Blockchain, cryptocurrencies and NFTs had to endure a weary year, but 2023 could be an opportunity to resolve some critical issues.
If 2021 ended with a lot of optimism towards the blockchain market, 2022 recorded a diametrically opposite trend, with the sphere of the general public now looking at cryptocurrencies with a certain suspicion, a caustic attitude which will surely mark the evolution of the sector in 2023 . It is impossible to predict the fate that awaits the crypto sphere, however the episodes of the last few months outline a future landscape which is broadly already perceptible.
A slow start with revolutions to come
Starting in May, the digital currency sector experienced a series of increasingly powerful and painful jolts, a trend that culminated in late November with the massive FTX bankruptcy. "The failure of the EARTH-Moon project first, and then FTX, led to what the British would call a ’reality check’: a forced ice shower for all the improvised and sometimes unprepared cryptocurrency fanatics", argues Leonardo De Rossi, professor of Blockchain and cryptoasset at Bocconi University. A "bitter medicine" which according to De Rossi corresponds to the beginning of a new cycle characterized by "pragmatism and skills" which will end up skimming away fanaticisms and improvisations.
Since these are recent events, everything suggests that the first quarter of 2023 will open in fact with a situation in all respects homologous to the current one, i.e. a slow decline in the market in which the most quoted tokens will be, albeit relatively stable, subject to repeated oscillations. The initial calm will therefore be followed by possible evolutions or perhaps by some storms. In fact, the interconnected crises have all too well aroused the attention of governments on the problems inherent in a sector endowed with a regulation that is still fairly lax today. Washington in particular is trying to find a system that is officially designed to protect investors from cybercrime and scams.
Some think that the Biden Administration is simply seizing the opportunity, that it is taking advantage of the dramatic moment to try to suffocate a newborn libertarian market; it doesn’t matter whether the intentions of the legislators are sincere or opportunistic, the fact remains that the United States has long stalled on defining what their points of view are on the blockchain affair and the collapse of FTX represents the fuel that will inflame the political discourse . On the other hand, the topic of cryptocurrencies has been involving the White House, the Federal Reserve, the Security and Exchange Commission and even the IRS, the tax collectors with stars and stripes, for months now. On the other side of the ocean, the Groupe d’action financière (FATF) and the European Union are in turn ready to strengthen controls on the crypto-exchange sector. Giuseppe Denaro, a crypto popularizer known by the nom de guerre of Zaragast, expects, for example, "greater sensitivity from regulators to control the bigger players in the market and same it from total madness”.
The forms of this regulatory evolution are the subject of extensive debate. There is a fear that the vital essence of the blockchain will be profoundly distorted, however greater bureaucratic attention would put in place considerable guarantees dedicated to those investors who have been little protected up to now. Efficient regulation would therefore smooth out the high-risk-high-reward volatility of the category in favor of greater stability and would potentially be able to curb fraudulent activities. Finding the right balance that makes everyone happy seems to be a chimera, yet the factors at stake offer such a jagged and uncertain overview that every option still remains on the table. There is also the risk that, as Alberto De Luigi, co-founder of Sequentia AG, points out, the Administrations will get stuck in a "battle for the declaration of income from crypto-assets, like Don Quixote fighting windmills", that they will choose a castrating regulatory path instead of fertilize the growing cryptocurrency sector. "We therefore welcome jurisdictions that know how to innovate, as was done in Liechtenstein, in the heart of Europe where the blockchain act (TVTG) entered into force in January 2020".
The decentralized court
De Rossi describes 2022 as a "Two-faced Janus who looks to the past and sees the future", a rhetorical figure that highlights how the too many setbacks of centralized exchanges are making it urgent to go back to the times when "those who invested did so because he really understood and metabolized the technical and monetary specifics of bitcoin itself". While on the one hand the FTX crisis has convinced the powers that be to take over the legislative reins of the blockchain branch, the cataclysm has also prompted the diametrically opposite situation, that of decentralized finance (DeFi). Returning to the past matrix could therefore have a strong potential of blockchain systems: instead of relying on a few individuals who hold full control of the "cash", one would rely on an infrastructure where no figure is truly dominant. Users with non-custodial wallets have on the other hand recorded a marked growth and the volume of European P2P trading has risen by 28% in the last month alone. The world of DeFi is full of potentially and harmful flaws, however it still orbits in a relatively embrional stage of its journey and the potential for growth is virtually endless. The decentralized world will hardly be reached by legislators and politicians in the immediate future, which makes it like heaven - and hell - for all those who feel more adventurous and who want to immediately ride a market that could in the future take on important dimensions, but which in the present risks turning out to be a Wild West.
Investments in 2023
Italians are savers: they tend to hide money under the mattress, an option which, although possible, is not materially easy to implement in the digital currency sector.
At the same time, some caution should be maintained. Bitcoin and Ethereum promise to be influential enough to be able to count on a growth that will show its scope in the long run, but the homologous coins are experiencing a more lame condition. “In the last 12 years, we have witnessed about fifteen catastrophic events, from which Bitcoin has always recovered,” says Andrea Medri, CFO and Co-Founder of The Rock Trading. "Furthermore, the bankruptcy of giants opens the way to a series of benefits: the selection of a winning business model and greater protection for those who invest. It is the victory of the platforms that choose to operate in regulated regimes”. Moving out of the sphere of influence of the big cryptocurrencies, the situation is plunged into deep volatility, the consensus often cited in the environment therefore suggests relying on investment differentiation without staking more than 5% of one’s portfolio in the blockchain field.
Taking into account that 2022 ended with a bear market , caution could still be the attitude of choice. Overall, however, all the experts we contacted to write this article nonetheless agree on adopting an optimistic tone regarding the technological evolutions of the future, explicitly suggesting that Big Tech and traditional financial operators will increasingly take an interest in the blockchain world.
riginal article published on Money.it Italy 2023-01-16 14:15:48. Original title: Criptovalute: ecco a cosa stare attenti nel 2023
