@Tata-JLR: Alex Smout shares his predictions for crypto in 2023

We’ve collected industry expert predictions on the future of crypto in 2023.

 
From a peak in late 2021 to the ‘crypto winter‘ of 2022, the past couple of years have been a turbulent time for the cryptocurrency industry.

We asked a panel of experts to provide their predictions on what the crypto landscape will look like in 2023.
 

Sendi Young, Managing Director at Ripple

 

 
“Despite the market downturn, institutional adoption of blockchain and digital assets will accelerate as corporations launch pilots and continue to investigate the technology. Banks are no longer questioning whether they require a crypto strategy but are instead asking themselves what their crypto strategy should be. There is a recognition from traditional financial institutions that the technology is here to stay, creating opportunities to bring greater efficiencies, transparency and speed to existing financial infrastructure.

“While many legacy financial services companies continue to exercise caution around incorporating digital assets across their businesses, particularly in light of recent market turmoil, a significant number of traditional finance and payments institutions such as Barclays, Goldman Sachs, JP Morgan, Mastercard, Morgan Stanley, SBI Holdings and Visa are already pursuing blockchain-related projects ranging from cryptocurrency custody and trading, to data processing, to payments and trade execution.

“The investment horizon of banks and other large financial institutions is measured not in days and weeks, but in years, so we see the embrace of digital assets and blockchain continuing throughout 2023 and beyond.”
 

Max Thake, Co-Founder at peaq

 

 
“In 2023, beware of bulls – but keep building. The macroeconomic conditions pressuring markets across the board will carry on for longer than optimists will admit. However, this is not the death knell of Web3. 

As always, but perhaps more than usual in this bear market, usability is king. If your project can deliver value to its users, then you will survive the chaos of the market and contribute to the next era of blockchain, which will have fewer veiled scams and stronger foundations than crypto in the bull market. 

2022 was a year of swells and plummets in the Web3 space: Terra collapsed, Etherum celebrated The Merge, SBF’s empire shattered. These events will direct our understanding of how traditional corporations fit into Web3. Clearly, creating a Frankenstein monster of corporate structures built on the blockchain is a recipe for disaster. After the events of 2022, decentralized protocols will likely enjoy a bump in credibility, while centralized players getting too creative with their books will feel more regulatory heat – and will probably take a dent or two in terms of user confidence.

On the other hand, established corporations still have a place in Web3 when they combine their power with the disruptive technology of blockchain startups. As the numbers of these collaborations increase, the end result will be a flood of real-world use cases and values that prompt sustainable, healthy, responsible growth for the industry.”
 

Diego di Tommaso, COO and Co-Founder at OVER

 

 
“2022 has been a fundamental year in the crypto industry. On the infrastructural side, we saw the first implementations of L2s, starting from Optimistic rollups and concluding the year with ZKRollups. Those scaling solutions will be the foundation of the next bull run, creating a highway to onboard the next billion users into the blockchain without sacrificing decentralization.

“Ethereum also switched to POS this year reducing its consensus algorithm energy usage by 99.9% and increasing the attractiveness of ETH as an asset in comparison to other big players such as BTC. 2022 has also been the year for the novel discovery of NFTs and the rise of Open Metaverses based on NFTs. In 2022, the full potential of web3 based metaverses became apparent, even more so than much more established Web2 metaverses.

“In 2023, I can see the potential rise for L2s and ZK rollups. The new block space will be filled with use cases that were impossible before because of the former infrastructural constraints. Scale economies and network effects will come into place because of the riskless access to L1 liquidity. Being able to seamlessly move and access liquidity between L1 and L2 without incurring centralized bridge risks will make a real difference in the success of Rollups and projects built on those. 

“While this may be, 2023 will see challenges in regulation risks. I am not confident regulators will draw a clear distinction between DeFi and centralized exchanges such as FTX, when drawing the next bill on crypto regulation. The FTX collapse, with the usage of customer funds for speculative investments, is something that would not have been possible in a transparent DeFi environment. This is why what we really need in 2023 is more DeFi. We need to move from the “Don’t be Evil” of CeFi to the “Can’t be Evil” of DeFi. Looking closely at what happened with FTX there is a lesson to learn on what should be regulated more sternly – CeFi – and what should be untouched – DeFi. 

“I would be quite surprised to witness a new bull run in 2023. I think that first, we need a better macroeconomic environment, and second, we need all the dust from the EOY 2022 debacle to settle to allow for a new, strong bull trend to flourish. That likely brings us to 2024, ironically enough, the year of the next Bitcoin halving!”
 

