2023 Crypto Assets Market Outlook

In 2022, interest rate hikes became a major factor affecting global asset markets, and Crypto Assets were no exception. Additionally, some events within the industry, such as the collapse of a major exchange, dealt a heavy blow to the market. These events highlighted the issues of trust in centralized trading, prompting industry institutions to actively explore a more transparent and healthier trading ecosystem. Decentralized exchanges and compliance are both potential development directions.

Regarding the situation of a large crypto assets company, it currently seems unlikely to further deteriorate to the point where a large amount of Bitcoin held by its asset management institutions would be forced to sell. Therefore, from the perspective of the main driving factors behind the market decline, there are currently no signs of large-scale liquidation risk.

On the Ethereum side, its foundation has made it clear that even if it requires putting aside other functions, the Shanghai upgrade in March must proceed as scheduled. This undoubtedly injects a strong dose of confidence into the industry. Over the past few months, the market's focus on Crypto Assets management has mainly concentrated on staking, and the Shanghai upgrade will effectively address the staking liquidity risk issues that plagued many in 2022.

Historical experience shows that the Ethereum Foundation often chooses a favorable macro environment when making significant strategic decisions. Therefore, March may be an important time point. In addition, several layer two network projects based on zero-knowledge proof technology have announced plans to launch their testnets or mainnets in the third or fourth quarter of 2023.

From the perspective of internal industry factors, there are no obvious potential risks in the coming year; instead, there are two positive factors: one in March and the other in the fourth quarter. Therefore, it currently seems that there is a lack of factors that would trigger a further decline in the market due to specific events.

In addition, there are two points worth noting: first, there are about 470 days until the next Bitcoin halving. If the cyclical pattern of the past ten years continues, a new round of market activity may start to form by the end of this year; second, from the perspective of the Crypto Assets market cycle, it typically shows characteristics of short bull markets and long bear markets. The current bear market has lasted for more than a year and may be coming to an end.

Based on the above analysis, we believe that the most painful or rapid decline stage of this bear market has passed, and the market is in a phase of gradually restoring confidence, looking for new narrative logic, and consolidating.

Looking ahead to 2023, considering the interest rate hike cycle and the driving factors within the industry, it is expected that there may be a wave of market hotspots in the second quarter, and another wave of market trends may occur again in the fourth quarter of the second half of the year. Unless there are special, extremely negative black swan events or a severe deterioration of the external macro environment, the market bottom for this round of Crypto Assets may have already appeared, and a significant upward trend is expected to emerge intensively next year.

I hope that in the new year, everyone can continue to maintain their firm belief and reap happiness!