Crypto.com Summary and Outlook: The number of global cryptocurrency owners is expected to reach 600-800 million in 2023, and SBT will guide us into a decentralized society

Author: Crypto.com Research

Compiled by: Shenchao TechFlow

2022 was a journey for the cryptocurrency industry. In this report, we have compiled the top ten cryptocurrency events and trends of 2022, followed by our outlook for 2023.

2022 Review

• In 2022, the global economy struggled under macroeconomic and geopolitical headwinds, including monetary tightening policies by central banks around the world to combat inflation, conflicts in Europe, supply chain disruptions, and the lingering effects of the COVID-19 pandemic. Therefore, the global GDP growth rate for 2022 is expected to be 3.2%, a significant drop from ~6% in 2021. Meanwhile, the inflation growth rate continued to soar, reaching an average of 8.8%.

• Besides the macro headwinds, the cryptocurrency market was also negatively impacted by several events, particularly the collapse of the Terra stablecoin (UST) in May and the bankruptcy of FTX in November. These two events and their subsequent effects created a ripple effect that impacted other participants in the ecosystem and dampened confidence in the industry. As of the writing of this article, it can be said that this is still the "winter of cryptocurrency." That said, it is natural for market cycles to fluctuate between bear and bull markets, as shown in the figure below.

• Ethereum's merge on September 15, 2022, is widely regarded as one of the most anticipated cryptocurrency events of the year. One of the positive impacts of the merge is that Ethereum's energy consumption dropped by 99.95%, as PoS does not require energy-intensive mining machines like PoW. Instead, PoS blockchains rely on validators to verify transactions. It is estimated that the energy consumption of the PoS Ethereum blockchain is about 1% of PayPal's, several orders of magnitude smaller than PoW networks.

• After FTX's bankruptcy at the end of 2022, we saw decentralized exchanges (DEXs) capturing a higher share of the total cryptocurrency spot trading volume. As of November 2022, DEXs accounted for 14% of spot trading volume, up from 9% in October.

• In 2022, new Layer 1 (L1) blockchains gained attention: Notable examples include Aptos and Sui, both created by former developers of Meta's Diem team. As a result, Sui and Aptos utilize similar technologies, including parallel engines and the Move programming language.

• PoS staking by default requires locking tokens, which means token holders must choose between earning yields or retaining liquidity. Liquid Staking attempts to solve this issue by allowing token holders to enjoy the best of both worlds—earning PoS token yields while maintaining a degree of liquidity. The flexibility that liquid staking offers to stakers is one of the reasons it thrived in 2022. Based on the market capitalization of liquid staking tokens, ETH is the most popular token choice. Lido Finance continues to lead the liquid staking market, capturing about 78% of the market share.

• In the first half of 2022, the NFT market was vibrant, with strong trading volumes. In May 2022, OpenSea's daily trading volume peaked at $544 million, driven by the "Otherdeed for Otherside" series launched by the blue-chip Bored Ape Yacht Club (BAYC) NFT's parent company, Yuga Labs. Despite a slowdown in trading volume in recent months, NFT collaborations and innovations continue.

• Despite the market downturn, there were still about 1 million blockchain gamers daily for most of 2022. The Wax blockchain currently leads in daily gamers, with 315,000 as of the writing of this article. Wax hosts several top blockchain games, such as Splinterlands and Farmers World.

• Blockchain-based social applications gained attention in 2022, as evidenced by the sharp increase in the unique wallets interacting with social DApps' smart contracts.

• Capital investment and project incubation in the blockchain space continued to grow. In the first half of 2022 alone, approximately $29 billion was raised, with infrastructure and Web3 startups, including NFTs, blockchain games, and the metaverse, accounting for the vast majority of the funding pool. In these six months, the total amount raised exceeded the figures for 2021, which saw 1,313 rounds of funding totaling $30.2 billion. By industry, the distribution of investments in the blockchain services category remained consistent throughout the year. It received the most funding, with a total of 592 rounds of transactions, followed by the DeFi and GameFi sectors.

• Security issues are a focal point for any blockchain network. In 2022, we witnessed many hacks and vulnerabilities. As of the writing of this article, the total amount of cryptocurrency hacks in 2022 was approximately $3.7 billion, a 63% decrease compared to 2021. Among these, the amount stolen from cross-chain bridges accounted for more than one-third of the total.

2023 Outlook

Despite the challenging macro conditions, cryptocurrency adoption grew robustly in 2022.

As of November 2022, the number of cryptocurrency owners surpassed the milestone of 400 million, reaching 402 million. Throughout the year, the average monthly adoption growth rate was 2.9%.

Based on market conditions, we expect the number of global cryptocurrency owners to potentially reach 600-800 million in 2023.

• In the blockchain gaming sector, we expect to see some AAA games in the next year or two, which will provide players with new gaming experiences that combine high-performance gameplay with blockchain technology.
• The use of Soulbound Tokens (SBTs) is increasing, which could be another potential market driver. SBTs are NFTs tied to individuals or entities that are non-transferable and non-tradable. They are designed to represent the social identity of the holder by including commitments, certificates, and affiliations. It is akin to the concept of a resume or CV. The adoption of SBTs could guide us into a decentralized society (DeSoc) or a collectively decided sociality, where souls and communities convene in a bottom-up manner. DeSoc is based on non-transferable SBTs, aiming to represent the commitments, certificates, and affiliations of the "soul," which can encode trust networks in the real economy to establish provenance and reputation.

• In 2022, we observed an interesting phenomenon where an increasing number of Web2 developers showed great interest in Web3. Since 2018, the downloads of two popular Web3 development libraries, Ethers.js and Web3.js, surged tenfold. The influx of developers into Web3 will stimulate the growth of companies providing Web3 development tools.

• After several bankruptcies and hacking incidents in the industry in 2022, we see an increasing focus on security and user education. Building a successful business model hinges on establishing trust with end-users. As we enter 2023, we expect this trend of heightened focus on security and user education to continue. On one hand, we may see more platforms investing in security audits and certifications. On the other hand, we also look forward to seeing more educational initiatives launched in this field, continuing the trend that began in 2022.

• In addition to the aforementioned trending topics, developments in other areas are expected to receive attention, including new blockchain infrastructure, ZK proofs, more utility-based DeFi applications, Ethereum's Shanghai upgrade, and institutional adoption, among others.