In 2022, the crypto industry entered a deep bear market as the Federal Reserve continued to raise interest rates and global liquidity tightened. This year, the total market capitalization of crypto assets shrank by more than $2.2 trillion, and the size of institutional business in CeFi declined by approximately 71.4%. The industry was devastated after a series of incidents, such as the collapse of Terra, the bankruptcy of 3AC and FTX; many giant institutions, such as BlockFi and Genesis, cannot escape from the nightmare of either being bankrupted or liquidated. However, the development of the industry did not stop here: the total amount of investment and financing in the primary market exceeded US$27.7 billion; Ethereum opened a new era of PoS and Layer2 has seen unprecedented growth; X2E pitched a new business model of GameFi, etc. This report provides forecasting and suggestions for 2023 by comprehensive analysis on developments and losses in 2022 on 7 aspects: market, data, investment, region, application, technology, and regulation.
We established regional crypto market development maturity index by inputting variables from four dimensions: percentage of crypto users in total population, CEX volume, DeFi traffic and Internet search hotness, with the U.S., Vietnam and Russia ranked the top three (in the order mentioned). There are approximately 320 million crypto users worldwide in 2022, with over 40% being Asian, and new user growth declined to 25 million from 194 million in 2021. The U.S., South Korea and Russia have the largest number of visits to CEX exchanges, with accumulative share of over 22%. The U.S. has the largest share in DeFi, with almost six times more traffic on DeFi than the second, Brazil. South America, South Africa and the Middle East are highly interested in the crypto industry. The crypto population in Southeast Asia reached 46 million, second only to North America. Cryptocurrencies are used for payments and store of value in most application scenarios in South America and Africa, with more than 1/3 of the nationals using stablecoins daily.
The infrastructure segmentis still centered with performance optimization, and service facilities are more advanced. Layer2 projects on Ethereum spring up. Multi-chain networks and high- performance L1 chains have vastly developed thanks to modularization of new L1 chains. The storage segment has seen a diversified growth that storage capacity and utilization rate have gradually climbed. Domain names, as the infrastructure of application layer of Dapps, and DID are also experiencing a boom. Cross-chain bridges are not uncommon, but there is still room for security and interoperability improvement. Although little progress has been made in Bitcoin mining, the Ethereum staking rate is only at 12.56%; a new era of staking-as-a-service is about to begin.
On application layer, DeFi’s TVL across chains is cut over 70% from all-time high; leverage is disappearing and the ROI decreased. The NFT market has cooled down to a bear market from the craze at the beginning of the year, with a decrease of 42% in market cap and a sharp decrease of 88.9% in the number of active users. NFTfi has emerged to be the next breaking point for wild growth. GameFi and Metaverse have eye-catching performance, but still are underdeveloped.
In terms of regulations, over 42 sovereign countries and regions around the world have adopted 105 regulatory measures and guidance for the crypto industry this year; the positive ones accounted for 36% of all the policies, which is a major increase from that of last year. A full- scale regulatory framework for the industry is on the agenda in all countries that regulations on CEXs are tightening and on-chain regulation might be incorporated into the system.
As the bear market continues, we hereby suggest 4 valuable indicators on bottom of the market and provide some suggestions to endure the bear market avoiding traps and enhancing assets protection. Finally, we make some forecasting for the industry in 2023. (1) The market will reach the bottom in early 2023; (2) Social tycoons in Web2, such as Twitter, will continue to pursue Web3, introducing new paradigm of SocialFi; (3) Ecological prosperity for Layer2 will happen in 2023; (4) Accelerated ZK network will start to launch; (5) Dapp chain will usher in a period of rapid growth; (6) bona fide demand for on-chain storage is growing rapidly, and the storage segment will embrace substantialand organic development; (7) on-chain regulation will be strengthened and some protocols may be endangered; (8) cryptocurrencies will be adopted as payment or authorized as fiat currency by more countries.