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Kamal Youssefi, President at The Hashgraph Association

 

 
“2022 was a damaging year for how the crypto and Web3 industry is perceived. Bad actors eroded much — if not all — of the trust that had been previously built, destroyed livelihoods and tainted the progress made by projects offering true, valuable utility. This is impossible to deny.

“Those left standing have a critical mission: we must focus on building and supporting projects centered on application, not speculation. If we do not, this current downturn may descend further to a state of collapse, razing the very ideals of Web3 and all of the work that many intelligent people have poured into a seismic technological movement.

“Amid all the negativity, The Hashgraph Association has been insulated by working with projects built on the Hedera network – a distributed ledger technology (DLT) that has always prioritized enterprise-grade security, performance and scalability. We have had much to celebrate in this time, with over 35 projects qualifying for grant funding through the Hashgraph Innovation Program and bringing verticals, from gaming to agriculture, onto a compliant and stable network.

“To restore trust in our industry, we must work with incumbents, start-ups and governments alike to offer sustainable, secure and impactful pathways into the world of DLT. This is exactly the type of innovation that The Hashgraph Association facilitates. We are privileged to be working with the projects set to be at the forefront of the recalibration of crypto perceptions in 2023.”
 

Tommy Gallagher, Founder at Top Mobile Banks

 

 
“The adoption of digital currencies like Bitcoin and Ethereum is expected to expand and become more widely accepted in the world of commerce and business. Analysts predict that by 2023, the value of these currencies will have significantly increased, providing a greater range of investment opportunities and transparent exchanges. The blockchain technology that supports these digital currencies is constantly improving and being utilized for more than just cryptocurrencies.

“Smart Contracts and Decentralized Applications (DApps) offer efficient communication and data storage between businesses and customers, leading to faster and more secure transactions. In addition, various companies and entrepreneurs are creating new uses for crypto-assets, such as Initial Coin Offerings (ICOs) and Payment Network tokens like Ripple. As the industry develops and matures, regulations will continue to evolve, allowing for even greater integration of crypto into businesses. The blockchain infrastructure will also become more advanced, supporting faster and more secure transactions and potentially new methods of transferring value.”
 

Fergal Parkinson, Director at TMT Analysis

 

 
“It feels as though crypto has dominated headlines this year with bankruptcies, redundancies and assets collapsing in value, 2022 proved a challenging year for many assets and won’t have done much to stoke up armchair investor appetite. The crypto market needs to focus on changing consumer perceptions over its value and security to build trust during 2023 – without tackling these consumer fears, mass adoption will remain a pipedream for many assets.

Crypto firms need to accelerate their efforts to ease consumer concerns and will increasingly be implementing more stringent security and anti-fraud processes in order to attract investors. I’d expect to see additional focus not only on integrating security measures but a greater commitment to communicating the strong measures they have in place to reassure existing investors and develop trust with potential investors. 

“Cost-effective approaches such as mobile number verification offer a simple yet effective solution to tackle the negative industry perceptions and be the turning point for a sector with designs on cementing its position as a global monetary alternative. Without tackling the trust issue, this future is out of reach.”
 

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Alex Smout, Principal, InMotion Ventures

 

 
“Safer crypto. Following the collapse of FTX, and the subsequent run on Binance, there has been a recoil from cryptocurrencies, but it is in crypto’s best interest to change how exchanges operate. While I would like to see the move to decentralised exchanges, the economics will always drive large central providers.

“Western consumers are now all too aware of the lack of regulation and that the trust they are accustomed to with traditional banks is not applicable. While regulation will take time, in the meantime we will see self-custody of crypto become the norm, and users keeping control of their digital assets, which aligns with the spirit and vision of Web3.

“Crypto is here to stay, awareness and capability is growing and that cannot be reversed, but it will become more accessible, safer, and useful to the average person. In light of the macro economic environment, I believe speculation activity and hype for digital assets will ebb, while the community instead builds great products that foster trust in digital assets.”

“Generative AI finally hit the mainstream in 2022. Consumers globally got the chance to play with what is arguably one of the most powerful developments in AI, and have the first glimpse of the true breadth and depth of its applications and the disruption it will bring. Whether this was having the engine write an essay, dubious code or having it create an aspirational avatar of their best digital self. We can now expect a plethora of commercial applications, especially for enterprise, next year. Whether these will yet be robust or reliable enough though remains to be seen”
 

Andy Renshaw, SVP Product Management at Feedzai

 

 
“Following the downfall of FTX, it’s fair to say the crypto winter is here, and if there’s a silver lining for the year ahead, it is a drop in cryptocurrency scams as investors move away from FOMO-driven decisions to take a harder look at the market. But, while crypto’s risk has been fully exposed, it’s still likely to attract potential investors and consumers should exercise caution and ask hard questions when making these types of investments. 

