Crypto trends that marked 2022, and what to expect in 2023 🚀

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🎅 Ho ho ho,

2022 is almost over, and it’s a good time to sum up and reflect on its main events… before moving on to the 2023.

This Christmas issue Newsletter is a high-level look on the crypto industry in 2022 and some news to look out for in 2023 from the perspective of the crypto tech, adoption, regulation, price, and of course NFTs and web3.

Crypto tech ⚙️

From a technical standpoint, the year’s main event – Ethereum’s Merge – has been brilliantly executed (transferring a whole blockchain from a PoW to PoS consensus without interrupting it was a big deal), opening for Ethereum a whole new world of institutional investment without eco-shaming.

The Merge has also drastically decreased ETH issuance rate (taking into account the ETH burned as base fees, only 0.11% of new ethers are being created each year). This makes Ethereum one of the scarcest cryptoassets with an inflation rate even lower than Bitcoin’s (currently 1.7%).

However, the transition to PoS has also brought its set of problems, related especially to the growing centralization concerns and regulatory risks.

This year’s biggest flop was undoubtedly Terra and its now-defunct stablecoin, while the most promising projects include a new blockchain Aptos, created by former Meta engineers, and Tether’s P2P apps building platform Holepunch.

Solana was the blockchain that suffered the most eye-catching outages (at least 6), while Cardano finally enabling staking and smart contracts was hardly noticed by the industry.

Cross-chain bridges are still the most coveted target for hackers (as of August, such hacks represented 69% of total yearly crypto theft).

🔮 What to look out for in 2023? Several interesting projects announced this year may be released in the next one, including:

–          Jack Dorsey’ Block to launch a custom Bitcoin miner that would allow individuals to use off-peak hours electricity;

–          Jack Dorsey’s decentralized social network BlueSky and decentralized exchange tbDEX;

–          Solana’s smartphone;

–          Circle and Axelar to release a new type of cross-chain transfer protocol, less vulnerable to hacks;

–          a new decentralized stablecoin?..

Crypto adoption 💳

Crypto adoption has two main vectors – grassroot (individuals using crypto as payment or investment) and institutional (companies and funds using crypto mostly as investment).

One of the markers of Bitcoin grassroot adoption is Lightning Network, a layer-2 solution allowing fast and cheap transactions. Its capacity is growing constantly, recently reaching an all-time high of 5’161 BTC.

Unlike some die-hard crypto believers, many Institutional investors have given in to the temptation of selling their crypto low. Grayscale, the biggest crypto fund allowing accredited investors to get a crypto exposure without buying crypto, has recently registered a record 50% discount on its BTC fund shares.

Still, the sentiment is rather optimistic, even for this group. A Fidelity survey reported that an average of 81% of institutional investors believe digital assets should be part of their portfolio.

As the adoption grows, so does the number of scammers: Solidus Labs reported that in the first 11 months of 2022 a total of 1.1 million of “scam tokens” were created, a 41% increase vs 2021.

🔮 What to look out for in 2023? More grassroot adoption.

Crypto adoption by country 🗺️

Brazil has made a big leap this year: its deputies approved a much-awaited crypto bill, and Rio de Janeiro is on its way to become the new Miami, with a bunch of incentives aimed at attracting crypto companies.

In Chainalysis’ 2022 Crypto Adoption Index (calculated using weighted data on countries’ on-chain received volume per capita) Brazil made a leap from 14th to 7th place. Other LatAm countries follow: this year’s top-20 included also Argentina, Colombia, and Ecuador.

Ukraine’s crypto adoption ranking moved up, notably because of the war (crypto donations and an easy means for refugees to transfer value), while Turkey making the top-20 list has surely used crypto as a hedge against its 90% inflation.

The United Kingdom was the only new developed country on this year’s top-20 (US is a regular guest), likely due to the repeated pro-crypto stance from (all) its fast-changing prime-ministers and other officials.

 Several African countries have announced their intentions to foster crypto development and encourage its use. Among them Cameroon, Democratic Republic of Congo, and Central African Republic (the latter even adopted Bitcoin as legal tender). More on crypto in Africa here.

Some crypto projects develop fast on municipal levels too: a Swiss city of Lugano has launched its “Plan B” program aiming at attracting crypto businesses and motivating the city merchants to use Bitcoin and Tether as means of payment.

🔮 What to look out for in 2023? Increasing adoption in developing countries and a development of the crypto industry in the UK and Switzerland (Lugano in particular).

Crypto adoption by the big tech 📱

Integrating crypto into most popular software is a necessary step to a global adoption, and several companies made their first timid steps towards it.

Most exchanges now allow buying crypto with Apple and Google Pay, and the issuer of USDC Circle has integrated Apple Pay in order to let merchants easily accept the stablecoin.

Google Cloud signed a partnership with Coinbase to allow users pay for it in crypto and enable web3 developers to easily access Google Cloud’s blockchain data via its serverless data warehouse BigQuery.

The most crypto-enthusiastic company was probably Telegram with its crypto payment bot and other crypto projects.

🔮 What to look out for in 2023? More integrations with popular online services, probably including Twitter and AppStore.

Crypto regulation ⚖️

The biggest crypto regulation events happened in the US and the EU.

The EU adopted the MiCA law together with a corresponding AML regulation, both entering in force in mid-2024. The former mostly outlines the rules for crypto service providers and stablecoin issuers, and the latter imposes (too) harsh reporting obligations on every company processing crypto transfers.

In the US, the Treasury has updated its OFAC list of sanctioned entities, including the smart contracts of a popular crypto mixer Tornado Cash 🌪️, provoking a wave of outrage across the industry.

🔮 What to look out for in 2023? American regulators, pushed by the FTX scandal, will most likely produce a much needed specific crypto regulation. Also 2023 will be the year when a lengthy SEC v Ripple trial will be over, creating a precedent for the future.

Bitcoin price 📉

Bitcoin price (-65% vs last year) is one of the main benchmarks in the crypto world, often followed by the whole market.

This year it was influenced by two main forces:

–          4-year halving cycle, which indicated this period as a rollback from an all-time high (read more about it here), and

–          global macro events, transcribed into Fed’s interest rate hikes.

Both these factors contributed to spectacular crashes of crypto protocols and companies that weren’t solid enough to withstand the prices fall.

🔮 What to look out for in 2023? A slow recovery from this year’s crash and likely a pre-halving rally by the end of the year.

NFTs and Metaverse

2022 was marked by an unprecedented consumer brands’ foray into the NFT space.

👜 From luxury like Gucci and Prada to mass-market brands like Adidas and Nike, fashion industry is actively exploring all the new sales and marketing channels that NFTs and metaverse can provide. A Metaverse Fashion Week kicked off in Decentraland.

Luxury cars, supermarkets or beer… many brands feel the need to invest in the NFT development.

Web3 music is another sector developing very fast.

Social media integrates NFTs fast. After Reddit and Twitter, this year Instagram and Facebook too rolled out NFT integrations.

🔮 What to look out for in 2023? Of course, a full release of Otherside, but also of the new metaverse conceived by Ripple and the FLUF World 🐰 – The Open Metaverse. More fashion companies and consumer brands to dive into NFTs.