10 Crypto Events/Trends to Watch in 2023
Things could change the course of crypto and blockchain tech for several years.
- Governments and major businesses pushing CBDCs and corporate coins
At present, roughly 100 countries across all continents intend to launch a Central Bank Digital Currency or have already done so.
I have a piece dedicated to this available here.
As per corporate coins, JPM Coin is a notable example, spearheaded by the American bank, JP Morgan.
This attempts to facilitate numerous assets across several banks participating in this system, utilising a permissioned (closed-source) distributed ledger.
Walmart’s stablecoin patent and Diem (formerly Libra) proposed by Meta Platforms (currently on hold, under management by Silvergate) are two others that come to mind; the latter, in particular, attracted much criticism, negative publicity and regulatory issues.
If corporate coins become successful, it will be fascinating to see what impact this has on permissionless (open-source) blockchains such as Bitcoin, Ethereum, Cardano and others.
2) FTX/Alameda Research saga
Unless you have been living under a rock, you have almost certainly heard about this calamitous fallout (I imagine ad nauseam at this point) involving Sam Bankman-Fried, a.k.a. SBF, the disgraced former CEO of the FTX exchange, and the billions of dollars in “missing” funds.
For brevity, I will refrain from providing a recap (more on that in these pieces).
I expect this one to be a drawn-out process going well into 2024.
3) Further scrutiny of stablecoins
Tether (USDT) has been one of the most criticised stablecoins, with a market valuation of about $97 billion, making it the leading stablecoin on the market for many years.
For perspective, USDT market’s cap is currently over $30 billion more than its leading rival, USD Coin (USDC) and more than quadruple that of Binance USD (BUSD) in third place.
To quell concerns and general doubts over its reserves, Tether is now working towards an updated audit, its first one in five years.
The discourse surrounding these digital assets has intensified since the rapid demise of algorithmic stablecoin, Terra USD (UST) and its respective crypto asset, Luna (LUNA).
4) Upcoming Bitcoin Block Reward Halving
One of the most highly anticipated events in the crypto space, the supply of new Bitcoins entering circulation (i.e., inflation rate) will be halved once again, dropping to <1% p.a. following the last event back in 2020.
BTCUSD chart to date. Arrows represent approximate dates of previous halving events.
Chart supplied by TradingView; arrows included by the author.
The discourse surrounding the upcoming BTC Halving (currently scheduled for May 2024) will become more prominent towards the end of 2023, so it is still a while away.
Nonetheless, this has historically generated lots of hype and could (hopefully) translate into higher prices at some point after the event. Based on the previous three events (see above), there is plenty of cause for long-term optimism surrounding Bitcoin prices.
Mind you; past performance does not guarantee future results.
5) Fortune favours the brave, particularly with a looming recession
Countless articles across multiple media sources forecast a significant slowdown across many economies worldwide.
In many places, it will be a matter of when not if.
Several savvy investors share tips for profiting from a recession; many see the opportunities that significantly lower asset prices can offer, notably when said asset has solid long-term potential.
In terms of the crypto market, this recent drop is one of several that have occurred since Bitcoin’s inception nearly 15 years ago.
For perspective, as shown in the chart below, the overall crypto market is roughly at a similar level to the market peak back in January 2018 (excluding inflation).
Multiple blockchains have progressed considerably in just a few years, something that many laypeople disregard or refuse to acknowledge.
6) More Ethereum updates post-Merge
Last year, we finally witnessed Ethereum’s complete transition from proof-of-work (PoW) to proof-of-stake (PoS) as per The Merge.
As a result, this upgrades the reliance on mining to create new Ether instead of relying on a more energy-efficient staking system, as illustrated below.
Despite validators earning ETH staking rewards in multiple ways, they still cannot withdraw the funds (except for certain exchanges and other forms of ‘liquid staking’, more info here).
