12 Crypto predictions for 2023

Hello and welcome to our 2023 crypto predictions!

Despite the challenges that the market faced in 2022, we remain confident in the resilience and potential for growth in the crypto industry. Here are our top predictions for what we can expect to see in the coming year.

1. Regulation

In 2023, we expect to see increased pressure from regulators on the crypto industry, following the failures of FTX, Celsius, Voyager, and others in 2022. Centralized actors, such as exchanges and custodians, have been on the news for most of the year: for this reason, CeFi is likely to be the very first area that regulators will address.

2. Decentralization

The scandal surrounding FTX was a major failure for the industry, and we believe it serves as a reminder of the importance of decentralization. As a result, we expect to see a significant increase in the use of self-custody solutions such as wallets (Ledger saw a spike in sales in Q4 2022) and DeFi applications. We are particularly excited about GMX, a pioneer in perpetual DEX, and expect to see strong growth in terms of volume and users in 2023.

3. Bitcoin

Given Bitcoin’s status as the most decentralized network and its classification as a commodity in the US, more and more dApps will seek to integrate with the decentralized network. This will bring new utility to Bitcoin and drive further adoption. With Lightning Network transaction throughput and speed rivaling those of VISA and Mastercard at a fraction of their costs, it’s no surprise that the quantity of Bitcoin locked into the Lightning Network increased by 5 times during 2022.

4. Ethereum

Ethereum is currently undergoing its largest network upgrade to date, transitioning to a proof-of-stake consensus model. As of now, stakers are receiving approximately 5% annual interest for committing ETH to validators. Enabling Beacon Chain withdrawals could give stakers greater confidence in committing their capital to the protocol, potentially resulting in an increase in the percentage of ETH staked from around 13% to over 25%.

5. Layer-1

While many Layer-1 chains have been under the spotlight during the last year, we consider Cosmos to be in a unique position. Enabling an “internet of blockchains”, rather than a single blockchain managing all projects, is key to achieving superior scalability, security, and interoperability performance. 2022 was an important year for Cosmos, which now comprises over 50 chains and over 300 applications. Projects like Axelar, Juno, Evmos, and Injective have already launched on the network, with more like Sei and Sui. We expect the Cosmos SDK to be the most commonly used stack for developing a proof-of-stake chain and for the total value locked and volume across IBC to significantly increase in 2023. If you are curious about Cosmos, check out our latest article here.

6. DeFi

For DeFi to truly challenge the traditional finance industry, the user experience must be improved. As users seek to easily interact with multiple networks, we expect to see improvements in the security and user-friendliness of cross-chain activity. One way to do this is through the development of cross-chain DEXs that allow users to easily trade tokens on different blockchains. XDEFI, a multi-chain wallet that facilitates operations across over 15 networks, is a name you might want to keep on your watchlist. We have already published a report about it, check it here.

7. Zero-Knowledge Proof

As the industry works towards onboarding a new wave of users, scalability, and privacy will be crucial considerations. Zero-knowledge proofs and advancements like SNARKs and zEVMs offer the potential for increased transparency while maintaining privacy. Protecting identity while still being able to confirm certain attributes about oneself is a key step towards moving away from the centralized data manipulation of Web 2.0.

8. Giants Driving Mass Adoption

In the past few months, we’ve seen many giants turning their attention to the crypto industry. VISA advanced a proposal to let $ETH holders set up an automatic payment from their wallets, with no intermediaries involved. Paypal partnered with Metamask to enable users to use their accounts to buy $ETH directly in their wallets. Reddit launched its blockchain-backed avatar collection. In the coming year, we expect to see more and more big players like Google, Amazon, Netflix, Spotify, and Apple taking their first steps in the blockchain space. As these companies adopt the new technology, it will drive further adoption and bring in both retail and institutional investors.

9. NFTs

NFTs will see renewed interest, this time focusing on creating utility for holders. Putting aside the collectibles industry, the real potential for disruption lies in using NFTs to grant specific privileges across a variety of industries. In particular, we expect to see the adoption of NFTs in triple-A games and in the identity management vertical, with soulbound tokens getting more and more popular.

10. Metaverse

The metaverse is not a finished product, but rather a work in progress. In 2023, we expect to see more pieces fall into place as technology improves and a greater focus is placed on interoperability. While the gap between the physical and digital worlds still exists, we believe that the process of bridging it will accelerate in the coming year. This will require the support of brands, game engines, artists, and developers, all working towards the shared goal of a seamless digital experience.

11. Decentralized Social Networks

While Elon Musk was busy buying the Web2 giant Twitter, blockchain protocols worked hard to enable developers to build social networks using a decentralized stack. Blockchain can make social networks more resistant to censorship, more resilient to outages, more private, and more equitable. There is a massive pipeline of decentralized apps that are developing on protocols such as Lens or Farcaster and we think that these frameworks could lead the next wave of non-crypto users to embrace this technology.

12. Artificial Intelligence

2023 will be a pivotal year for the intersection of artificial intelligence and blockchain technology. OpenAI has already demonstrated the impressive capabilities of AI, and we expect to see artificial intelligence applied to the blockchain industry in the coming year.

While the market decline certainly won’t feel like a gift, a bear market allows you to invest in the most promising projects at lower valuations, since only resilient teams will continue building in these difficult times. Since the start of our operations in 2018, we have experienced market cycles similar to the one we’re in. The previous bear markets gave us the opportunity to spot hidden gems such as Thorchain, Numeraire, or AMP and largely anticipate their success in the bull market. That’s why with our methodology, discipline, and deep knowledge of the market we are ready and excited to support founders who are building the next wave of disrupting projects.