Furthermore, while the shine might be falling from crypto, there are plenty of other investment scams to push. Using their familiar high-pressure tactics, fraudsters will likely try to lure investors into fake stock, gold, or other commodity-related scams.”
 

Nigel Green, Founder and CEO at deVere Group

 

 
“The themes that began in 2022 will accelerate and develop in 2023.  

“Following the collapse of FTX, amongst serious debacles others last year, we expect greater regulatory scrutiny of the crypto market throughout 2023.  This is something I have long championed as digital currencies are set to play an ever-greater role in the global financial system and they held to the same standards as other areas.

“Despite currently hawkish tones from the U.S. Federal Reserve, and other central banks, inflation will peak in 2023, probably around the mid-year point, and central banks will begin unwind their rate hikes.

“Assets that most benefitted from low interest rates were, naturally, hit hardest in 2022 by the hikes. These include stocks, especially in the tech sector, and cryptocurrencies, amongst other risk assets.

“We expect as the programmes unwind, will be the assets that will experience some of the biggest rallies.

“Although, the high-octane rush of previous rallies is unlikely, instead we will see a steadier, continued upward trajectory for Bitcoin and other cryptocurrencies when the unwind kicks off.
 

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 Ayelen Denovitzer, Founder and CEO at Solvo

 

 
“In 2023 we will see opaque and complex products continue to have reduced uptake and firms who prioritize the customer and transparency will rise and succeed. Cryptoassets offer real potential but consumer confidence was rightfully shaken in 2022. Going forward Crypto platforms need to focus on building trust and transparency for investors and crypto-curious customers.

“This means building in radical transparency to platforms so investors can see where their assets are at any given time, it means embracing regulation and operating under a credible regulatory regime, and it means having an excellent user interface so the barriers to entry are lower to understanding and accessing crypto assets.”
 

Navdeep Sharma, Co-Founder at ReelStar

 

 
“For crypto, 2023 will be an exciting volatile year, which will require extreme agility both in coin markets as well as blockchain and DeFi growth and innovation. We see continued scrutiny of cryptocurrency by governments worldwide. It is inevitable given the massively publicized failures, in the area in 2022, that the legislation will be quite restrictive.

“The UK or Europe will likely be first and set a precedent for other countries. The European Parliament will pass MiCA. Start-ups will continue to have a difficult time sourcing funding until the coin market rebounds, then the pressure will ease.

“Bitcoin havening in 2024 and Ethereum’s possible sharing will positively influence market increases in H2. CBDCs will emerge this year and drive significant growth in stablecoins, both USD and other fiat currencies. We will see greater tokenization of non-crypto assets and the expansion of DeFi applications and instant payment solutions. Increasing competition and interest from regular financial institutions will drive an increased number of mergers and buyouts (particularly for the underlying technology).

“The SEC will succeed against Ripple, expect big industry changes! But to end on a positive note there will be large increases in the sustainability of the entire blockchain industry.”
 

Ken Timsit, Head of Cronos

 

 
“Crypto developments in 2023 will largely be informed by lessons from the past year and I predict that DeFi, GameFi, and SocialFi, will create exceptional opportunities for industry-wide growth.

“This year, DeFi will continue to present solutions for users that offer a seamless alternative to centralized experiences, with the additional benefits of decentralization. As the crypto industry continues to mature, DeFi protocols will deliver user experiences with high liquidity, high yield, advanced features for power traders (limit orders, margin trading), and a large range of cryptocurrencies. 

“Meanwhile, building on its explosive growth in 2022, GameFi will continue to focus on value creation and monetization strategies in the year ahead, however the latter will need to be executed in a sustainable manner. Here, DeFi will function as the plumbing system that delivers the financial elements that power these economic prospects.

“Lastly, there is also a tangible opportunity for growth in the SocialFi space this year. Self-sovereign identity, portable social media networks, and a refined creator economy will provide a coherent pathway from Web2 to Web3 for end-users. Similarly to GameFi, SocialFi will offer individual opportunities for monetization and value-adds through blockchain technology.” 
 

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Tim Dierckxsens, CEO at Venly

 

 
“Globally, the market downturn will see many of the smaller marketplace and metaverse projects that launched en masse in the last bull market disappear, either through M&A or limited funding. That being said, Web3 and blockchain technology is here to stay. Over the next few years, rather than hype in the market, we will see projects buckle down and build to determine sustainable use cases, value-adds, and revenue streams.

