#Crypto2023

In 2022, each of us has left behind burning memories in the long river of time. For Web3, we have also witnessed many major events in the economic field together with everyone, marking many unforgettable moments on the timeline.

2022 is a challenging year for blockchain and Web3. The entire crypto world and the global economy have fallen into a trough. After the Terra crash in May, leading institutions such as San Arrow, Voyager Digital, Celsius Network, BlockFi, and FTX fell like dominoes. Affected by this, many Web3 projects did not get ideal financing, or the amount of the first round of financing was greatly reduced compared with the prior commitment. If the Luna incident made capital hesitant, FTX directly dissuaded capital. Many mainstream capitals not only completely stopped investing in Web3, but also began to liquidate historical investments. Since FTX went bankrupt, experts have begun to label Web3 as a Ponzi scheme. The Ponzi scheme is essentially to pay the investment of the next round of investors as investment income to the previous round of investors, and so on, involving more and more people and funds. Similarly, FTX continues to use the deposits of new investors in its exchange to pay interest and short-term returns to early investors, and the money of these early investors has been transferred to its affiliated hedge fund Alameda research.

Although cryptocurrencies are currently in a state of decline, the long-term development of Web3 is still very promising. So what are the Web3 market trends worth paying attention to in 2023?

1. The future trajectory of the Fed’s policy - next year, the rate will rise by more than 5% and there will be no rate cuts

Black swan events frequently occurred in 2022. In addition to the serious financial problems of Terra, FTX, and Three Arrows themselves, the root cause is inseparable from the tight cash flow caused by global monetary tightening. The rise in global interest rates is undoubtedly a double whammy for the cryptocurrency industry, which is already in a bear market. As long as the era of rising global interest rates does not stop, the bear market in the cryptocurrency industry will not end. The prosperity of the crypto market in 2021 is precisely because the Federal Reserve has printed a large amount of money, which has made the US dollar cheap, causing the market to buy a large amount of risky assets, thereby stimulating the rise in prices of various assets.

The latest dot plot released by the Federal Reserve shows that the final terminal interest rate should fall between 5.1 and 5.3%, which means there is at least another 75 basis points of interest rate hike, not considering interest rate cuts. This will be a continued negative for high-risk assets such as cryptocurrencies.

The deteriorating financial environment has brought more risks to the cryptocurrency industry. Due to its own characteristics, the cryptocurrency industry has a higher leverage ratio than traditional industries. In the context of global capital tightening, the higher the leverage ratio, the more obvious the downward trend of products.

2. The government also seems to be stepping up its efforts to regulate the digital industry

Government regulation of Web3, especially cryptocurrencies and NFTs, has been increasing.

Earlier, Hong Kong has passed the Anti-Money Laundering and Terrorist Financing Bill, and is drafting the regulatory provisions for licensed virtual asset exchanges under the new system, and will open a public consultation. The regulations clearly stipulate that asset exchanges must apply for a license from the Hong Kong Securities and Futures Commission, and must conduct due diligence on customers and store records, and must submit audited accounts and financial information to the Hong Kong Securities and Futures Commission on a regular basis.

Different states in the United States have different ways of regulating virtual asset platforms. Some state financial regulatory authorities require operators to obtain business licenses, while federal agencies such as the U.S. Securities and Exchange Commission (SEC) can regulate virtual asset-related businesses, such as handling security tokens or preventing money laundering.

The European Union has proposed a draft "Crypto-Asset Market Regulation (MiCA)", which intends to stipulate that virtual asset operators should apply for licenses from local competent authorities and set regulations for operator information disclosure, investor protection, organizational governance, and prevention of market manipulation. If it is finally passed, it is expected to take effect as early as 2024.

In order to ensure that they can cope with sudden and large withdrawals of deposits in the traditional financial sector, commercial banks must deposit a proportion of their cash reserves in the central bank. This amount is the deposit reserve. In the world of cryptocurrency, there is no mandatory disclosure of reserves. Even so, after the FTX incident, many cryptocurrency exchanges around the world disclosed their reserves. According to Nansen data, Binance announced asset reserves worth approximately US$52.2 billion, including 24% of BUSD and 21% of USDT. Subsequently, several exchanges including OKX, KuCoin, and Crypto.com also announced the currencies and quantities of their reserves. There is no doubt that this is done to give investors confidence, indicating that they will not be "insolvent" like FTX, which can stabilize and even rebuild industry confidence.

Bitcoin halving

The Bitcoin halving in 2024 will have a positive impact on the crypto industry. So far, Bitcoin has undergone three halvings, in November 2012, July 2016, and May 2020. The fourth Bitcoin halving is expected to occur in May 2024. By then, Bitcoin will be halved from the current 6.25 to 3.125.

We can safely expect that each Bitcoin halving cycle will be followed by a bull run. In 2016, BTC was worth $665 before the halving and reached $2,250 a year later. The 2020 halving took place in May, and by the end of the same year, the price of BTC reached $29,000 — the highest price of the year.

Historical data shows that bull markets are followed by bear market conditions that last about 12 months. The value of Bitcoin usually drops sharply and starts to climb again a few months before the next Bitcoin halving cycle. Bitcoin bull Tim Draper is firmly bullish on Bitcoin. He predicts that by the end of 2023, the price of Bitcoin may rise to $250,000, a surge of 1,400% from the current price. Given the pattern of previous Bitcoin halving cycles, another bull market is likely to come.

4. SocialFi’s opportunities to go beyond its niche

If 2019 and 2021 are the first years of DeFi and GameFi respectively, then 2023 can be said to be the first year of the Web3 social explosion.

A decentralized social network is a type of decentralized application (DApp) that uses smart contracts on the blockchain to allow users to publish content in an uncensored environment. Some decentralized social platforms will also use NFTs, native tokens, etc. to allow creators to earn income from their own content, and users can also use tokens to obtain upgraded features, purchase in-app products, or support their favorite content creators. Taking the Web3 writing platform Mirror as an example, creators can cast published content into NFTs, set up a subscription system operated by cryptocurrency, and even use the tools on the platform to establish a decentralized autonomous organization (DAO)

In addition to the Mirror writing platform, the live broadcast + NFT market social platform for actresses has gradually come into people's sight. Kanojo DAO aims to create an open ecosystem for social media creators to interact with users in a simpler mode. Create a decentralized environment that is easy for creators and fans to interact. Different from the unequal regulatory rules, platform profit exploitation, copyright and royalties that are common in the traditional market, the ecological problems indirectly restrict the development of the entertainment industry. Based on these factors, Kanojo DAO provides users with choices in social entertainment, ensures that creators can hold the copyright of their works through blockchain technology, and allows all platform users to share their content freely. Are you tempted?

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