2023 Trend Predictions: Innovation on Bitcoin, Wall Street, and More
CEO & Co-founder of Lolli, Alex Adelman, shares his annual predictions for bitcoin and crypto in 2023.
In 2022, crypto flew too close to the sun.
In the span of just a year, an industry forged by the principles of decentralization and transparency became one dominated by an oligarchy of centralized powers that gambled away customer funds behind closed doors.
The revelation that FTX had defrauded its customers on a massive scale showed how far crypto had come from its original ideals. While FTX’s unsound business practices were an extreme example in the crypto industry, some of the practices that led to its downfall, like promoting a company-made token with unstable value, had also become relatively pervasive. Crypto was now operating with the same opacity and recklessness of 2008 Wall Street – ironically, the climate that bitcoin was created to oppose.
This moment in crypto history has been a rude but necessary awakening to the shifts the industry must now make to restore trust, liquidity, and its vision of creating a better world through sound money.
While recovery won’t be linear, they say bear markets are for building. We’ll see crypto rebuild and evolve in 7 key ways in 2023.
1. Crypto will refocus on decentralization
We will see a surge of building and development on bitcoin, the most secure, immutable, and censorship resistant digital ledger in history. In particular, developers will accelerate applying smart contracts and layer 2 solutions to bitcoin to capitalize on network's security and immutability for decentralized finance and othe creative applications.
Crypto companies will return to their commitment to using decentralized systems to make companies more immune to exploits, hacks, and corruption. Decentralized exchanges (or DEXs), which automatically facilitate transactions by using smart contracts, will become increasingly popular as they minimize points of failure and maximize privacy.
DEXs have seen rapid growth in recent years, up from 90,000 users at the start of 2020 to over 4 million by the end of 2021. We’ll see this trend accelerate in 2023 with daily usership and transaction volumes on DEXs reaching new all-time highs. Crypto’s return to decentralization will involve a renewed focus on the most decentralized and thereby secure stores of value like bitcoin, which will continue to gain crypto market share in 2023.
In 2023, the crypto industry will need to ‘rebrand’ itself in order to rebuild consumer confidence. In marketing and communications, companies will emphasize principles and practices of security, privacy, and decentralization more than ever. Crypto’s unique value proposition of making finance more decentralized and accessible to create positive goods will come to the foreground of how companies represent themselves to mainstream audiences.
We will see a surge of building and development on bitcoin, the most secure, immutable, and censorship resistant digital ledger in history.
2. Wall Street will go head-to-head with crypto incumbents
In 2022, we saw Wall Street leaders like BlackRock, Fidelity, and BNY Mellon pile into crypto. Today, 65% of the top 20 financial firms in the world have made initiatives into crypto, including launching crypto investments and building out digital assets teams. The growing presence of Wall Streeters in crypto means two things:
- Dozens of other leading financial firms that do not currently have public presence have crypto initiatives on their road maps.
- Firms like BlackRock that have made initial moves into crypto are planning further forays, including launching exchanges and wallets. Fidelity’s announcement of its plans to team up with Citadel and Schwab to launch a new crypto exchange indicates that these plans are already in motion among some of the industry’s biggest players.
As Wall Street firms with vast resources, brand equity, and diverse client offerings launch their own exchanges and wallets, crypto incumbents will face tough competition. Crypto companies will need to double down on their unique value propositions to come out on top, including their experience and expertise with blockchain technology and commitments to decentralization and security.
3. Crypto will become a powerful loyalty engine for retailers
Despite bear market conditions throughout 2022, household name brands like Starbucks, Gucci, and GameStop have forged ahead into crypto initiatives. In 2023, we will see even more retail companies across sectors leverage crypto to automate and modernize existing infrastructure, with a particular focus on web3 loyalty programs.
Following in the steps of industry leaders like Starbucks and Amex, retailers will focus on using crypto to overhaul loyalty program models in 2023, especially given low brand loyalty among consumers. According to a recent study, 27% of consumers have no brand loyalty across any retail sector. However, over 30% said receiving loyalty rewards was the most likely factor to increase brand loyalty.
