By Darren Parkin
A trio of senior figures from digital asset management firm Wave Financial gather round the crystal ball to assess where they think the crypto cards will land in 2023.
David Siemer, CEO and co-founder
Are there more big dominos to fall?
Our expectation is there are a whole bunch of others, some of them even top 10, exchanges that are probably functionally insolvent as well. We’re just sitting around waiting to see when they blow up.
So far in this crypto winter we have bid on two companies and there are probably three others we are leaning toward making offers for, things are really cheap in crypto. A couple of deals we are making offers on we are literally offering them zero and a teeny bit of stock and we are going to get it because it’s either that or they put the lights off. It’s really just tactical hires.
Where do the opportunities lie for 2023?
We think one of the most exciting areas of digital assets going forward is making crypto something that people experience every day. It will be crypto’s ‘internet moment’ and we see this emerging in gaming, NFTs and Web 3.0 aka the metaverse.
Whilst these areas saw a big bubble in 2022, which has since burst, the potential is huge, especially given the size of the gaming market with near 500 million gamers across the world and growing rapidly, dwarfing both the film and TV sectors. This is being fuelled by micro-transactions of people buying items in games, which is a perfect use case fit for crypto.
The promise of Web 3.0 and GameFi is how crypto will hugely increase longevity and revenue generation from games, meaning these games no longer become a throw away purchase, which will lead to a new and large economy. This will change the way gamers interact with their Xboxes and PlayStations and is why we see the likes of Microsoft and others have been investing so heavily in the crypto portion of Web 3.0. Eventually this will lead to every game having a crypto wallet embedded in it, which will hold all their gaming assets securely.
Another key event that will happen in 2023 is the further introductions of Central Bank Digital Currencies (CBDCs). Whilst we expect the tailwinds of the impact of these new digital currencies on crypto to take a few years to play out, it does mean that populations will become familiar with crypto wallets and therefore the broader digital asset space. This in turn will lead to further adoption of DeFi, but more regulated DeFi. We have to remember that DeFi has in the large part not been impacted by the recent turmoil in the crypto space, demonstrating just how robust and secure the underlying technology is. DeFi has proven to be way cheaper and safer than CeFi has proven to be and it is gradually becoming more user friendly. Following the fall of many of the CeFi exchanges, we expect DeFi usage to increase significantly.
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Matteo Dante Perruccio, partner and International President
Can institutional appetite for digital assets be restored in 2023 and how?
I am relatively optimistic that institutional trust will return. It should have been no surprise that we have witnessed a significant correction in the crypto markets.
There are two forces at work. One is a healthy correction of a bubble in crypto asset prices created by extraordinary FOMO (Fear Of Missing Out) and the entrance of new capital into the crypto markets over the last 18 months.
As a 35 year veteran of financial markets I have always believed that no industry or asset class is immune to the laws of physics. Gravity exists and what goes up eventually must come down. The industry should come out of this period stronger, more resilient with the players who have embraced sound risk management the winners.
The second component of this crypto winter involves the extraordinary events of LUNA-Terra, Three Arrows Capital, Voyager Digital, Celsius and most recently FTX and Genesis. These crises have much more to do with poor risk and credit management than crypto assets specifically. This speaks to the nascent stage of this industry in addition to the rapid growth in a relatively lightly or unregulated environment globally.
I believe that both the market correction as well as the industry events are not only important, but necessary for the healthy growth of the industry. These events will inevitably mean more regulation. If it is good regulation as opposed to punitive regulation, I believe that will be the much needed catalyst for increased institutional interest.
Without regulation, institutional capital will not come. Regulation will involve more clearly defining the assets in the digital asset universe, establishing clear AML and tax requirements, which will provide some of the much needed clarity for new capital investments. The risk we face is not regulation per se but rather it is bad, knee jerk punitive regulation.
Have we seen the end of the “bad actors” within the digital asset space?
There are and will always be bad actors in growth industries. What is needed is more oversight to hold industry players to higher standards. As the stronger more risk conscious players acquire and absorb the weaker and more distressed players, we will witness an inevitable overall improvement of the quality and risk awareness in the industry. I firmly believe that this period that we are experiencing is an important and necessary phase in what is still a young industry.
Bitcoin price prediction for end of 2023:
I do not have a price prediction, but am optimistic that we will see a more positive market in the first and second quarter of 2023 driven by more regulatory clarity. There will continue to be distressed situations, but I believe we are exiting the most difficult period and will see a gradual improvement in the overall digital asset environment.
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Benjamin Tsai, managing partner and co-founder
Does DeFi have a future?
We are bullish on DeFi as it has survived well in the recent CeFi meltdown, demonstrating the technology can withstand major disruptions from bad actors in poorly run centralised businesses.
The concept of overcollateralisation seems to have worked, and the obligations to the DeFi platforms seem to have precedence in the capital stack over other forms of debt and equity. Another example of how DeFi has been is how Celsius and FTX/Alameda both intentionally paid back their DeFi loans before they declared bankruptcy.
DeFi is still in its early days and we expect more different variations to appear. We view this market with enthusiasm and excitement for its future. Another area of interest to us is regulated DeFi, where the lenders and borrowers are not necessarily anonymous, but the platform can exist as part of the existing regulatory framework.
As regulatory guidelines evolve, we expect more institutional and retail investors will join this unstoppable evolution of financial technology advancement.
What will be the impact of greater regulation of digital assets?
Regulation will in the short term be very painful for products which have not been interested or able to follow the guidelines that are not set in stone, with variations across different countries. There may also be a short term pull back from the US (and possibly other relevant countries) which have the heaviest impact on business.
But we remain optimistic that good regulation remains the way forward, which is why being regulated by the SEC was so important. Having regulatory clarity means that existing and future projects can follow rules now, if indeed they choose to do so, which as we’ve unfortunately seen recently, is not always the case.
The other advantage is that regulatory clarity will bring more institutional and retail investors into the space. This will support the long term vision of crypto as a proper asset class.
Bitcoin price prediction for end of 2023?
$55,555.
The post Siemer, Perruccio, Tsai: Here’s how we see 2023 shaping up for crypto… appeared first on CityAM.
