By Manoj Dharra
In recent months, the financial markets’ persistent stop-and-start pattern has made it difficult for allocators to deploy money in a meaningful way across most asset classes.
However, in the case of cryptocurrency, the insolvencies and deleveraging events of 2022 have culminated in a confidence crisis, which is expected will prolong the down cycle for at least mid-way 2023.
Analyst believe going forward the liquidity constraints may also hamper short-term market operations as numerous institutional organizations deal with assets frozen in FTX’s bankruptcy proceedings.
Against this backdrop analysts expects key themes to prevail in 2023
- Institutional investors will chase sustainable tokenomics.
- Will new opportunities emerge in 2023
- Exploring new use cases for NFTs
- More clarity on regulatory front
- Reform of Crypto participants
- Measures to attract Institutional investors
- More interest in the Defi
- Crypto crimes: Will hacks/rug pull fall in 2023
The Year 2022 For Cryptocurrencies
Was a historic year that saw huge transformation in the crypto environment that will last for several years. Nonetheless, despite the uncertainty surrounding the potential impact, there are significant differences between this market and the previous crypto winter.
But no one is arguing that digital assets haven’t faced an important setback. The total market capitalization of cryptocurrencies is currently around US$810 billion, down over 65% from $2.2 trillion at the end of 2021, albeit still high relative to most of the asset class’ history.
Comparatively, the Nasdaq is down 30% since the end of 2021 and the S&P 500 down 18%.
From a Sharpe ratio perspective however, crypto’s risk-adjusted return actually performed in line with US and global stock indices through 2022 and did much better than US bonds.
The Way Forward 2023
For one factor, institutional crypto adoption remains solid. Many investors take a long-term view and understand that these markets are cyclical. Rather than taking a step back, they are exploiting this setting to sharpen their skills and lay the groundwork for the future.
With India leading the G20, there have already been various conversations concerning the scope of industry recognition and regulation. Many believe that 2023 will be a watershed moment for cryptocurrencies.
With all of this and more on the horizon, the coming year looks good for crypto enthusiast who have maintained their confidence as well as critics who continue to doubt their validity.
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