5 Crypto Trends To Watch In 2023

2022 was a tumultuous year in crypto. It was also a necessary reset for the industry to flush out bad actors and projects; we’re now in a better position for future bull markets. As a new year starts, we can put behind the gloom and start looking for new narratives that will move the industry and adoption forward, hopefully leading to a recovery in prices.Let’s take a look at the most significant crypto trends that look to be shaping up in 2023. 

1) Ethereum Staking – Shanghai Upgrade & Liquid Staking Protocols

Ethereum’s Shanghai upgrade is scheduled for the end of March 2023. The Shanghai upgrade enables ETH to withdraw their staked ETH, which isn’t currently possible. The upgrade will make ETH a better investment and yield an option for investors. In anticipation of the Shanghai upgrade, Lido (LDO), the most popular staking platform on Ethereum, is up 63% in the past week at time of writing. 

Liquid Staking tokens have had a great start to the year and we expect this trend to continue. Some of the crypto assets that could be winners from the Liquid Staking Derivatives ‘LSD’ trend are Lido (LDO), RocketPool (RPL), Coinbase (COIN), Stakewise (SWISE) and frxETH (FXS).

2) NFTs that survive will thrive

The market for profile picture (PFP) NFTs is saturated with projects, most of which won’t be successful. NFT projects who survived 2022 and kept engaged with their communities are best placed to increase their floor price in 2023. Pudgy Penguins is a great example of an NFT project that remained engaged with their community and kept building throughout 2022. Their work led to a 7x in their ETH floor price in one year. If you can identify which teams have good art, an active community and a team committed to building the project, you can buy into the project in 2023.

In 2023 we‘ll continue to see NFTs expanding beyond art into different use cases such as digital identity and memberships. We’ve already seen early adoption by Starbucks with their loyalty program on Polygon used to strengthen customer retention. NFTs expansion into Web2 is likely to be a trojan horse – users won’t know their loyalty cards and memberships are NFTs.

3) GameFi investments yielding results

GameFi projects were incredibly popular with Venture Capital firms in 2022, and when VCs show interest in a sector it typically leads to a rush of startups launching. We can expect to see plenty of games launching this year, and picking the winners from the new crop of GameFi projects and could lead to massive wins. Investing in games will be more complex than tokens as value could accure in NFT items, land or even the in-game tokens..

Play-to-earn (P2E) is likely to continue as a popular trend, but at more reasonable price levels. Only those early to games or the best competitors, are likely to be in a position to make a living from P2E. 

4) Layer 2s adoption continues growing 

Layer 2s are the solution to Ethereum’s scaling problem by offering lower fees and faster transactions. In the battle to be the best Layer 2, the main contenders are Polygon, Arbitrum, Optimism & ZKSync. Each Layer 2 has carved its own niche, with Polygon dominating Web2 onboarding via NFTs and miniscule gas fees, Arbitrum as the home to Decentralized Perpetual Exchange GMX (and it’s copycats), Optimism as the home of Synthetix, a derivatives liquidity protocol and ZKSync as the EVM compatible Layer 2, meaning everything on Layer 1 is still accessible on ZKSync (but far cheaper!). 

Whilst Polygon is best known for onboarding global brands to crypto, there is a new narrative forming around PFP NFTS. Y00ts, the popular NFT collection on Solana, announced they would be moving to Polygon in 2023. The presence of a y00ts could lead to derivative projects launching or an NFT bull run on Polygon. 

One of the biggest Layer 2 questions at the moment is when Arbitrum will launch their token. The team hasn’t announced anything yet but many users are guessing there will be an airdrop of the token to wallets who’ve been active on the Arbitrum network. Bridging over and trying out some of the protocols on Arbirtum is a good idea if you want to be eligble for the airdrop.

5) Decentralized Exchanges

After the catastrophic collapse of CeFi businesses in 2022, we’re likely to see a flow of users move to DeFi alternatives that proved their reliability during the market crash. There’s demand for easy-to-use on-chain exchanges as seen by the success of GMX with their simple user experience. 

To meet this demand, DeFi projects will improve their products and accessibility, making DeFi as easy to use as CeFi with the security of holding your own funds. A problem still to be solved for DEXs is lack of liquidity – currently liquidity is spread across different protocols and chains. Lack of liquidity means users can lose a percentage of their funds to slippage, making DEXs an unattractive alternative to CeFi.

Some DEX are also undergoing a redesign of their tokenomics. SushiSwap is one project currency implementing new tokenomics, aiming to boost liquidity and decentralization of the protocol. 

Whilst all of these trends may not play out in 2023, we’re optimistic this year in crypto will be better than the last.

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