
• The horizontal expansion capability in key ecosystems of Arbitrum and Polygon is strong, which gives continuous growth momentum to its future transaction volume.
• GMX's single-day revenue exceeded Uniswap on November 28 in 2022, and as the transaction volume increases, there is great potential for the future value of the agreement.
• There are more and more projects based on GLP and GMX, which may become the infrastructure of DeFi in the future.
ATOM:
• The future value of the ATOM token will be gradually improved according to the proposal, which will give the token the momentum to continuously capture the value of the entire ecosystem.
• The Cosmos-related combination suite is the first solution for the future application chain, which is conducive to the development of more projects and empowers its own token system to improve the ecological closed loop.
• With the popularization and application of Cosmos native stablecoins, the diversity of assets in the future ecosystem, the convenience of inter-chain operations, and the unique staking system will further strengthen the cohesion of the ecology, which will give more imagination and possibility for the Cosmos.
Additionally, we expect that 3 categories would attract more attention in the first half of 2023:
(1) Liquid Staking Derivatives (LSD) would be much more prosperous because of Ethereum's upcoming ‘Shanghai upgrade’ in 2023 Q1. LDO, SSV, SD, FXS and ANKR are some of the projects in this category that are worth paying more attention.
Actually, Lido (LDO) has already obviously led to the significant price increases of LSD category tokens in recent times. Compared with the token staking rate of other relatively famous public chains (mostly distributed around 60%-80%), the staking rate of ETH is relatively low. There is still a big potential to improve the staking rate of ETH. After ‘The Merger’, ETH has essentially entered a deflationary stage. With the continued prosperity and development of the Ethereum ecology, the economic incentives of ETH staking are highly sustainable and attractive, and they continue to attract more and more institutions to participate in.
(2) Structured Products: Financial products may become increasingly sophisticated, with complex instruments emerging on a regular basis. Numerous structured products have sprung up that abstract away the complexity to maximize risk-adjusted returns. Yield optimizers are the most popular type of structured products in DeFi. They are sought to maximize yield with minimal loss of principal and usually come with an auto-compounding feature. SharkFin, a principal protected CeFi structured product usually sold by CEX, would be a great investment target assuming the bear market may last in 2023.
(3) Artificial Intelligence (AI) in web3 space: The prosperity of ChatGPT contributed to the increase of AI category token prices, such as FET, NMR, and others. AI technology will play a non-negligible role in promoting blockchain infrastructure construction and more imaginative innovation and development in terms of computing power, data, graphics and many other fields. What is more, Immutable CTO thought that OpenAI will lead to better art and narration in Web3 games. It is worth looking forward to how AI technology will affect the development of blockchain applications in the long-term future.
5. Spring ahead
While the markets expect a challenging 2023 for the global economy, I truly believe that the crypto ecosystem will show its strength and resilience, facing winter with continuous signs of development and innovation that could lead to a new spring. The points above are a clear indication of that.
Other than that, the FED's monetary policy is likely to move away from tighter controls, so, combined with the momentum of a regulatory agenda, we will see cryptocurrencies recover, making this winter an unbeatable opportunity for qualified players to stand out for their good practices.
About the author:
Gracy Chen is the managing director of Bitget, overseeing the growth and expansion of the company, leading its strategy, execution, and business development. Gracy was named a Global Shaper at the 2015 World Economic Forum. We invite you to follow her on Twitter.