Blockchain 2022 Review & What’s Next in 2023
By Anju B Nair, Sr. Technical Content Writer, Kerala Blockchain Academy
Blockchain 2022 Review & What’s Next in 2023
With 2022 in the past, the key question now emerges: How will 2023 turn out for Blockchain, Web3, and Crypto? Any tech enthusiasts enthusiastically look at this question as blockchain is always an unfurling technology that continuously pours in its adoption prospects though dismayed at some point. In this article series, we have selected the top 10 Blockchain events and developments of 2022, followed by our outlook for the key trends in 2023. We will be discussing one of the following topics every Tuesday here, and we may help each other update with the technology. The events that will be covered for the next ten weeks will be
- Macro Economy and Market Cycle
- The Merge
- Centralized and Decentralized Exchange
- Layer-1 and Layer-2 Landscape
- Liquid Staking
- Blockchain Gaming
- Digital Identity and Social
- Capital Investment and Incubation
If you have something more to add to the above-selected events, feel free to drop your thoughts as comments to the blog. However, before we get started, let’s clarify that the information in this series is for general guidance only and should not be construed as tax, legal, or investment advice. Any information in the article content is not meant to provide access to any goods or services or to recommend them. The opinions presented here are exclusively based on information in the public domain, gleaned from other trustworthy sources, and taken as fact. We do not adopt, endorse, or bear any responsibility for the truthfulness or dependability of any information provided by third parties, despite our efforts to do so. That said, let’s start with the blockchain ramble.
#1 MACRO ECONOMY & MARKET CYCLE
As 2022 comes to an end, it’s clear that those trends of the past are not going to persist into the new year. Why? Because most retail investors have lost significant amounts of money on “blockchain, cryptocurrency, Bitcoin, Ethereum, Solana, etc.” Many institutional investors that made equity investments are at a loss due to lousy crypto weather. 2022 has been a challenging year for Web3, particularly the crypto industry.
In 2022, the global economy struggled under macro and geopolitical headwinds. As a public, we witnessed the monetary tightening by central banks to combat inflation, the conflict in Europe, the supply chain disruptions, and the lingering effects of the COVID-19 pandemic. As a result, the expected global G.D.P. growth in 2022 went to 3.2%, a sharp drop from ~6% in 2021. Meanwhile, the annual inflation growth rate increased, reaching 8.8%.
The downturns, including the war, inflation, and monetary tightening, put significant pressure on various asset classes, including cryptocurrencies. 2022 was a rough year for investors in cryptocurrencies and NFTs. Crypto went through significant corrections with added downward pressure from black swan events like Terra/LUNA implosion, 3AC, and FTX bankruptcy. On a macro level, the central banks ended a decade of monetary easing, resulting in “risk-on” asset prices falling.
More than $1.3 trillion was wiped off the value of the market. And bitcoin, the world’s largest digital coin, saw its price slump by more than 60%. The kingpins, Bitcoin (BTC), and Ethereum (ETH) underperformed other asset classes, such as gold and equity.
It is arguably still the “Crypto Winter” at the time of writing. That being said, it is natural for market cycles to fluctuate often between the bearish and bullish periods. Let’s check out what’s in store for the market in 2023.
The 2023 Year Ahead
In 2022, we saw the Ethereum update, which proved to be a significant advancement for the cryptocurrency sector, promising the blockchain to be more scalable, safe, and long-lasting. Coming to India, the government unveiled Central Bank Digital Currency (CBDC), and a new crypto tax policy. More on, applications for blockchain are introduced daily and are extensively tested at different endpoints.
Coming back to the market cycle; despite challenging macro conditions, crypto adoption growth remained strong in 2022. As of November 2022, the number of crypto owners crossed the 400 million milestones, reaching 402 million. During the year, the monthly average adoption growth rate was 2.9%. Depending on market conditions, we expect global crypto owners to reach 600–800 million in 2023.
The Indian Context
Amidst this global backdrop, the Indian crypto industry faced its own unique challenges with implementing the new tax laws. More than the 30% capital gains tax, the inability to offset losses, and the 1% TDS, made crypto trading difficult on compliant onshore exchanges. The industry witnessed a severe drop in trading volumes and the diversion of funds to risky offshore exchanges. The government introduced several policies to regulate the adoption of cryptocurrency assets in 2022, including a 30% crypto tax and Central Bank Digital Currency (CBDC), which the RBI introduced.
However, it’s worth highlighting that on-ground builder activity seems unhindered by price movements. India’s Web3 developer community is one of the strongest in the world, and over the year, we have not observed a slowdown in the building of new blockchain/crypto projects. This culmination was the recently concluded largest Web3 hackathon in the world: ETH India, where thousands of developers came together and built >400 projects in record time. Once regulatory clarity emerges, India can be a powerhouse in leading the global crypto and Web3 industry. The upcoming year, 2023, is expected to look at multiple developments around CBDCs and crypto regulations in India and globally. The crypto industry will continue to evolve and will become more mature.
From the Indian perspective, the Union Budget, which is likely to be tabled on February 1, 2023, will be a significant event. The creation of the regulatory framework and MiCA will take place in 2023. CBDC applications and CBDC-based products will emerge, as was the case with UPI. As a result, projects with utility and value derived from real-world use cases will drive the industry forward. The focus will be on the growing interest in and adoption of CBDC. The new wave may spark a new wave of CBDC-related startups and products. However, one should keep an eye out for projects in the Web 3.0 space in the coming year that demonstrates consistency, innovation, and technological advancement. On the other hand, a lot of attention will be paid to the global developments surrounding the regulatory framework.