Cobo Godfish: 2023 Searching for New Narrative Logic

Written by: Shen Yu Cobo, Co-founder and CEO

About Interest Rate Hikes and FTX

First of all, the biggest macro factor in 2022 was the interest rate hikes, which put pressure on global assets, including cryptocurrencies. Additionally, events like the FTX collapse within the cryptocurrency market dealt a significant blow to the market.

The biggest impact of the FTX incident was on the existing exchange ecosystem, which will continue to evolve to address trust issues related to centralized trading. Industry players, including Cobo, are currently working to promote a more transparent and healthier trading ecosystem.

Decentralized exchanges are one direction, and compliance is another possible direction. As a custody platform, Cobo hopes to help achieve the separation of trading, custody, and settlement through the upcoming SuperLoop, while ensuring trading efficiency, thereby restoring trading institutions' confidence in trading.

Cobo Loop Alliance Members

In 2019, Cobo was the first to launch a cross-platform clearing and settlement network for cryptocurrencies— the Loop Alliance, allowing alliance members (such as exchanges, trading institutions, etc.) to settle transactions instantly off-chain. After upgrading to SuperLoop in the future, it will become an over-the-counter custody and settlement network for exchanges, allowing trading teams to trade on exchanges while maintaining independent custody of funds.

About DCG

Currently, the situation with DCG does not appear to be escalating further—by escalation, we mean the possibility of forced sales of hundreds of thousands of Bitcoin assets held by Grayscale. Therefore, from the perspective of the main driving factors behind the market decline, there is no risk of large-scale potential liquidation.

About Ethereum

The second matter is also quite clear: the Ethereum Foundation has announced that the Shanghai upgrade is basically confirmed to arrive on time in March. The foundation has determined that even if other features are set aside, the Shanghai upgrade must be ensured.

From this perspective, Ethereum has injected a strong dose of confidence into the industry. For the past three months, the focus in the entire market around cryptocurrency asset management has repeatedly been on Staking. Thus, the liquidity risk of Staking that troubled everyone in 2022 can be smoothly resolved with the Shanghai upgrade in March.

Looking back at history, the entire Ethereum Foundation tends to choose favorable external macro environments when making significant strategic decisions, whether it was EIP-1559, the Merge, or the Shanghai upgrade. Therefore, March is also a relatively important time node.

Thirdly, we see many Layer 2 projects, especially those based on ZK technology, expressing their intention to launch testnets or mainnets in Q3 or Q4 of 2023.

Overall, from the perspective of internal industry factors, there are no major potential risks in the coming year, and there are two positive factors: one in March and the other in Q4. Therefore, from this level, there are not many factors that could drive a decline due to events.

About the Cycle

Additionally, we need to note two relatively certain things: one is that there are still over 470 days until Bitcoin's next halving. If we replicate the impact of the halving cycles over the past decade, it could mean that a new round of market activity may emerge by the end of this year.

The other point is that the entire cryptocurrency market cycle has been characterized by short bull runs and long bear markets. Since we entered the bear market phase in March of last year, this cycle has lasted just over a year and is nearing its end.

Based on the analysis of macro and internal industry factors, looking back at the past year in the industry, we have already passed the most painful or rapid decline phase of this bear market. We are now in a stage where the market is gradually restoring confidence, seeking new narrative logic, and consolidating.

Looking ahead to 2023, with the interest rate hike cycle and these driving factors within the industry, it is expected that there may be a wave of market hotspots in Q2, and another wave may begin in the second half, starting in Q4.

Unless there are special, extremely adverse black swan events or a deterioration in external macro factors, the bottom of this cryptocurrency market cycle may have already appeared, and we anticipate that significant upward trends will emerge densely next year.

This is a little sharing at the end of the year, as a greeting for the New Year. Finally, I wish everyone in 2023 to remain resolute and reap happiness!

Shen Yu

Fifth day of the first month of 2023