Shared by the editors of World Chain Finance, Coinbase released the Cryptocurrency Market Outlook in 2023. The report proposed three key themes that are expected to prevail in 2023, as well as updates on Bitcoin, Ethereum, and regulation. The following will answer for you.
1、 Institutional investors turn to high-quality assets
In the field of encryption, Coinbase expects that the selection of digital assets will shift to higher quality assets such as Bitcoin and Ethereum based on sustainable token economics, the maturity of their respective ecosystems, relative market liquidity and other factors.
2、 Creative destruction will eventually bring new opportunities
Coinbase believes that investors' willingness to increase their holdings of counterfeit currencies has been seriously affected by the deleveraging in 2022, which may take several months to fully recover. Recent events have dealt a particularly severe blow to newer projects.
In particular, some of these agreements lend their tokens to market makers using FTX as a liquidity pool. These projects now have to wait until the end of the bankruptcy proceedings to recover their assets, which means that they may not be able to use most of their native tokens in their treasury for several years. This can have an important impact on retaining developers and future application development.
3、 Basic reform ushers in the next cycle
Coinbase believes that the next market cycle for digital assets will largely depend on the development of standards and frameworks for regulated entities. Clear guidance is necessary to avoid pushing innovation to areas where regulatory requirements are weak and customers may face greater risk.
We expect that the selection of digital assets will shift to a higher quality ecology, such as Bitcoin and Ethereum, based on factors such as sustainable token economics, the maturity of their respective ecosystems, and relative market liquidity.
4、 Core viewpoints
The dramatic events in 2022 will shape the pattern of Crypto in the next few years. Although there is uncertainty around the potential impact, there are still some important features that distinguish this market from the previous Crypto winter. On the one hand, the adoption of Crypto by institutions is still firm, and many investors have a long-term perspective and recognize the periodicity of these markets. Instead of retreating, they use this environment to hone their knowledge and build infrastructure to prepare for the future.
But no one thinks that digital assets have not suffered major setbacks. The total market value of Crypto market is about 835 billion US dollars, down 62% from 2.2 trillion US dollars at the end of 2021, although it is still high compared with the history of most asset classes. In contrast, the NASDAQ index has fallen by 30% since the end of 2021, and the S&P 500 index has fallen by 18%.
However, from the perspective of Sharp ratio, throughout 2022, Crypto's risk adjusted return is actually consistent with that of US and global stock indexes, and far better than that of US bonds. Before the crash in November, the Sharp ratio of an equally weighted Crypto basket composed of BTC and ETH was - 1.08, while the average return of the US stock market was - 0.90. This is very different from the trend observed in the last Crypto winter, when the performance of digital assets in 2019 and early 2020 was almost lower than that of all traditional risk assets.
To sum up, we believe that investors' willingness to accumulate competitive currency has been seriously affected by the deleveraging in 2022, which may take several months to fully recover. The next market cycle for digital assets will largely depend on the development of standards and frameworks for regulated entities.