First Mover Asia: 3 Crypto Predictions for 2023 From Digital Asset Manager 3iQ's Research Head
Good morning. Here’s what’s happening:
Prices: Three days before the close of 2022, bitcoin inched proudly upward. Solana continued its most recent tailspin, while other cryptos were mixed.
Insights: Mark Connors, head of research for digital asset manager 3iQ, sees a crypto rebound by the third quarter of 2023 and financial services firms and others playing a more proactive role in the development of regulation.
Bitcoin Remains Defiant at the Close of a Dreadful Year
By James Rubin
On the third to last day of a historically, massively, tragically bad year, bitcoin held its head proudly if barely above water.
The largest cryptocurrency by market capitalization was recently trading just above $16,630, up a few fractions of a percentage point over the past 24 hours. BTC has now been balancing roughly between $16,400 and $17,000 for 13 days amid investor sluggishness typical for a year's closing days. Crypto markets would also rather forget acquaintances – auld and new – to 2022 even as they gird for more rough times ahead in 2023.
"Bitcoin continues to happily tread water and watch the storm pass as it fluctuates in a range of around $16,000-$17,000," wrote Craig Erlam, senior markets editor for foreign exchange market maker Oanda, in an email. "That's broadly been the case over the last couple of weeks and it doesn't look like changing in the coming days, barring any unexpected headlines."
Erlam added: "The question for many now is whether it has bottomed and how long it will take confidence to return, enabling a strong recovery. I'm not convinced by either in the near term and think there are plenty more twists and turns to come early next year."
Ether was recently changing hands slightly below $1,200 but up 0.8% from Wednesday, same time. Other major cryptos were mixed with ETC, the token of the Ethereum Classic blockchain project, rising about 4% and popular meme coin SHIB up nearly 3%, but SOL's sad saga continuing, with the token of the embattled Solana blockchain, plummeting more than 12%. SOL has dropped more than 30% over the past week from over $12 to about $8.35, and is off more than 95% since January 1, the decline largely stemming from the platform's ties to the collapses of the Terra ecosystem and crypto exchange FTX.
The CoinDesk Market Index (CDI), an index measuring cryptos' performance, recently jumped 0.21%.
Equity indexes closed 2022's penultimate trading day on a high with the tech-heavy Nasdaq and S&P 500 climbing 2.6% and 1.7%, respectively. The S&P notched its biggest gains in a month. The Dow Jones Industrial Average (DJIA) rose 1%. Investors remain wary about China's retreat from Covid lockdown, which could jolt its stagnant economic growth but also raise global, energy prices.
Security remains a key issue for the crypto industry. In an interview with CoinDesk TV's "First Mover" program on Thursday, Ari Redbord, head of legal and government affairs at crypto sleuthing firm TRM Labs, said that cracking down on crypto hacks will require hardening cyber defenses. The former U.S. Justice Department prosecutor said that finding strategies to identify and trace illicit activity will mean developing better “blockchain intelligence tools” that can identify new mixers before bad actors can get to them.
According to TRM Labs, more than $3.6 billion in funds have been drained in crypto this year. About 80%, or roughly $3 billion, targeted decentralized finance (DeFi)
Earlier in the program, CoinDesk Indices Managing Director Andrew Baehr, said that although bitcoin's value declined about 64% year-to-date, CoinDesk research showed that BTC and ETH returns in 2022 per unit of risk were about the same as equities and significantly better than bonds.
““We want to underscore this is not too different from what you would see in traditional markets, especially stock markets," Baehr said. "Look at some of the darlings that people were really excited about 18 months ago in stocks, they’ve lost 80-90% of their value as well.”
|Cosmos||ATOM||+2.8%||Smart Contract Platform|
|Solana||SOL||+2.6%||Smart Contract Platform|
|Avalanche||AVAX||−2.1%||Smart Contract Platform|
Fund Manager 3iQ Has 3 Bold Predictions for 2023
By James Rubin
A year ago, before the crumbling of the Terra ecosystem, the implosion of Three Arrows Capital and crypto lending platform Celsius and disgrace of exchange giant FTX, who could have foreseen that the digital asset industry would be limping home in 2022. A year ago, bitcoin was still percolating over $47,000 and seemed likely to remain unruffled by the economic headwinds already buffeting the world.
