News Updates December 27, 2022

1. 10 predictions for crypto in 2023

Expect blockchain adoption to increase in the year ahead — in addition to the culture wars surrounding it.

This year has been a particularly tumultuous one for the crypto market, with many decentralized and centralized entities failing or struggling to stay afloat. It feels as though we are in the final stages of the bear market, with bad actors and practices being purged in a process that is both dramatic and necessary for the maturity of the entire system. Despite this, the Web3 technologies that emerge from this crypto winter will change everything. 

Web3 represents the next evolution of information exchange, with similarities to the transformation from a largely agricultural society to a more industrial one. It is a computing fabric that is designed to put humans at the very center and prioritizes privacy. Blockchain technology will bring about a new way of interacting with the internet and will fundamentally change how we engage with each other. As we move into the future, here are some predictions for what we can expect to see on the other side, in 2023.

1) Crypto venture capital funding will continue to decline through the first half of 2023, but that is not necessarily a bad thing; rather, it is normalizing to a point that is rational. Investors don’t want to catch a falling knife, so they are waiting for things to bottom out while also weighing broader macroeconomic concerns and the global recession risk. At the same time, new settlement (layer 1s/2s), interoperability (layer 0/bridge), lending and trading protocols will continue to get funded to fill the vacuum resulting from the changes resulting from the recent hacks, treasury shortfalls, regulatory changes and exchange collapses.

2) In 2023, the initial Web3 anarchist ethos that rejected the need for big brands will go away. Participants will finally realize that when there is no outside money from big brands, then all you have is a token whose only value comes from user and speculator dollars. Instead, projects will embrace large brands and the ad, marketing and sponsor dollars they bring so that the dream of Web3 (token representing microequity) can be achieved via divvying up meaningful outside capital among actual users. Web2 brands — such as Nike, Starbucks and Meta — will continue to experiment in Web3, with a continued focus on nonfungible tokens (NFTs) as the preferred format, and with an emphasis on customer acquisition and engagement over monetization.

3) People will realize that the way many have been thinking about community in Web3 is bullshit. “Community” was often simply a lovely word used primarily to describe “a bunch of speculators in a Discord sharing a common dream of rapid wealth who abandon the project once the growth carousel stops moving.” While we’ll continue to see exceptions to the rule — such as strong, engaged decentralized finance communities, as well as online-to-offline decentralized autonomous organizations like LinksDAO — what we’ll realize in 2023 is that the whole Web3 ideal of project/community fit was frequently just project/speculator fit. So, we can’t afford to ignore the fundamentals of actual product/market fit.

4) As Web3 app development costs go down and user acquisition costs go up, there will be an emphasis on quality and discovery. Web3 will have its App Store and AdMob moments, which will help developers and users find each other more efficiently. L1s and wallets will initially compete for this position, but a new player will likely take over. Breakout Web3 apps in 2023 will look more like the top-downloaded and top-grossing apps in the early days of mobile — simple user experience and graphics with intuitive but innovative engagement and monetization mechanisms — like Angry Birds in 2009.

engagement and monetization mechanisms — like Angry Birds in 2009.

5) The current trend toward “stability” and “sustainability” in games — in some ways resulting from the bumps of Axie Infinity — will spawn a wave of products with built-in stability but that lack the dynamic boom-and-bust nature of most crypto speculation. This will create a flat, muted player experience, which just feels like a copycat version of existing Web2 video games. Over time, game developers will relearn that market speculation is part of the fun and try to incorporate it in healthy, responsible ways.

6) Web3 will continue to offer a solid niche, with apps that are functionally clones of existing businesses, but with some basic blockchain components. These apps will carve out a market niche of users who want that same traditional core product offering but have some affinity for Web3, similar to many early internet companies (such as Amazon as a web bookstore) or mobile companies (such as Robinhood as a mobile stock trader). They will differentiate largely on marketing and experience rather than on core product offering. A few of them will take moonshot bets at truly paradigm-breaking innovation, a la Amazon.

7) To deal with compliance costs and overhead, blockchain apps will increasingly rely on existing, large-capitalization tokens to power token-related mechanisms. Ethereum will continue to delay its roadmap in 2023, but once it does eventually ship sharding to reduce gas fees, alternative L1s will see a big dropoff in interest.

