Now that 2022 is out of the way, we’re taking a dive into what will be the big cryptocurrency talking points around the virtual water cooler in 2023, and which projects may be worth keeping an eye on as the year progresses.
Far from a complete list, but the following were chosen as a direct response to the drama that faced us in 2022.
Self custody
Cataclysmic events of 2022 will generally drive the trends for the coming year, perhaps none more so than the concept of self custody.
To catch you up to speed, when FTX collapsed in November, it came at the expense of some US$8bn in customers’ assets being held on the exchange.
Whether by mismanagement or flat-out theft, it turned out that Sam Bankman-Fried’s crypto exchange was playing fast and loose with user funds, opening high-margin risky positions that ultimately saw the funds disappear.
Yet it didn’t need to go down that way.
As more sophisticated crypto traders understand, you do not need to entrust your digital assets to any exchange. Rather, a simple third-party wallet such as Trust Wallet lets you retain full control of your coins by not leaving them at the mercy of bad-faith actors.
You can even opt for a hardware wallet such as Ledger Nano, which is a small USB-like device that lets you store your coins offline completely.
Want to learn more about wallets? Read here: Top crypto wallets for safeguarding your digital assets
While crypto wallets do add an additional layer of complexity for people just getting into crypto trading, they are likely to become more popular as the fragility of crypto exchanges becomes more apparent.
Trust Wallet Token (TWT) was among the best-performing altcoins this year, having rallied to an all-time high following FTX’s collapse. Its success might encourage a groundswell of competitors in the new year, so watch out for early investment opportunities.
Can decentralised finance capitalise on CeFi’s darkest hour?
Centralised exchanges and lending protocols went through the wringer this year. From FTX to Celsius, by way of Voyager, BlockFi and more recently Genesis, it seemed that every month brought a new failure for centralised finance (CeFi).
As such, 2023 could be the year for decentralised finance (DeFi) to really take off. Why?
With trust in CeFi perhaps irreversibly damaged, the benefits of a trustless, peer-to-peer financial ecosystem, powered purely by smart contracts not people, will become more apparent.
But consider yourself warned: DeFi is far from risk free. Yes, no dodgy CEO is going to rob you blind, but being something of a no man’s land, scams are rife, while hacks, liquidity issues and slippage problems are common.
That being said, some DeFi protocols have stood the test of time and could be beneficiaries of a DeFi revolution.
For looking to get into Ethereum-based DeFi trading, Uniswap is the top decentralised exchange (DEX), while PancakeSwap is the leading DEX on Binance.
For decentralised lending, Convex Finance and Aave are among the most liquid platforms.
Bitcoin ETFs to get the go-ahead?
Grayscale US$10.7bn Bitcoin Trust (GBTC) has had a shocker of a year. The market’s largest bitcoin-only investment vehicle is running at a near-50% discount to its underlying bitcoin holdings.
It has been Grayscale’s long-running ambition to convert the trust into a spot exchange-traded fund (ETF) on the US stock market, but the Securities and Exchange Commission (SEC) under chair Gary Gensler has shown little interest in approving the transition.
Most recently, the SEC sought to crush an appeal from Grayscale’s chief executive regarding the transition, in further proof that Gensler is unwilling to give the nod.
But could things change in 2023?
Gensler is under intense scrutiny over his handling of the FTX crisis, which has spurred Democrat Ritchie Torres to ask the US Government Accountability Office (GAO) to conduct a review of the SEC’s failure to protect the public from “the egregious mismanagement and malfeasance of FTX.”
Matthew Sigel, head of digital assets research at New York fund manager VanEck, went as far as to theorise that crypto permabear Gensler could be on the way out in 2023.
A shake up in the SEC could renew hopes for a more liberal approach to bitcoin ETFs, although it’s safe to say that it will be an uphill battle.
One thing is for sure: Grayscale is not done pressuring the SEC yet, and the tussle between the two entities could get even more intense in the new year.
Ethereum scales up
2022 was meant to be the defining year for the Ethereum blockchain. Ethereum, which is far and away the largest smart contract platform for token issuances, NFTs and gaming, finally completed its much-hyped Merge, being the transition from proof of work (PoW) to proof-of-stake (PoS).
Ethereum maximalists waited with bated breath for a massive pump in the price of ETH, but their hope was all in vain as The Merge went with a whisper rather than a bang.
And for a good reason: While The Merge represented the first stage of Ethereum’s massive scalability upgrade, and fundamentally changed the platform’s consensus mechanism, it didn’t actually change transaction speeds or even transaction costs- two major roadblocks to Ethereum’s scalability.
That could – and probably will – change in 2023.
Without getting too bogged down in technical details, The Merge was just the first in a series of rhyming upgrades, with more planned for the years ahead, including The Surge, The Verge, The Purge and The Splurge.
The Surge upgrade will implement two forms of technology called sharding and roll ups, which will significantly lower the cost of transactions and increase throughput from 15 transactions per second (tps) to up to 100,000 tps.
In essence, The Surge will make good on the promises that The Merge first made.
ETH could definitely see strong price action as the ecosystem scales up, but other projects will also benefit.
Layer-2 solutions including Optimism (OP), Arbitrum, and the biggest of them all Polygon (MATIC) could see their values increase too. This is because the Ethereum Foundation actively relies on these and similar projects to facilitate network scalability.
Without being too cynical, it does need to be asked: Despite Ethereum becoming hundreds of times more efficient, with cryptocurrency’s reputation in the toilet, will anyone really care?
Wheat from the chaff
Solana (SOL) was one of the biggest losers of 2022 (at least, for the cryptocurrencies that didn’t collapse entirely).
Year to date, the supposed Ethereum killer is 95% down, having tanked from US$170 to less than US$10.
Unfortunately for the platform, 2022 was marred by widespread blackouts and hacks, topped off by significant exposure to the FTX collapse
Solana’s downward spiral could be a sign of things to come in 2023 for the major Ethereum alternatives; those that don’t cut the mustard will be left behind while the projects that show genuine utility, developer engagement and all-around support will hopefully thrive.
There is a tonne of high-performance blockchain networks out there- from big-hitters such as Cardano (ADA), Tron (TRX), Avalanche (AVAX) and Polkadot (DOT), to niche outfits like Fantom (FTM) and EOS.
Guessing which projects will pump in value is a bit of a mug’s game, and if 2022 has shown us anything, it’s that no altcoin is safe.
It will also be harder for some of these to compete with Ethereum’s increased scalability, but perhaps that’s what the cryptocurrency market needs- a flushing out of the projects built in the bull market but not proved their worth in the bear market.
There will likely be more pain to come in the first half of 2023, so stay safe out there!