How was 2022 for the crypto industry and what to expect ahead in 2023?

It is no doubt that 2022 has been a challenging year for global markets as a result of several worldwide downturns, including war, rising inflation, monetary tightening, and many more, which have put significant pressure on various asset classes, including cryptocurrencies. The government introduced a number of policies to encourage the adoption of cryptocurrency assets in 2022, including a 30% crypto tax and Central Bank Digital Currency (CBDC), which was introduced by the RBI. However, significant events like the collapse of FTX, the bankruptcy of Vauld, and the Terra-Luna crash overheated the cryptocurrency market. At the beginning of 2022, Bitcoin, the most valuable cryptocurrency by market capitalization, was trading at $47,686.81, with a market capitalization of $902,104,193,385. By the end of 2022, on December 30, however, Bitcoin had dropped to $16,602.59, with a market capitalization of $319,559,502,980.

How was 2022 for the crypto industry in India?

Parth Chaturvedi, Crypto Ecosystem Lead, CoinSwitch said “2022 was a difficult year for the crypto industry globally, as on a macro level, central banks ended a decade of monetary easing, resulting in “risk-on” asset prices tumbling. Crypto, being an emerging asset class, went through major corrections with added downward pressure from black swan events like Terra/LUNA implosion, 3AC and FTX bankruptcy.”

“Amidst this global backdrop, the Indian crypto industry faced its own set of unique challenges with the implementation of the new tax laws. More than the 30% capital gains tax, the inability to offset losses and the 1% TDS, made crypto trading difficult on compliant onshore exchanges. The industry witnessed a severe drop in trading volumes and also saw the diversion of funds to risky offshore exchanges,” said Parth Chaturvedi.

“However, it’s worth highlighting that on-ground builder activity seems unhindered by price movements. India’s Web3 developer community is one of the strongest in the world and over the course of the year, we have not observed a slowdown in the building of new blockchain/crypto projects. The culmination of this was the recently concluded largest Web3 hackathon in the world: ETH India, where thousands of developers came together and built >400 projects in record time. Once regulatory clarity emerges, India can be a powerhouse in leading the global crypto and Web3 industry,” further added Parth Chaturvedi.

Mr Dileep Seinberg, Founder and CEO, MuffinPay, Crypto Neobank said “The year 2022 was a turbulent calendar for the cryptocurrency markets, thanks to multiple knee jerk reactions amid the impending crypot winter. The fallout of major projects like Terr’a LUNA and failure of major exchanges such as FTX, Celsius, Three Arrow Capital and Vault further bruised the market sentiments.”

What to expect from the crypto market in 2023?

Parth Chaturvedi said “In terms of token-specific movements, BTC will be entering the last stage before the scheduled 2024 halving event and its institutional demand will be the main driver for prices. For ETH, the Shanghai upgrade will allow unstaking of ETH and will add more circulating supply. Other Layer 1 protocols would really need to justify their “ETH Competitor” status with falling developer interest, while Layer 2 Rollups are going to go mainstream as they allow for transactions to happen efficiently and only move settlements to the Ethereum Mainnet. Another altcoin pocket of interest would include Legacy DeFi tokens, which have continued to work like clockwork, even in these times of extreme stress and carnage. Other emerging themes to watch out for are DeSo (Decentralised Social), DAOs, and ReFi (Regenerative Finance).”

“Overall, for 2023, crypto markets are placed in a precarious situation with interest rates remaining high and several contagion effects still undiscovered. However, it is worth highlighting that prices don’t determine how the industry is booming at the “Build” level, with innovative projects continuing to explore new frontiers of Web3. The proverbial “tourist money” has left and rotated out of this asset class for now, while diamond hands continue to HODL,” said Parth Chaturvedi.

Mr Dileep Seinberg said “However, the upcoming year, 2023, will be looking a multiple developments around CBDCs and crypto regulations in India and across the globe. The crypto industry will continue to evolve and will become more mature. From the Indian perspective, the Union Budget which is likely to be tabled on February 1, 2023, will be a major event. The creation of the regulatory framework and MiCA will take place in 2023. CBDC applications and CBDC-based products will emerge, as was the case with UPI.As a result, projects with utility and value derived from real-world use cases will be driving the industry forward.”

“The focus will be on the growing interest in and adoption of CBDC. This could spark a new wave of CBDC-related startups and products. Better accountability will result from a focus on crypto-based auditing processes. NFT and the metaverse will develop more quickly in the future. In the upcoming months, tokenization of various real estate assets will also start to take shape. However, one should keep an eye out for projects in the Web 3.0 space in the coming year that demonstrate consistency, innovation, and technological advancement. On the other hand, a lot of attention will be paid to the global developments surrounding the regulatory framework,” added Mr Dileep Seinberg.

“Macroeconomic factors, such as inflationary pressure, rising interest rates, and the pivot away from it, as well as fears of a global recession, will play a significant role. In addition, it’s important to keep an eye on the projects’ financial health, the length of the crypto winter, the legality of the currencies, and the evolution of regulation. The year 2022 has significantly reduced investor wealth, wiping out more than $2 trillion in national wealth. 2023 is probably going to be a year of growth and consolidation. The later part of the upcoming calendar will see the emergence of new projects and potential signs of improving sentiment. How the year turns out, though, remains to be seen,” said Mr Dileep Seinberg.

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