2023 Crypto Market Outlook: Trends and Developments to Watch

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GMO-Z.com Trust Company

5 min readJan 18, 2023

The cryptocurrency market has seen its fair share of ups and downs in 2022, but as we head into 2023, it’s worth taking a closer look at what the future holds. This article will provide a 2023 crypto market outlook, focusing on the growth potential of DeFi, the adoption of fiat-backed stablecoins, the impact of regulatory change, the evolution of blockchain technology, the metaverse, and the NFT market. We’ll also touch on some key trends likely to shape the crypto market this year.

Last year, the market was more challenging and volatile than ever. The collapse of Terra UST, FTX, and over 130 companies on FTX’s contagion lists impacted the market. The total market capitalization shrank from around $2.25 trillion at the beginning of 2022 to about $798 billion at the time of writing.

The market capitalization of stablecoins also dropped from $166.27 billion to $137.79 billion. Among the turmoil, USDT, USDC, BUSD, and DAI remained major players in the market, with USDC and BUSD seeing considerable growth in market share.

Regulators worldwide are stepping up to create clear and effective rules for the crypto market. In September, the White House released a comprehensive framework for crypto regulation. The collapse of FTX further increased the need for regulators to step in to protect crypto investors. The UK and EU have also proposed new bills, the Financial Services and Markets Bill (FSMB) and the Markets in Crypto Assets (MiCA) regulation.

As we look ahead to 2023, what can we expect?

More adoption of fiat-backed stablecoins

According to Messari, the market share of the algorithmic stablecoins has been declining since the Terra collapse, from a peak of 12.2% in May 2022 to 1.6% in January 2023. In 2023, fiat-backed stablecoins will continue to lead the market, and we can expect more integration and adoption. In addition, the use cases in payments and the development of the non-USD stablecoins will also be key areas to watch.

Accelerating growth in DeFi

DeFi has shown resilience in 2022. While the liquidity of decentralized exchanges(DEXs) and the experience of fiat on/off-ramps still need to be improved, DEXs still have a lot of growth potential. On the other hand, how centralized exchanges can improve transparency and restore investor confidence will be another major topic of the year.

Regulations changes

The US regulators released a joint statement that the recent collapse of some major crypto firms has led them to stay cautious in evaluating proposals for banks to engage with the market. In the UK and the EU, the FSMB and MiCA regulations are expected to be amended and adopted this year.

Meanwhile, in Japan, despite a bill passed by parliament in 2022 banning the issuance of stablecoins by non-banking institutions, it is reported that regulators plan to lift the ban on foreign-issued stablecoins in 2023, which could significantly affect the crypto market in Japan.

Development in layer 1 and layer 2 solutions

Layer 1 blockchain technology will continue to improve and innovate to address the market’s needs. Crypto-hackers took over $3 billion from the market in the past year. Security will continue to be one of the main development themes going forward. As blockchain technology becomes more secure and mature, we may also expect to see a decrease in hacking incidents.

As for layer 2 solutions, transactions and activities have increased significantly over the past year. Innovation and development of layer 2 solutions are worth paying attention to. In the meantime, native token issuance by major layer 2 solutions such as Arbitrum or StarkNet is also in the spotlight.

CBDC into the pilot phase

According to the Atlantic Council, all G7 economies have moved into the development phase of CBDC. By 2023, more than 20 countries will have taken significant steps toward piloting CBDC. In addition to crypto regulations, this year, we may see more countries move forward with the development of digital currencies.

The metaverse

The McKinsey report states that e-commerce in the metaverse could reach $2.6 trillion, with an overall potential of $5 trillion, by 2030. Despite a decrease in VR device sales and shipments last year, tech companies like Meta and Microsoft remain optimistic about the metaverse. New VR devices from Meta and Sony are expected to be released this year. In addition, we can expect an increase in luxury brands and retailers to join the metaverse, making user experience and channel integration another development focus.

Increased use cases in the NFT market

OpenSea continues to be the leading platform in the market, with a share of around 52% of the market last year. One area to keep an eye on is the Blur Marketplace, which has grown significantly since its launch last October. As more brands join the market, NFT use cases beyond digital art and collectibles may grow, potentially combining NFTs with tickets or memberships. Additionally, brands may use NFTs to offer exclusive benefits and experiences to increase user engagement and customer loyalty, similar to Starbucks’ recent NFT program.

Bottom line

In 2023, the crypto market will continue to show significant growth potential. From DeFi to the metaverse and NFT, we expect to see more innovations and use cases. As we move forward into the new year, let’s keep an eye on these key trends and be ready for exciting changes.

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