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Crypto Industry Outlook

2023 Crypto Industry Outlook

Read our eight predictions for cryptocurrencies over the coming year and what it means for consumers, businesses, and investors.

The crypto industry had a rough year in 2022 after the failure of Terra/Luna and FTX sparked broad declines in crypto prices. But despite these challenges, the industry’s long-term growth prospects remain strong. New developments in everything from central bank digital currencies (CBDCs) to Web3 infrastructure promise to accelerate growth over the coming year.

Let’s look at eight predictions for cryptocurrencies over the coming year and what it means for consumers, businesses, and investors.

#1. Retailers Start Accepting Digital Currency Payments

Satoshi Nakamoto originally designed Bitcoin to cut out financial intermediaries and streamline online payments. While many cryptocurrencies have become more property-like than currency-like since the original whitepaper, a growing number of retailers are embracing crypto payments as a way to reduce transaction costs and enable micro-transactions.

In fact, according to Deloitte, nearly 75% of surveyed retailers plan to accept cryptocurrency or stablecoin payments within two years. Most retailers appreciate that crypto remains early-stage, but 83% expect customer interest in digital currencies to increase, and over half have already invested over $1 million into enabling digital payments.

#2. CBDC Projects Continue to Make Headway

Central bank digital currencies (CBDCs) have been picking up steam, with over 100 countries exploring the idea of a digital currency in one form or another. Most notably, China debuted its e-CNY CBDC at the 2022 Winter Olympics. Since then, the country’s citizens have set up over 250 million e-CNY wallets and transacted billions of yuan.

In the United States, the Federal Reserve released a discussion paper examining the pros and cons of a U.S. CBDC in January 2022. And by the end of the year, the Federal Reserve Bank of New York and the Monetary Authority of Singapore teamed up to explore wholesale CBDCs that could help improve cross-border transactions.

#3. Web3 Infrastructure Becomes More Mature

Web3 promises to usher in a new era of decentralization, moving away from gated social networks and toward user-controlled data. While the underlying infrastructure remains early-stage, decentralized domains and distributed hosting could see a significant uptick in usage in 2023 as critical projects mature and adoption rises.

Crypto Industry Outlook
Source: VitalFlux

For example, IPFS (a distributed hosting service) increased its monthly active users from five million in 2019 to over 50 million in 2022. Meanwhile, Unstoppable Domains (a crypto domain name service) achieved a $1 billion valuation after raising a $65 million Series A in July 2022, boosting its growth potential in 2023 and beyond.

#4. Ethereum’s Ecosystem Expands without Gas Limits

Ethereum 2.0, launched in September 2022, ushered in the Proof-of-Stake (PoS) era. While ETH gas fees remain expensive, the Merge laid the foundation for future gas optimizations. Developers plan to introduce Sharding capabilities in 2023 that will allow the network to reduce congestion and increase throughput – lowering gas fees significantly.

At the same time, decentralized finance (DeFi) will continue to grow atop the Ethereum blockchain, and institutions will increasingly tokenize real-world assets on the world’s largest smart contract-enabled blockchain. The increasing usage of the Ethereum blockchain could help ETH prices recover from their slide in 2023 and beyond.

#5. Utility NFTs Become More Ubiquitous

NFT art and collectibles have become a multi-billion dollar asset class over the past two years. But under the hood, many NFT collectors are actually buying into a community. Meanwhile, NFTs have become popular for creating, buying, and selling in-game characters and items. These are examples of the growing utility of NFTs.

At the same time, a growing number of household brands have adopted NFTs. For instance, Tiffany’s released a collection of pendants for CryptoPunk holders. Other companies enable anyone to purchase NFTs representing an ownership stake in an asset. For example, Royal enables fans to invest directly in songs and earn streaming revenue.

#6. Decentralized Social Networks Replace Twitter

Web 2.0 social networks are quickly falling out of favor. Most notably, Elon Musk’s Twitter takeover has sparked a lot of controversies, leading many users to seek alternative platforms. These trends could lead to the development of decentralized social networks that replace today’s social media giants as the town square of tomorrow.

Decentralized networks could address several shortcomings of centralized social networks. For instance, they are censorship-resistant and open to everyone, offer improved monetization frameworks for content creators, and afford a high level of privacy and anonymity. Some examples include Minds and Mirror.

#7. Blockchain Finds More Corporate Applications

The global blockchain technology market will reach nearly $1.5 trillion by 2023, according to Grand View Research, as companies adopt the technology to address real corporate challenges. For example, blockchain technologies could help improve everything from event ticketing to tracking packages moving through a supply chain.

Crypto Industry Outlook
Source: The Block Crypto

Many companies are already piloting blockchain projects to address critical business challenges. For instance, Volvo and BMW use blockchain technology to track raw materials used in lithium-ion batteries from the source to provide provenance. And Mercedes is working on a project to track CO2 emissions in its cobalt supply chain.

#8. Metaverse Interactions Become More Common

Many people dismissed the Internet as a fad in the 1990s, but improving technical capabilities and network effects have made it an essential part of our everyday life today. Similarly, many people dismiss the metaverse as a fad, but improvements in virtual reality technologies and network effects could make it a part of our future lives.

Cryptocurrencies will play an essential role in the metaverse, enabling people to bring avatars and items across different metaverse platforms. In addition, cryptocurrencies could open up novel economic and monetization models for these platforms, making them a more vibrant place for creators, and by extension, for users.

The Bottom Line

The crypto winter may have put a damper on crypto prices, but the industry’s long-term growth prospects remain strong. From Web3 infrastructure to the metaverse, many crypto-driven projects continue to gain traction among consumers, businesses, and investors.

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The above is for general information purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax, or other advice specific to your particular situation.

Justin Kuepper