Some policymakers, retail & institutional investors, and neutrals may have lost trust in the growing crypto industry. This is mainly due to the damaging developments of 2022 that saw spectacular crypto implosions and bankruptcies.
The total market cap fell from a peak of around $3 trillion in November 2021 to less than $1 trillion in late 2022. However, the downturn was not down to crypto. The sell-off in cryptocurrencies was also caused by external macroeconomic factors that saw the stock market lose a fair share of its value. When 2022 came to an end, Wall Street saw its biggest annual drop since 2008.
Despite 2022 being a difficult year for investors and traders, the crypto market has started the year on a high note. And it could have an impact on how market participants, outsiders, and even regulators will view the overall crypto market.
With that said, here are the narratives that will likely shape the crypto space in 2023.
Regulation
This is an obvious one on the list. And it is mainly due to self-inflicted damage catalyzed by unexpected, high-profile crypto bankruptcies.
The collapse of FTX, once regarded as the ‘knight of the crypto industry,’ is still fresh in the memory of many people. This is because its fall from grace was swift. FTX collapsed over 10 days in late November. It was later revealed that FTX had liabilities in the range of $10 billion to $50 billion.
FTX was not the first. Terraform Labs, Celsius Network, Voyager Digital, and Three Arrows Capital all went belly up, plunging the industry into a crypto winter.
The bankruptcies raised the eyebrows of regulators and the industry should expect to see new regulations to control the growing industry.
The regulations may not be bad at all. They may bring new institutional investors who may have otherwise shunned the space.
Investor optimism
2022 was undoubtedly a bad year for cryptocurrency investors and traders. The prices of bitcoin and other so-called blue-chip cryptocurrencies tanked by more than 60%.
The entire market was in freefall. However, the downturn presented some forward-looking investors with an opportunity to buy at very low prices.
This can be seen in how 2023 has begun. The crypto industry has seen unexpected price surges. Some cryptocurrencies such as Solana are up more than 100% from their late 2022 lows. The market cap year-to-date tells the whole story.
This investor optimism is set to continue in 2023 even though pullbacks and corrections are expected along the way. This is all in anticipation of an upcoming bull run that could be triggered by a bitcoin halving event.
Bitcoin Halving
The next bitcoin halving event is anticipated to take place around May 2024. That’s nearly 15 months from now.
Halving events are usually followed by bullish cycles. This happened in 2020, 2016, and 2012. If history and patterns are to repeat themselves, then a crypto bull run may go into a full-swing mode in H2 2024.
How then will the bull run of 2024 shape the crypto narrative of 2023?
It is simple. No one wants to miss the bull run. And the best time to plan for a bull run is now when many cryptocurrencies can be considered to be cheap.
If this is the case, the demand for bitcoin will increase. And there is a potential to see new market participants.
NFT Growth
Once upon a time, NFTs were the hottest tickets in town. In 2021, an NFT collector paid $1.3 million for a picture of a rock. There were even more extravagant NFT purchases than this.
2022 saw a significant drop in NFT trading volumes. From January to September 2022, the NFT transaction volume was $466 million, down from $17 billion.
The collapse in NFT trading volume was in line with what was happening in the overall crypto market. On the brighter side, well-known individuals and companies joined the NFT wagon. These include Christiano Ronaldo, Donald J. Trump, Starbucks, Gucci, Adidas, etc.
This is a strong foundation and will likely see the interest returning to NFTs. In the sector, there is a possibility that NFTs will find more utility. NFTs are an integral part of play-to-earn games and the metaverse. They could even have a future in other emerging technologies.
Growth in AI Crypto Projects
The success of the Chat-GPT chatbot has shone a light on artificial intelligence. This will lead to several crypto projects taking an interest in artificial intelligence.
At the moment, AI-focused crypto projects have seen significant gains since the year began. AI-focused crypto projects are set to experience further growth.
Bringing it all together
2023 will lay its foundation on the ashes of 2022, which left a trail of destruction that will take a long time to undo.
As investors pick up the pieces, they have so much to look forward to. When the financial markets, including crypto, were crushed from March to April 2020 as a result of the coronavirus pandemic sell-off, a few people predicted that crypto was going to end the year on a high.
This year, too, could surprise many.
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