The crypto market has been on a turbulent ride for months. From Terra’s collapse to FTX’s crash and the consequent contagion, the ecosystem has been rocked by fear and doubt. But in spite of this, the market still has its feet firmly rooted in the global financial system. In fact, crypto faithful believe that the market is headed for continuous growth. And there is sufficient crypto market information to validate this belief.
Revenue in the industry is projected to have an annual growth rate of 14.36% between 2023 and 2027. Therefore, the revenue is projected to hit $73.01 billion by 2027—a 71% increase from the $42.69 billion projected for 2023.
Also, it is expected that over 347 million people will use cryptocurrencies by 2027. This is underpinned by the projected user penetration rate of 3.8% in 2023, which will increase by 0.6% by 2027.
With Bitcoin (BTC) and Ether (ETH) hitting their all-time highs in 2021, the year saw heightened investor interest in the market. This was made evident as the crypto market cap hit $3 trillion. Also, the decentralized finance (DeFi) and the non-fungible token (NFT) spaces experienced exponential growth. This boom did not leave out the centralized finance (CeFi) market. CeFi exchanges were hotbeds for leveraged trading with attractive yields. Generally, investors found the crypto space investment-worthy, causing several venture capitalists to lead funding rounds for crypto businesses.
However, 2022 was an antithesis of the market’s 2021 performance. Following the crash of Terra, almost $2 trillion was wiped off the market. Consequently, investors’ interest in the space dipped. A survey showed that only 21% of Americans were comfortable with making crypto investments. This was a 14% drop from what it was in 2021. Furthermore, about 30% of millennials were comfortable investing in cryptocurrency in 2022. This was a significant decline from 50% in 2021.
These declines resulted from the micro (e.g. industry malpractices by Terra and FTX) and macroeconomic factors (e.g. inflation) that plagued the market. These factors, in turn, ushered in trends that have dictated the direction and performance since mid-2022 until now.
The 2022 crypto market saw it all: Inflation. Increase in interest rate. Unending debates about crypto regulations. The collapse of multi-billion-dollar companies and the resulting contagion that spread through the industry like wildfire. These events have birthed specific crypto market trends that every crypto user should watch out for as 2023 burgeons.
The goal of cryptocurrency is to offer people full autonomy over their finances. Thus, the cryptoverse is a giant system that thrives on decentralization and anonymity. However, unscrupulous actors have taken advantage of these qualities to defraud unsuspecting crypto users. This has made governments and financial regulatory authorities demand the regulation of cryptocurrencies. This demand has polarized not just the crypto community but the US Congress. While some see crypto regulations as a welcome development, others argue that regulation would thrust control to a centralized authority, which defeats the purpose of Nakamoto’s creation. So what would it be in 2023?
The truth is no one can ascertain if there would be specific guidelines for the crypto industry. One reason for this is the polarization of ideas seen in the US Congress. For instance, the division halted the progress of a crypto bill known as The Digital Commodities Consumer Protection Act (DCCPA). And the collapse of FTX, whose founder was a major proponent of the bill, did not help matters.
But there are assertions that even if the entire crypto industry is not regulated, the regulatory torchlight should be shone on one aspect of the industry: stablecoins. This is not surprising given the fall of UST and the issues surrounding USDT’s stability.
Web 3 and non-fungible tokens (NFTs) have gained traction since 2021. Blockchain and crypto devotees were agog at the prospects of owning non-fungible tokenized assets that they can use in an alternate universe. For them, it would be a new kind of world made possible by Web 3. The hype around Web 3, NFTs, and the Metaverse manifested as an array of digital arts and collectibles that populated different social media platforms, particularly Twitter.
However, as 2022 drew to a close, the hype began to fade. The industry was and is still looking to shift toward viable business utilities. For instance, there is the Starbucks’ Odyssey Rewards program where users can use collectibles known as “Journey Stamps” to access exclusive coffee experiences and benefits. Also, the entertainment industry may look toward NFTs to modify ticket sales. Generally, 2023 may usher in a wave of Web 3-based immersive experiences in the music, fashion, and beauty sectors. This will definitely drive the adoption of NFTs and Web 3 products.
Also, more market makers for Web 3 will spring up. An example of such is Gotbit.io. It is a platform-based market maker that aims to help Web 3 companies explore the potential of their products in secondary markets while offering fair prices and liquidity to users.