“As more builders, founders, and businesses look to leverage new innovations to support their respective objectives, there will be a growing demand for safe and reliable infrastructure providers, in contrast to actors who prioritized profit maximization at the expense of users’ safety and security. The industry continues to mature and evolve, and so the support of institutions and the role of regulatory bodies will play an integral role in shaping its future.”
 

Solo Ceesay, CEO & Co-Founder at Calaxy

 

 
“Two of the main challenges witnessed by the industry unlikely to diminish in 2023 are ambiguous regulation and negative perceptions due to recent nefarious activity.

Ongoing mainstream discourse points to the removal of more players from the ecosystem, which could, unfortunately, lead to further turmoil. The broader macroeconomic environment might weigh heavily on risk assets more generally, as the Federal Reserve continues to increase rates to keep inflation at bay. Other than an XRP settlement, we may not see many catalysts push the market higher.  

The lack of clear regulation has created a breeding ground for corruption and nefarious practices. It’s likely that we’ll see several projects made an example of moving forward, and while this may seem unfair, it does destroy the ambiguity surrounding an unclear regulatory framework. Moving forward, builders may be a little apprehensive, and some institutional capital will briefly leave the space, but long term I am still incredibly bullish on decentralized technology.”
 

Arnaud Castillo, CEO & Co-Founder at CrunchDAO

 

 

“In the aftermath of FTX, platforms will now have to prove their reserves so that this type of scandal doesn’t repeat itself. Discourse surrounding “Proof of Reserve” has surfaced to explore how maximum transparency can be ensured. Perhaps “Proof of Liability” should also be traversed.

“Several signs are pointing to the market reaching bottom in Q1 2023, with a target of between $10-13K USD. The S&P and NASDAQ have not yet reached their bottom with an extremely high valuation, despite a substantial decline. The correlation between American stocks and crypto is even higher than last year with the arrival of institutional investors.

“With a 75% drop in the crypto markets since the beginning of the bear market already witnessed, we expect this to further decline to 80-85%, corresponding to levels of decline usually seen in bear markets. Additionally, we are in the middle of the halving, which often corresponds to the lowest periods of bitcoin valuation. While market decline will likely continue into Q1, we will hopefully begin to see an uptick in price following this.”

Daniel Howitt, CEO and Co-Founder at Recap

 

 

“The economic challenges the West and the UK faced last year, specifically the energy crisis and high inflation, which the banks are tackling by raising interest rates, has caused turmoil for crypto investors.

“Interest rate rises have obliterated the valuation of risk assets like cryptocurrencies. The drop in prices has caused many crypto market participants that were over-leveraged, out of business.

“I expect the crypto contagion to continue this year and market conditions to remain on the downside until we have clarity on how bankrupt companies are going to pay creditors back – will they be forced to liquidate crypto, further crashing prices?

“No matter what, I predict an outlier – Bitcoin. With exchanges and services going bankrupt overnight, users are taking their Bitcoin assets off the platforms and putting them into cold storage. This maintains self-custody of their assets and with the collapse of FTX, I suspect we will see a conscious shift from investors back to self-custody this year.

“Global regulators will want to ensure that what’s come to light in recent months, cannot happen again. I expect to see a regulatory crackdown, making it much harder for UK individuals to participate in offshore exchanges. Part of that will be tax compliance on a mass scale – the wheels are already turning on this with the Organization for Economic Co-operation and Development releasing its new Crypto-Asset Reporting Framework (CARF)”

 

Edwina Johnson, Head of Global at Alloy

 

 

“In 2023, founders will urgently prioritise efforts to get in shape ahead of regulatory reforms which could arrive as soon as summer.

“For companies with enough runway to survive customers’ and investors’ dramatic loss of appetite, it’s important to avoid searching for potential shortcuts and use this time to build a compliance programme that will pass muster with banks and regulators.

“Contrary to popular belief, a lot of fraud in crypto mirrors the activity we see within fintech and other TradFi platforms, although anonymity and immutability make it more difficult to manage. Payment fraud, wire fraud, card fraud and romance scams all exist on crypto platforms, and for every kind of financial institution, It’s key to have a system in place which can detect anomalous activity and tie it back to the onboarding decision.

“There’s an interesting opportunity for crypto companies to collaborate with reg-tech, identity-tech and cybersecurity startups which are already well-established in banking and fintech circles. The future of regulation in crypto is likely to take inspiration from the existing rules for traditional financial services, and so ID verification and fraud prevention firms can help crypto companies to take a proactive stance and avoid being caught unaware by new laws.”

 

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