8) Stablecoins will find more use cases outside of crypto capital markets, which will drive more mainstream adoption — primarily among businesses — and innovation within Web3. Governments and private blockchain research and development will continue, with some announcing centralized public infrastructure like central bank digital currencies or marketplace infrastructure.

9) Culture wars around crypto will heat up toward the end of 2023, leading into the United States election cycle. Booms and busts will continue, with accidental hacks (like Wormhole), over-aggressive risk exposure (like Terra) and outright fraud (like SafeMoon). More politicians will take strong stances on crypto. However, the U.S. government will continue to be indecisive on regulation, to the detriment of the domestic industry. Any regulation that does emerge will be patchwork and could still allow risky projects to slip through the cracks.

10) As builders develop through the bear market, there will be a point in 2023 when new growth areas start emerging beyond existing prevailing narratives like NFT profile-picture projects, play-to-earn projects, alternative L1s, etc. The new narratives will propel the next cycle, and hopefully, these fresh frameworks will drive real consumer utility and adoption, bringing in several hundred million new crypto users/wallets.

The uncertainties of the future also represent opportunities, and those who are able to adapt quickly stand to benefit if significant changes do occur.

2. Russia’s Former President Predicts a Monetary Crash and a Global Shift to Crypto

 Dmitry Medvedev believes that the US dollar and the euro will lose their strength, while crypto will come to prominence.

Dmitry Medvedev – a Russian politician who served as President of the country between 2008 and 2012 – thinks 2023 could see the crash of the International Monetary Fund (IMF) and the World Bank. He suggested that such an event could reduce the power of the euro and the dollar and boost the usage of cryptocurrencies.

Tron’s Founder – Justin Sun – agreed with Medvedev’s “insightful comment.” He also maintained that crypto adoption is gradually rising in China and that “the best is yet to come.”

Medvedev’s Crypto Forecast

Numerous prominent individuals and political figures used the approaching end of 2022 as an opportunity to share their predictions on what to expect in the following year. The latest was Dmitry Medvedev – former President of Russia and ex-PM of the world’s largest nation by landmass.

He believes the Bretton Woods system (an international monetary agreement that standardized currency exchange rates) could fall apart and prompt the collapse of leading financial institutions, such as the IMF and the World Bank. As a result, two of the world’s leading fiat currencies – the euro and dollar – could lose their dominance as global reserve currencies, triggering a broad cryptocurrency adoption.

The List Goes on

Medvedev’s list of predictions consisted of some bizarre possible scenarios like the United Kingdom joining back the European Union (EU), the formation of the “Fourth Reich,” and a consecutive war between France and the “Fourth Reich.”

The 57-year-old politician also said all the largest stock markets and main economic activity could shift from the United States of America and Europe to Asia.

In addition, he believes a civil war could break out in the US, following which Texas and Mexico could unite in an allied state. After the end of the military conflict, Elon Musk could win the presidential election in numerous states, he concluded.

3. North Korean Hacking Group Steals Millions Posing as Japanese VCs And Banks.

North Korean group BlueNoroff has find a new way to hack into your crypto wallets. Now it resembles banks and Japanese VC firms.

This December 27, Kaspersky Lab announced that the North Korean hacking group ‘BlueNoroff’ stole millions of dollars in cryptocurrencies after creating more than 70 fake domains and impersonating banks and venture capital firms.

According to the investigation, most of the domains mimicked Japanese venture capital firms, denoting a strong interest in user and company data within that country.

“After researching the infrastructure that was used, we discovered more than 70 domains used by this group, meaning they were very active until recently. Also, they created numerous fake domains that look like venture capital and bank domains.”

The Bluenoroff Group Perfected Its Infection Techniques

Until a few months ago, the BlueNoroff group used Word documents to inject malware. However, they recently improved their techniques, creating a new Windows Batch file that allows them to extend the scope and execution mode of their malware.

These new .bat files circumvent Windows Mark-of-the-Web (MOTW) security measures, a hidden mark attached to files downloaded from the Internet to protect users against files from untrusted sources.

After a thorough investigation in late September, Kaspersky confirmed that in addition to using new scripts, the BlueNoroff group began using .iso and .vhd disk image files to distribute viruses.