Web3 loyalty programs give brands a competitive edge with digitally-native consumers that value compelling, unique loyalty rewards. By virtue of running on blockchain, web3 programs will also provide companies with newfound flexibility and scalability for building sophisticated loyalty engines than legacy points-based models.
In 2023, we will see even more retail companies across sectors leverage crypto to automate and modernize existing infrastructure, with a particular focus on web3 loyalty programs.
4. It’s regulation time
In the wake of FTX’s collapse, crypto regulation is inevitable in 2023.
The U.S. will at long last answer the question of which agency (the SEC or the CFTC) will oversee crypto. Given the complexity and diversity of crypto offerings (for example, SEC chair Gary Gensler has noted his belief that most cryptos are securities while bitcoin is a commodity), we will likely see joint oversight with both agencies maintaining their respective responsibilities.
In March, the U.S.’s first framework on crypto set a notably friendly tone for regulation to come, emphasizing the importance of promoting innovation and investments in crypto. The high-profile collapse of FTX and other industry insolvencies that have since unfolded will put a sharper edge on regulation when it comes, and pressure policymakers to install comprehensive guardrails on crypto exchanges and lenders. High-profile crypto suits like FTX, 3 Arrows Capital, and Celsius will also see their day in court this year, setting new regulatory and policy precedents.
The arrival of U.S. regulation, which has long been a looming question mark of the industry, will have positive implications for crypto and pave the way for the next bull market by increasing stability and consumer confidence.
The high-profile collapse of FTX and other industry insolvencies that have since unfolded will put a sharper edge on regulation when it comes, and pressure policymakers to install comprehensive guardrails on crypto exchanges and lenders.
The recent Future of Money and Payments report issued by the US Department of the Treasury showed the agency’s particularly optimistic focus on stablecoins – especially in using stablecoin technology for a digital dollar. In 2023, stablecoins will see increased crypto market dominance and adoption as a global payment mechanism, particularly facilitated by friendly U.S. regulation. The total value of stablecoins rose to roughly $145 billion in June 2022 from around $108 billion a year earlier. By the end of 2023, we will see total stablecoin market capitalization surpass $180 billion.
5. More countries will adopt bitcoin
In 2023, we will see some of the countries hardest hit by inflation adopt and regulate bitcoin. Some of the most likely candidates are Venezuela, Mexico, and Nigeria, all of which have both seen record-high levels of inflation and explored crypto-friendly legislation in 2022.
Not coincidentally, these countries also had some of the highest levels of crypto adoption this year. In Venezuela, crypto adoption was up 40%. Nigeria, where the naira has depreciated by over 209% in seven years, over a third of the population is invested in bitcoin. Mexico has a particularly strong crypto remittance market – the second-largest in the world in 2021, with remittances increasing by over 16% in 2022.
In developing economies where high inflation is often paired with large unbanked populations and political instability, bitcoin creates a holistic economic solution giving everyone with internet connection access to sound money and financial resources.
Companies that adopt bitcoin for payments will also spearhead the adoption and advancement of daily bitcoin-based payments solutions using layer 2 technologies like Lightning and ZK-Rollups on bitcoin. Solutions like these make using bitcoin to pay for goods and services cheap, scalable, energy-efficient, and interoperable with other blockchains – creating accessible, secure infrastructure for everyday transactions.
In developing economies where high inflation is often paired with large unbanked populations and political instability, bitcoin creates a holistic economic solution giving everyone with internet connection access to sound money and financial resources.
6. Meme tokens, fungible and non, will continue to gain adoption
In recent years, growing mainstream adoption of meme tokens like Doge and Shiba Inu, which have a total market cap of over $16 billion today, has made the internet a veritable new stock market for the people. Meme tokens are no longer considered a passing trend, but a pillar of the crypto ecosystem capturing the irreverent, internet-native culture that originated with bitcoin, which was the first de facto crypto ‘meme’ known as ‘magic internet money’.
