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Look at these emerging themes to watch out for in the crypto outlook in the year 2023
The year 2022 proved to be a watershed moment in the digital asset market. Following the market's exponential rise in 2020-2021, the year's unusual occurrences drew attention to the industry's shortcomings. They illustrated the value proposition that digital assets provide to market players vs traditional finance. After reaching an all-time high of US$3,009 billion on November 10, the crypto market value reverted in the last weeks of 2021 and 2022. The gloomy year led the market capitalization of cryptocurrencies to a 2022 low of US$727.58 billion on November 21, 2022.
The original Terra Luna collapse dealt a massive blow. While the subsequent downfalls and bankruptcies were disastrous, the repercussions from the FTX-Alameda catastrophe were practically unforeseeable. It wasn't simply a setback; it was a massive breach of ecological trust.
Many assets in the crypto market were positioned themselves for good returns at the end of the year before the crash of FTX (FTT-USD) in early to mid-November. Unfortunately, the FTX collapse and other events made 2022 one of the worst years for crypto investors since the sector began in 2009 with the advent of Bitcoin (BTC-USD). In terms of both year-over-year (-64%) and fall from an all-time high (-74%), 2022 will be the second-worst single-year performance for Bitcoin since 2011. This bear market cycle, however, is unique from prior ones. Bitcoin's crypto market domination climbed from 32% in early January 2018 during Ethereum's (ETH-USD) peak to over 50% during the 2019 crypto market bottom.
As several ICO cryptocurrencies failed to recapture all-time highs during the last bull run, Bitcoin's dominance grew. Given the extent of the cryptocurrency selloff, Bitcoin's market dominance of 38% is low in comparison to past cycles. Other assets have outperformed Bitcoin throughout this crypto winter cycle. ETH dominance numbers that were indicative of peaks may now be moving to dominance bottoms if ETH is ever to exceed BTC in terms of market domination.
From its high to its bottom, the cryptocurrency market cap plummeted by 75.8%. Cryptocurrency market capitalization fell from US$1,429 billion (65.4%) to US$756.15 billion at the end of 2022. Due to defaults and bankruptcies, the crypto market cap has reverted to levels last seen at the start of 2021. In 2021, the market capitalization of cryptocurrencies climbed by US$1,426 billion (188%), reaching US$2,185 billion at the end of the year. Terraform Labs and FTX disasters drove the cryptocurrency industry into a spiral, with fraudulent behavior and asset losses undermining investor trust and drawing regulatory and legislative investigation.
Bitcoin (BTC) and Ethereum (ETH), the top two cryptocurrencies, lost 64% and 68% of their value year over year, respectively, while Ripple (XRP) fell to ninth position following a 59% annual decrease. Despite the negativity, a few winners shone out. GMX (GMX) and Trust Wallet Token (TWT), both of which are in the top 100 cryptocurrencies by market capitalization, increased by more than 90% and 100%, respectively. Tron (TRX) plunged by 28%, while Binance coin (BNB) fell by 52%, exceeding its top 10 competitors. However, there have been some significant losses in the bitcoin market. Cardano (ADA) plunged 81% and Solana (SOL) fell 94%, dropping them both out of the top 10 cryptocurrency rankings. Web3 problems and a drop in NFT trade volumes compounded the gloomy mood.
Bitcoin (BTC-USD) was selling at over US$44,000 in 2022, and most analysts projected that it would soon reach the mythical US$100,000 barrier. Instead, at a little under US$17,000, Bitcoin is in a historically severe down market. Bitcoin appears to be in trouble in 2023, as it confronts not one, but two "death crosses."
Following a series of landmine occurrences in 2022, 2023 has a few bullets to dodge. While COVID's return and Genesis Trading's solvency difficulties are unlikely, they have the potential to create significant swings to the negative. While the short-term outlook is gloomy, 2023 will provide once-in-a-decade opportunities to invest in broad and specialist crypto topics. Themes such as zero-knowledge proofs, NFT infrastructure, and web3 gaming are projected to experience significant growth and value accrual in the future cycle.