Biggest Trends To Watch In Cryptocurrency In 2023

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Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Last Updated January 5th 2023
5 Min Read

If 2022 has taught us anything, it's the fact that predicting crypto outcomes may not be as helpful as one would think. Yes, we've made some great predictions, and we've made some poor ones as well. However, nothing could indeed account for the hit the crypto market took this year.

We've seen a lot, from ground-breaking technological advancement to million and billion-dollar business failures. So, where does this leave crypto? 

While intelligent guesses aren't precisely definitive for crypto's future, they can get tempting sometimes. Hence, various occurrences from 2022 will indeed significantly impact 2023. With this, we can expect several trends to emerge in the crypto space.

Here are some possible responses that are likely to create that impact on the crypto sector in 2023.


Biggest Trends To Watch In Cryptocurrency In 2023

When will the crypto winter unfreeze? 

After several unrelenting beatings, the crypto scene picked up a minor recovery by October. This was courtesy of the stock market stabilization along with slow inflation. Then, famous crypto institutions burst into flames. 

The shocking but evident crypto exchange FTX failure broke the market, thus, leading Bitcoin to its lowest number in two years. Alongside Bitcoin, many other cryptos subsequently hit their lowest. Although the prices have increased slightly, the effect of FTX's demise is still lingering. On top of that, many businesses associated with FTX have also gone down. 

It's pretty likely that as 2023 progresses, businesses will be increasingly required to reveal potentially harmful connections to FTX, which is a contagion that has spread to all over the crypto market. Hence, it's unlikely that crypto enthusiasts can observe a crypto spring until the real impact of FTX's billion-dollar collapse is considered. 

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.


Is crypto legislation starting to see the light?

Despite all the controversy and clamor revolving around crypto in 2022, the U.S. government is yet to offer any definitive answers concerning crypto regulation. So, can 2023 usher in some reliable boundaries and rules?

According to DeFi Education Fund policy director Miller Whitehouse-Levine, the verdict seems less optimistic even in 2023. Miller highly doubts that the vehemently opposed political forces can successfully settle their disagreements to green-light proper crypto regulation. 

The CFTC could've been the one entity with the power to offer regulatory authority over crypto under the DCCP Act, aka Stabenow-Boozman bill, which was slowly garnering the support of Capitol Hill. 

Unfortunately, one significant backer and advocate of the bill was the disgraced founder and ex-CEO of FTX. Thus, the bill was subsequently suspended weeks after FTX's historic failure. Combining this with the significant shift in the political landscape, we may not observe many changes this year. 

However, the stablecoin regulation might observe some changes. This is the one area where regulatory and legislative action is likely to occur. The outgoing chair of the HFS (House Financial Services) committee, Maxine Waters, along with the incoming chair, Patrick McHenry have been partnering on stablecoin for years since Facebook's failed attempt to launch Libra, their very own stablecoin. 

Stablecoins have garnered massive attention despite the absence of comprehensive laws. In fact, in May 2022, the so-called UST algorithm of stablecoin depegged from USD. Thus, collapsing its creator, Terra, and wiping out around $40 billion in value while igniting the ongoing crypto winter we're experiencing. 


Crypto Vs. SEC

Another major player in crypto's continuous and developing conflict with Washington is the SEC (Securities Exchange Commission) and its chairman Gary Gensler. 

In 2022, Gensler notoriously made headlines for increasing enforcement operations against crypto companies without properly establishing regulations or norms for new sectors. Following this, even SEC commissioner Hester Pierce explained such methods as ineffective in regulating. 

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.


Will any clarification come from the SEC by 2023? 

Numerous upcoming SEC rules adjustment on security exchanges marks a significant crypto development. A proposed draft of the updated SEC guideline has been released to the public. 

This defines the security exchanges in a particular light that may threaten to entangle DeFi protocol via broad definitions. However, the rule is yet to be approved and is undergoing comment. 

The regulation which invokes industries to be governed as a securities marketplace can end up having a disastrous effect on DeFi if such regulation is implemented this year in the same form. 

It's undoubtedly impossible for DeFi protocols to be regulated, similar to the NY Stock Exchange. This means that America will have to outlaw the smart contracts following this proposal. 

Hence, Miller of DeFi Education Fund states that if such rules are implemented, they will likely be invalidated and opposed in federal court. Moreover, the SEC may soon find itself buried under political issues. 

The recent criticism of SEC and Gensler's unwillingness and lack of offering specific regulations regarding crypto assets has spiked among some democrats and Republican lawmakers. 

Following the FTX collapse in November, Rep Tom Enmer pressed Gensler to testify before congress, which attributed the numerous 2022 collapses of crypto companies to the SEC's ongoing failure to establish a proper regulatory framework for the crypto industry. 

With republicans possibly winning control over the House in the U.S., angry words coming from federal regulators can soon result in actual consequences. According to Miller, Republicans carry massive power as every regulatory agency reports to congress. 

For instance, they can claim that they may only be able to utilize the money for enforcement once the SEC adopts proper regulatory measures surrounding digital assets like cryptocurrency, which might create a significant influence. 

The above are some of the trends that you, as an investor, need to watch out for in 2023.

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