What's in store in 2023?
In an interview with CoinDesk, Mark Connors, head of research for Canadian crypto asset manager, said he expects a price rebound in 2023 and TradFi companies and others to play a more active role not only in finding uses for blockchain technology but in the development of regulation. "Leadership will come from the corporate side, not the regulatory side," Connors said.
CoinDesk: What's your first prediction for 2023?
Connors: Leadership will come from the corporate side, not the regulatory side. We're looking for regulatory clarity so that investment firms can own coins and invest in existing Layer 1s. Whether whether it be bitcoin, Ethereum or Layer 1s, we believe the incentive structures of companies will make them take a leadership role and act and not wait for legislation to both continue to create their own industry blockchains as well as leverage the existing Ethereum EVM, and to a lesser degree, the bitcoin blockchain as they transfer both B2B and B2C functionality to blockchains. That was the most silent, underreported action in 2022. TradFi is going to lead the charge, not native crypto and not regulatory agencies. That's going to be the curveball.
CoinDesk: What else do you foresee for the year ahead?
Connors: 2023 will be a barbell for digital assets. It will be the core Layer 1s, Bitcoin, Ethereum, and it will be the use of NFTs by TradFi companies, which is a corollary to my first point. In 2022, the ecosystem was you had your alt level ones like Solana, Algorand and the like providing the bulk of the non-Bitcoin, Etherium, stablecoin market cap. Seventy percent of market cap in digital assets of the last 12 months. So that 30% of market cap is going to shift from alt level ones and level twos and other projects to be more NFT related. The NFT technology from a security and verification standpoint has greater integrity, and a higher trust and security factor. Given it can be nested with the Etherium ecosystem and can be bridged, it will have functionality and security. I think you'll see the most growth in NFTs.
CoinDesk: What's going to happen to crypto prices? Do you see a rebound, and if so, when?
Connors: We are so dollar based. Dollar strength destroys risk assets. The Fed has two mandates, price stability and full employment. But they have taken on a third mandate. They have a trilemma, which is wonderful because no economic system can run on two poles. My third prediction is that before the third quarter, the Fed will stop quantitative tightening. They will stop because the Treasury market would have experienced a failure like September 2019. Money markets will crack, the Fed will print and crypto will reverse as sharply as it did in March 2020. We're still young as a market. We don't conrol our own destiny on price and adoption.
|Cosmos||ATOM||+2.5%||Smart Contract Platform|
|Solana||SOL||+1.9%||Smart Contract Platform|
|Avalanche||AVAX||−2.5%||Smart Contract Platform|
2:45 p.m. HKT/SGT(6:45 a.m. UTC): Chicago Purchasing Managers' Index (Dec.)
6 p.m. HKT/SGT(10 a.m. UTC): Baker Hughes U.S. Oil Rig Count
In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:
Alameda Research Liquidates Ether-Based Holdings for Bitcoin; A Silver Lining in BTC and ETH Performance
"First Mover" dives into the day's top stories, including the sudden sale of several tokens held by Alameda Research worth some $1.7 million. On-chain data shows the ether-based token holdings were liquidated in a span of just a few hours and ultimately exchanged for bitcoin. Plus, CoinDesk Managing Director Andrew Baehr discussed a silver lining in the past year's performance of BTC and ETH. And, Ovie Faruq (aka OSF) NFT artist joined CoinDesk reporter Eli Tan to discuss the state of the NFT market.
Step Aside, Ethereum: Blockchain Project Stacks Wants to Bring Smart Contracts to Bitcoin: The project claims its Bitcoin sidechain can unlock “hundreds of billions of dollars” in DeFi on bitcoin.
Bitcoin, Ether Did Better Than You Think in 2022: CoinDesk research shows that per unit of risk, bitcoin and ether performed significantly better than bonds and had similar results to equities in 2022.
It’s Been a Year Since NFTs Exploded. Where Are We Headed?: For NFT collectors and creators, this past year marked noticeable changes within the market. From utility to community building, here are just a few trends that will push the space forward in 2023.
DeFi Platforms Need to Beef Up Security, Former Prosecutor Says: Ari Redbord, who now works at crypto sleuthing firm TRM Labs, says attackers are becoming more sophisticated.