Artificial Intelligence (AI) is not strange to the world. From manufacturing robots to self-driving cars, marketing chatbots to high-frequency trading bots, the world has seen a plethora of AI products. And 2022 was no different. The advent of ChatGPT sparked new conversations around the future of AI vis-a-vis jobs relating to content creation, programming, data entry, among others. These conversations, coupled with Microsoft’s interest in ChatGPT, drew investors’ attention to AI-related tokens.
A crypto market analysis has shown that between December 2022 and January 2023, Artificial Liquid Intelligence (ALI) and Singularity NET (AGIX) gained 170% and 165% respectively within a week. Investors anticipate this trend to continue in 2023 as iterations of different AI products are developed across disciplines.
However, the sustainability of this trend and others (crypto regulation, Web 3, NFTs, etc.) depends on several factors that can drive or stifle their development.
Factors that drive crypto adoption include:
Following the Great Recession of 2008, Nakamoto lost faith in traditional financial systems. This led them to develop Bitcoin, the first cryptocurrency. Bitcoin and other solid crypto innovations (e.g. Ethereum) introduced a new kind type of financial system that is decentralized and permissionless. Since then, people have become increasingly wary of traditional finance and are shifting towards cryptocurrencies and other blockchain-based assets. Aside from the freedom these assets offer, investors also take advantage of their volatility to make profits that they may not make from traditional asset classes.
Below is a table showing the distribution of cryptocurrency owners/users in ten (10) countries between 2021 and 2022.
Table showing the distribution of cryptocurrency owners/users between 2021 and 2022. (Data culled from Statista)
The extreme volatility of the crypto market is both a boon and a bane. It is one of the primary factors that have driven crypto adoption around the world. People who feel that they did not take advantage of Bitcoin early enough, keep seeking other cryptocurrencies to profit from their volatile prices. But like every other highly rewarding investment, speculative crypto trading is risky. And this has made cryptocurrency investments unappealing to other people.
Two primary factors that have withheld crypto adoption are:
As explained earlier, cryptocurrencies are highly volatile assets and are, thus, risky investments. So while there are people who have a high-risk appetite, there are others for whom the volatility and risk of cryptocurrencies are a turnoff. This set of individuals also feels that cryptocurrencies are a fraudster’s go-to.
It is true that scammers take advantage of the anonymity and autonomy cryptocurrency offers. In fact, a currency like Monero is untraceable and is a fixture on the dark web. As a result, many refuse to be associated with cryptocurrencies. However, associating cryptocurrencies with crime is only a misconception. Financial malfeasance existed even before cryptocurrencies came to the fore. Therefore, cryptocurrencies are not the problem, rather the people who use them for crimes are. Moreover, various crypto market analyses have revealed that the market consists more of players who use cryptocurrencies rightly.
As of 2022, there are over 320 million crypto users worldwide. Usually, crypto users are classified according to:
Being the first cryptocurrency, it is not unusual that Bitcoin is the most adopted cryptocurrency. As of 2021, it was estimated that 114 million accounts hold Bitcoin globally. Other cryptocurrencies also record a large number of users. For example, about 3.9 million wallets hold Ethereum, while over 4 million hold USDT.
Cryptocurrencies can be used for trading, e-commerce and retail, payments, and remittance. About 42.8% of individuals use cryptocurrencies for trading, while e-commerce and retail, peer-to-peer payments, and remittances account for the remaining 57.2%. However, it is expected that as cryptocurrencies penetrate industries, peer-to-peer (P2P), business-to-business (B2B), and business-to-customer (B2C) payments will be dominant use cases for cryptocurrencies. Therefore, it is imperative for more businesses to adopt cryptocurrencies. So far, there are several blockchain companies that are paving the way for other businesses within and outside the crypto space.
Blockchain and cryptocurrency companies are businesses dedicated to the mining, storage, and or exchange of cryptocurrencies. Some of these companies include: Binance and Coinbase.
Product: Cryptocurrency exchange
Revenue: ~$20 billion
Binance is the number one cryptocurrency exchange by trading volume. It was founded by Changpeng Zhao in 2017. Most cryptocurrencies are traded on the platform. Users can also store their cryptocurrencies on Binance. However, since it is a centralized exchange, they do not have control over their private keys. Binance provides users with other services where they can stake cryptocurrencies to earn rewards.
Product: Cryptocurrency exchange
Revenue: $7.84 billion
Founded by Brian Armstrong and Fred Ehrsam in 2012, Coinbase serves as a cryptocurrency exchange for over 100 million users. In 2021, it became the first crypto company to be publicly traded. The company has no physical headquarters and its over 3,000 employees work remotely.