In fact, one of bitcoin’s often overlooked achievements is that it is the best, most compelling meme of money ever created. In ‘memeing’ money, bitcoin, has also highlighted that any and all money is, in itself, a meme.
Like any great meme, all money hinges on the collective adoption of common beliefs about it to make it popular and widely used. As Israeli historian Yuval Harari wrote, money is “the most successful story ever told”. In this way, dollars and dogecoin are not so different.
Meme tokens are no longer considered a passing trend, but a pillar of the crypto ecosystem capturing the irreverent, internet-native culture that originated with bitcoin, which was the first de facto crypto ‘meme’ known as ‘magic internet money’.
From banknotes to bonds to bitcoin, all have been accepted as money because they fall within a set of rules and beliefs that are shared widely enough for the system to become and stay real. We, as a society, have been able to tell ourselves a unified story about how we exchange and store value even against rapidly changing commercial and monetary conditions simply because we have implicitly agreed to do so – an agreement that has been solidified and made invisible over generations.
If enough people believe that a given entity holds value and act accordingly, it becomes infused with that value. This is what has made bitcoin the best meme of money ever, in the same way that money is the fundamental meme of value itself. The day that Laszlo Hanyecz first bought 2 pizzas with 10,000 bitcoins in 2010, he used bitcoin as money – and so it was. 13 years later, the fact that Laszlo’s pizza purchase has gone from $40 to $233 million dollars shows bitcoin’s great and historical success in collapsing money and memes, and that behind every conception of value is simply a shared idea.
In the first month of 2023, we have seen developments that will continue to catalyze the growth of meme culture on the bitcoin network. In January 2023, the Ordinals project created a new way for bitcoin to host NFTs direclty on-chain through Inscriptions. This has served as a sort of homecoming moment for bitcoin, which saw its first NFTs hosted in 2014 using Layer 2. Ordinals Inscriptions have created a new way for a currency deeply connected to meme culture to natively host memes and other creative media on the network.
Inscriptions will also opened doors to new use cases and applications for the network, and inspire a a new wave of innovation and development on the bitcoin network. In 2023, we will see bitcoin attract a new pool of talent and developers looking to build on the network and capitalize on bitcoin's unique characteristics of decentralization, censorship resistance, and immutability of transactions.
7. Gaming will dramatically accelerate adoption
Web3 has the potential to transform the $200 billion gaming industry by giving power back to a population of over 4 billion gamers. Unlike web2 gaming models which extract value from players through microtransactions and downloadable content, web3 games use blockchain and cryptocurrency to give gamers ownership of the assets they buy or earn in games and an ability to transfer them between games or sell them on secondary markets.
In 2023, we will see adoption of web3 gaming accelerate as companies launch games with enhanced, immersive universes and gamification models. A number of web3 games have already made marked user experience improvements including Castaways, a play to earn game which saw over 75,000 weekly users in November after only a few months on the market.
Web3 gaming experiences will power widespread use of cryptocurrencies for payments, as gamers can use cryptos like Ethereum and bitcoin they earn within a game to buy and sell goods both on- and offline.
2023 will be a year of key developments in crypto. The products which will be built and refined in this year’s bear market will refocus the industry’s vision on creating a better world through sound money and lay the groundwork for global mainstream adoption through enhanced scalability, security, and user interfaces. Risk-free ways of obtaining and learning about crypto like loyalty programs, NFT airdrops, and play-to-earn games will see a surge in popularity in the first part of 2023 and bring the next 10-50 million users into crypto.
While 2022 brought new lows for the industry, it also brought new highs including transformational innovations in NFTs, DeFi, Layer 2 solutions on bitcoin, & more. The focused work that will take place in this bear market will build on these accomplishments to create the conditions for the next bull market in the later half of 2023, which will be the most transformational, impactful, and prolonged upward climb for bitcoin yet.
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