However, the Shanghai Upgrade, expected in March, will finally enable the withdrawal of staked ETH as part of Ethereum Improvement Proposal (EIP) 4895, alongside other improvements.
Ethereum (let alone many blockchains) still has a long way to go in achieving significantly higher scalability (transactions per second) and lower fees whilst maintaining high system security. Eventual upgrades in the form of sharding and rollups (preferred layer-2 on ETH) will finally resolve these issues.
7) Ethereum competitors on the rise
Whilst the leading altcoin/smart contracts platform has held its dominant position over the years, competitors (i.e., the aptly-named “Ethereum killers”) have been rising the ranks, with continuous upgrades to enable or expand their smart-contracts functionality with their network.
Developers and general contributors behind Cardano, Cosmos, BNB, Avalanche, Tezos, Polkadot and several others are making ongoing improvements to said blockchains and could (one day) usurp Ethereum).
Viewing the GitHub daily developer activity is an excellent metric to help determine how much progress is being made for a given blockchain. An example of some recent data is provided below.
8) Regulator fight against crypto, particularly in the USA and Europe
Debate still rages over the exact classification of various crypto assets, notably major ones (except for Bitcoin, which appears to be considered a commodity, based on the US Commodity Futures Trading Commission — CFTC).
Thinking of Ethereum and other altcoins, debate continues about whether ETH is a security. As per the latter group, the ambiguity remains.
Why is this all significant? If a digital asset is deemed a security, its respective foundation, exchanges trading said crypto, and the organisations behind affiliated tokens could all risk receiving fines, possibly hefty ones.
Thus, many crypto and blockchain enthusiasts from the USA and abroad will watch how the US Securities and Exchange Commission (SEC) handles this situation.
The (ongoing) Ripple Labs vs SEC case exemplifies the lengthy and frustrating process of seeking regulatory clarity.
Decisions made in the world’s largest economy will likely affect crypto laws made in other jurisdictions worldwide, particularly within major economies.
9) Layer-2 and general scalability improvements
Layer-2 scaling solutions (L2s) will continue playing a pivotal role in the space for a while for improved speeds and lower transaction costs on a given blockchain.
Besides offering these advantages for well-established blockchains such as Bitcoin and Ethereum, developers behind L2s incorporate other benefits into an L2s native blockchain.
Polygon is a notable example. It remains one of the most prominent and reputable L2s in the space, emphasising Ethereum scalability.
Besides its emphasis on its scalability solutions, its network devs have also been working on Polygon ID, a decentralised and privacy-focused ID management system.
Arbitrum, ImmutableX, Optimism and Cartesi are a few other options also involved in improving scalability, especially for Ethereum.
Besides Ethereum-related scaling, Cardano’s native scalability solution, Hydra, will garner much attention this year until it has been successfully deployed.
10) Banks and other parts of TradFi loading their crypto balance sheets
It is no secret that several banks, big and small are enthusiastic about crypto or, at the very least, see sufficient potential in the space to dive into it.
Fifty-five of the largest 100 banks globally are investing in the crypto and DLT space. Some juggernauts in the sector and various start-ups have been seeking relevant talent to equip themselves for (what could be) a massive future ahead for the space.
Moreover, according to a recent announcement from the Bank of International Settlements that (from January 2025) would allow banks to hold up to 2% of their reserves in crypto assets (expand and reword).
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10.5) Notable mention: NFT Renaissance?
This remains to be seen, particularly in 2023. However, specific non-fungible tokens will grow in popularity once again instead of being a one-off phenomenon that we witnessed back in 2021.
Having said this, in the midst of all the NFT euphoria, most collectibles were way overpriced, not to mention some being outright scams.
In this article, I provide my analysis of NFTs and their potential. Whilst it is from last September, the vast majority of the info contained within is still relevant.
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None of this is financial advice, and I am not a financial advisor.
This piece contains news and opinions from either myself or the sources mentioned here. Please do sufficient research before investing in any crypto assets, NFTs and any product affiliated with this space.
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