4. Bitcoin Drifts Lower as Crypto Winter Continues

ALSO: CoinDesk Columnist David Z. Morris played soothsayer about the seriousness of the allegations against Sam Bankman-Fried, the former CEO of embattled crypto exchange FTX.

Bitcoin drifted lower in Tuesday trading, albeit not by much as crypto prices remained largely frozen near levels they've held for a week.

Insights: In this last week of 2022, First Mover Asia is revisiting a few of CoinDesk's (CD) best, most impactful stories from the past year. Less than a month after a CD story led to the implosion of crypto exchange giant FTX in November, Chief Insights Columnist David Z. Morris zeroed in on the seriousness of CEO Sam Bankman-Fried's offenses. The U.S. Department of Justice subsequently charged Bankman-Fried with wire fraud and other alleged crimes. After posting bail, he is confined to his parents California home except to exercise, and must wear a tracking device.

The largest cryptocurrency by market capitalization was recently changing hands at $16,700, off 1.3% over the past 24 hours but near its most recent support just under $17,000. BTC's price has remained resilient over the past two months, despite the widening fallout from the implosion of crypto exchange FTX.

In a CoinDesk TV First Mover interview, Martin Leinweber, digital asset product strategist at Market Vector Indexes, noted bitcoin's strength relative to other cryptos. "If you look at the coins that demonstrate relative strength, which means coins that fell the least amount from the all-time high, you will notice names that nearly no one would have imagined, especially when you consider the ranking," Leinweber said. "So bitcoin was not the most defensive coin, one might expect from a store of value."

Ether was recently trading just over $1,200, also down 1.3% from Monday, same time. Most other major cryptos were slightly in the red with LINK, the token of software platform Chainlink, and CRO, the native cryptocurrency of exchange Crypto.com, each sinking more than 2%. The CoinDesk Market Index (CDI), an index measuring cryptos' performance, fell 1.15%.

Major equity indexes closed mixed after a good news, bad news day in which China announced it would allow international travelers to enter the country again but Russia said it would ban oil sales to countries that had placed a $60 per barrel price cap on it – the latest fallout from Russia's unprovoked invasion of Ukraine. How the moves will affect prices worldwide is uncertain. Brent crude oil, a widely watched measure of global energy markets, was recently selling at $85 per barrel, an 11% gain over the past three weeks. The tech-heavy Nasdaq slipped 1.4%, but the Dow Jones Industrial Average ticked up slightly.

Meanwhile, FTX's sad, unsavory saga continued with documents filed in Caribbean court showing that former CEO Sam Bankman-Fried borrowed hundreds of millions of dollars from Alameda Research to purchase his stake in trading app Robinhood Markets (HOOD).
In an affidavit before his arrest, Bankman-Fried said he and FTX co-founder Gary Wang together borrowed over $546 million from Alameda via promissory notes in April and May. They used that money to capitalize Emergent Fidelity Technologies Ltd., the shell corporation that in May bought a 7.6% stake of Robinhood.

5. DEX Trader Joe is live on Arbitrum amid trend to move to multiple chains.

Decentralized exchange (DEX) Trader Joe launched its mainnet on Arbitrum, its first move expanding to a chain beyond Avalanche.

The expansion from Avalanche’s most widely used application by volume is a significant trend for crypto protocols. They are launching on multiple chains in the hopes of growing and reaching a larger user base from a diminished pool as Layer 1 blockchains see a drop in transactions.

Trader Joe plans to continue its expansion to other chains that have strong decentralized finance (DeFi) activity and expected ecosystem growth, Trader Joe’s pseudonymous Marketing and Communications Lead Blue told The Block.

The DEX’s goal is to increase the usage of its new Automated Market Maker (AMM) model, a technology that’s the biggest such innovation since Uniswap V3, Blue claimed. Uniswap V3 currently has the highest cumulative trading volume across all DEXs, according to DeFiLlama.

Arbitrum and Optimism, both of which are Layer 2s built on top of Ethereum that inherit its security properties, have seen consistent growth in transaction count this year, according to The Block Data. Meanwhile, Layer 1 blockchains have seen a decline in the same timeframe.