I’m wrapping up my second year of producing content for the InvestAnswers community. 60% of my 2022 predictions came to fruition over the last twelve months. My goal for 2023 is to improve on this 60% mark with the prescriptive numbers I will share with you today. So, for good or bad, here it goes…
Here are my 25 predictions…
The Bitcoin bull run begins around the summer of 2023. Presently, Bitcoin is under a massive accumulation phase that is thinning the supply on the exchanges. All technical indicators are flashing that Bitcoin is at a bottoming pattern.
Unsurprisingly, Core Scientific owed the most, with $1.3 billion in liabilities on its balance sheet as of September 30th. As a result, the company declared bankruptcy recently.
Marathon is the second-biggest debtor, with $851 million in liabilities. Most of this debt is convertible notes with no monthly debt service payments. These notes instead give the holders the option to convert them to stock. Therefore, Marathon’s debt is relatively easy to service, and the company is not at immediate risk of going bankrupt.
Real World Assets (RWA) with real-world impact tokenization are growing rapidly. One example is how pools of workers are being tokenized by supplying gig workers early access to their cash who support platforms like uber and door dash. This is a trend to watch for DeFi heading into 2023.
ETH stakers are receiving ~5% annual interest rates in return for committing ETH to secure the chain. However, withdrawals have not been enabled, potentially hindering adoption. Enabling Beacon Chain withdrawals would give stakers more confidence to commit capital to the protocol, but will be met with some initial selling.
The percentage of staked ETH could rise from ~13% to above 25% once things free up after the initial sell-off.
The next big thing could be Decentralized Social Media which could lead to a much higher adoption rate than the impact NFTs made in 2020-22.
Early in 2022, social media platforms added the possibility of setting an NFT as a profile picture for all Twitter Blue paid subscribers. In a recent update from October 2022, the developers added the ability for users to trade NFTs directly from tweets.
The crypto user experience must be simplified and more integrated for mass adoption. I believe significant advancements will be made over the next 12 months.
After the collapse of centralized exchanges like FTX, other CEXs will see more outflows in favor of decentralized exchanges. One of the more obvious Web3 trends is the increasing wave of new DeFi users.
It will be of utmost importance for DEXs to keep improving their UI/UX and an assortment of advanced trading tools.
Transparency in proof of reserves will increase as it will be critical for centralized exchanges’ vitality moving forward.
Platforms such as Insurace.io, Nexusmutual.io, or Neptunemutual can ensure your wallet from anything in DeFi from a hack of a particular protocol, stablecoin de-peg, or insolvency of a centralized exchange for about 0.2–0.9%/month. Given the crypto catastrophes in 2022, these products will become more widely adopted.
We will see a big wave of high-quality games emerging in the market, bringing more adoption. So we should expect a wave of hundreds of millions of users entering the space from gaming alone. This will be a major catalyst for reaching the one billion user threshold.
The good news is that U.S. regulators seem open to letting stablecoins exist. Lyn Alden has pointed out that a regulated stablecoin market would mean a huge new infusion of Treasury-bill-backed liquidity worldwide. This would be good for both the U.S. dollar and the crypto space as a whole.
This development is a formula for upward pressure on crypto asset prices, for better or worse. As a result, Stablecoins will find more use cases outside of crypto capital markets, which will drive more mainstream adoption — primarily among businesses.
More politicians will take strong stances on crypto this year. 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.
Crypto Investors Focus on Fundamentals
Investors will start focusing on key aspects of a blockchain
Adoption & DAU
Ease of Development & Activity
Token Inflation
Scale and TPS
Breadth of Dapps
Integrated adopted wallets
Race to 1 Billion Users
In 2022 fundamentals did not matter much, as washing out bad actors and overall sentiment drove the price action. However, as we enter the next bull cycle, fundamentals will become a primary driver of price.
Macro was the “big lid on the jar” in 2022. I anticipate that inflation will reach the three-handle sooner than most analysts forecast.
A worldwide economic recession will hit in the first half of this year. However, it will be shallow and short. The U.S. residential and commercial real estate are strong indicators that a recession is near.
The Fed is beginning to see the lag effect of their tightening in 2022. As a result, data will soon support them in pausing their existing monetary policy.
This will be required to cut rates because of economic circumstances. Approximately 30% of the Fed’s debt is renewing in the next 12 months, so they must do something with rates for their self-interest.
Stock Market Will Go Up in 2023
76% of the Time Stock Market goes up
Since 1974, post-correction, S&P 500 has risen more than 24% one year later
From 2012 through 2021, avg stock market return was 14.8% annually
FIAT money experienced a dilution of 14% on average over the last 60 years. So unless you make more than 14%, you are losing wealth over this period.
The Fed could remain too aggressive in the face of declining inflation and rising unemployment. In addition, geopolitical factors could cause markets to get rattled as well.
In 2023, growth stocks will be rewarded for high growth once more.
Tesla’s energy business will surprise many on Wall Street as they ramp up, producing 10K megapacks in California, which are sold out through 2024.
Housing is amid a major slowdown. Existing home sales are falling faster than they ever have. In addition, mortgage interest rates have more than doubled since the start of the year and are now approaching 7%.
As a result, housing affordability is deteriorating at full tilt. The market is hemorrhaging buyers, and sellers are holding tight to the record low rates they locked these past couple of years.
Today the spread is nearly 300 bps which is historically high. The U.S. government issues over 50% of mortgage-backed securities and will need to begin ramping back up to avoid financial Armageddon in the housing market.
Workers falling behind in earnings ravaged by inflation will become fed up, resulting in strikes hitting all industries - retail, travel, manufacturing, etc.
Hopefully, Putin will act more rationally as he has a real risk of losing control of Russia.
If there are nuclear escalation developments, then none of this matters. “There are strong indications that if Ukraine tries to take Crimea, then Russia’s use of nuclear weapons is very high – through a ladder of escalations,” Putin stated.
Fingers crossed on this front.