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Cryptocurrency became the talk of the town in 2017 when Bitcoin reached a never-before-seen value of over US$19,000 (A$28,154).
A year later, Bitcoin had fallen to just over $4000.
Over the next three years, the poster coin for the crypto world would climb and then trade largely sideways, until it suddenly spiked to over $70,000 in February 2021. By May of that year, it was back to $45,000. By September, over $65,000; by November, nearly $90,000.
Yet, by November 2022, Bitcoin was back down to $25,000.
The point is that cryptocurrencies have always been high-risk and extremely volatile assets.
Crypto refers to digital assets such as cryptocurrencies, coins, or tokens representing ownership of a value or the rights to a commodity.
A major appeal of crypto assets is the fact that they operate independently of any central authority and are not controlled by governments or financial institutions.
They are stored on a decentralised digital ledger, called a blockchain. They hold no legislated value and they are simply worth what people are willing to pay for them in the market.
According to the Australian Securities and Investments Commission (ASIC), the 2021 surge in crypto prices was driven, for the first time, by institutional investors rather than individuals. Banks and firms were suddenly snapping up these virtual assets, and this helped propel not only crypto prices but crypto’s reputation.
With high-profile investors jumping on board the crypto train, many are wondering whether digital assets are the way forward. Some governments got involved, too, with El Salvador in 2021 becoming the first country to adopt Bitcoin as legal tender.
And, of course, coinciding with the cryptocurrency surge has been a rise in popularity for non-fungible tokens, or NFTs.
From sports clips to artwork to short videos, some of these digital collectibles have swapped (virtual) hands for tens of millions of dollars. It’s a new, uncertain space in trading and collecting, but one with huge value for those who get it right.
So, with the crypto market so volatile and movements unpredictable, what should investors look out for in 2023?
Codes, credibility, and currency
Cryptocurrency is classified into different groups, such as trading, gaming, government banking, healthcare, retail, eCommerce, and more.
Market researcher Grand View said after generating a massive US$40 billion (A$59.8 billion) in 2021, the cryptocurrency market had a predicted compound annual growth rate (CAGR) of 26.8 per cent through to 2030.
Grandview stated that one of the key elements influencing blockchain growth was the rising need for better transparency and operational efficiency in digital payment systems.
Over 2023, and particularly in Australia, many crypto players are expecting fresh regulation to begin making its way through Parliament — at least according to crypto exchange The Independent Reserve, which has been operating in the Australian blockchain ledger space since 2013.
The company aims to transform cryptocurrency technology into secure, robust and regulated financial services.
Independent Reserve CEO Adrian Przelozny said despite its popularity, the crypto industry was in high need of a “well-considered regulatory framework”.
“I firmly believe that the industry needs a well-considered regulatory framework. This includes onshore custody, which is the foundation for all other functions,” Mr Przelozny said.
“Ultimately, we want to see a regulatory framework that protects consumers and encourages responsible growth in the industry to create jobs and bring in overseas investment.”
Mr Przelozny stated that recent recommendations from the Australian government’s ‘Select Committee on Australia as a Technology and Financial Centre report, called the Bragg Report, were a step in the right direction.
“They would provide better consumer protection, clearer taxation rules, and operational clarity for businesses in the space,” Mr Przelozny said.
“It’s encouraging to see that the Australian Government is engaging with the industry during this process, and we are hopeful that legislation will be drafted this year and passed through Parliament in 2024.”
According to ASIC, over the years, many institutional and individual investors have been seen buying into fake crypto assets — an issue unable to be solved without the precise legal and regulatory status of the digital asset.
ASIC’s approach to regulation in this space has always been to encourage new technology but to also protect retail investors.
Meanwhile, cryptocurrency is being explored by countries with emerging economies such as Argentina, Zimbabwe, and Iran, which are plagued with devalued currencies.
An increase in data security and a growing adoption of digital currency by major corporations such as MasterCard and Tesla is anticipated to boost the industry.
Crypto assets such as Binance, Bit Fury, Ripple, and Intel Corporation are just some of this year’s key players that plan to capitalise on big moves in the crypto sector.
Where do NFTs fit in?
Research conducted by Grand View in April 2022 estimated the non-fungible token or NFT market to reach up to US$211.72 billion (AU$ 315.75 billion) by 2030 — a CAGR of 34.2 per cent from 2023.
It’s clear that interest in the space is only growing as the digital tokens are being viewed more and more as genuine, worthwhile investment assets.
In February, Paris hosted one of the biggest NFT conventions of the year, with more than 10,000 attendees gathered over two days.
According to the NFT Evening, the two-day convention was classed as the biggest Europe NFT event ever.
The convention explored the potential of Web3 and the roles NFTs will and do play within platforms like the Metaverse.
Industry leaders used the stage to also voice some of their concerns, including talk of the potential removal of royalties on NFT marketplaces.
While royalties have been a trending topic in the NFT space, the founder of Animoca Brands, Yat Siu, said the removal of royalties on marketplaces was dangerous for the NFT Industry.
When an NFT is sold, the original creator can receive a percentage of the sale price, known as a royalty fee.
Yat Siu compared royalties to the “gas” that fuelled the economy of creators.
“If you kill the royalties, you kill the very industry that fed you, so it has to be protected,” Mr Siu said.
He said the removal of NFT royalties could discourage creators from producing high-quality NFTs.
And without high-quality NFTs, potential buyers may not be as interested in making purchases, causing the value of the entire market to decline.
So, what tokens are currently topping the charts?
OpenSea, one of the largest NFT marketplaces, reveals the current trending NFTs and those that are selling the most.
The Azuki NFT, for example, was released in January 2022 and has become one of the most popular tokens on the OpenSea platform. The token has a total volume of over 448,500 Ethereum. For reference, one Ethereum currently trades for around $2700.
This anime art NFT is just one of the many digital art NFTS generating millions of dollars in sales daily.
In a nutshell:
2023 is shaping up to be an interesting year for digital assets and investment decisions.
CoinMarketCap states that cryptocurrency has become the world’s 8th-largest economy as of February last year.
While the volatile nature of the market means investors should take all predictions with a grain of salt, early signs point to a positive year for the cryptocurrency and NFT space — especially in light of the recent bank collapses in the US.
While regulation and authentication in the crypto space remain a key concern for investors, the increased adoption of cryptocurrencies by governments and institutions points to ongoing value in the space.
In regard to crypto trends for this year, the Independent Reserve CEO stated that sometimes it was not about timing in the market but time in the market.
“Seventy-eight per cent of users that invested in crypto for five years or more reported making profits, while only five per cent of investors reported making a loss,” Mr Przelozny said.
Tracking future trends of the NFT market, such as changes in average sale prices or new record-breaking sales, will help to provide valuable insight into how the market evolves for investors.
