By any standard, 2022 was a terrible year for cryptocurrency. More than $2 trillion in largely speculative market value was lost in total. Millions of consumers and businesses suffered financial losses. However, it’s important to keep in mind that the industry made significant progress in 2022. Despite these significant challenges and the volatility in the larger digital assets sector. However, which were exacerbated by the dramatic implosions of overleveraged players like FTX.
Even in the deepest gloom, there is still hope for light. Recently, Hong Kong launched its first cryptocurrency exchange-traded funds (ETFs) this year. Also, the Australian Treasury advanced its “token mapping” project, which will define digital asset regulation and develop suitable custody settings to protect consumers. One of the biggest democracies of the world India launched an e-rupee pilot while not a cure-all panacea, all of these advancements can only help the industry in the long run. These developments demonstrate that, despite the crypto industry’s current difficulties, the world is ready to accept digital assets.
The major change-makers for digital assets are:
- NFTs will bring the physical and digital worlds together
- Tokenization will alter financial markets
- The rise of CBDCs and stablecoins
- Beware of Inaccurate Information
1. NFTs will bring the physical and digital worlds together
The popularity of non-fungible tokens, or NFTs, has skyrocketed since they first gained attention in 2021 when the artist Beeple’s NFT, the most expensive NFT ever to transact at an auction, sold for US$69 million. With NFTs permeating pop culture, collectibles, and gaming NFTs racking up the largest sales volumes, trading in NFTs saw a startling 21,000% increase to US$17 billion in 2021. While a transaction trajectory like that is unlikely to persist. What we will probably see is a fundamental change from NFTs simply claiming digital assets to offering a wide range of features, such as exclusive discounts, memberships, and more.
In the upcoming wave of financial innovation, retailers will focus on NFTs to extend the customer journey past the checkout basket in an effort to cultivate a devoted following and ensure brand longevity. Making a small batch of NFTs to create exclusivity is one-way brands could do this. NFTs have the potential to completely change the game for both brands and consumers, resulting in much higher engagement.
2. Tokenization will alter financial markets
The idea of tokenization, or managing conventional assets through wallet and blockchain infrastructure, has the potential to foster both market expansion and inclusion. Major banks and asset managers began introducing or getting ready to introduce tokenized assets like bonds, carbon credits, and private equity funds in 2022. There are many financial institutions interested in tokenization.
It all comes down to the many advantages tokenization offers, including increased efficiency brought about by automation and disintermediation, increased transparency, increased liquidity, and quicker clearing and settlement times, as Singapore’s Project Guardian has shown. This past November, DBS Bank, JPMorgan, and SBI Digital Asset Holdings completed transactions involving the buying and selling of tokenized Singapore government securities, Singapore dollars, Japanese government bonds, and Japanese yen. Tokenization has the potential to completely alter how financial markets function if done on a larger scale.
Also Read: What Is ‘Semi-fungible’ Crypto Token?
3. The rise of CBDCs and stablecoins
Blockchain-based payments will also receive a lot of attention this year. However, particularly in the context of merchant settlement and international trade. The transfer of money between nations is currently slowed down, ineffective, and expensive due to “an archaic network of corresponding banks.” The World Bank estimates that the cost of these remittances is a staggering 6% of the total amount transferred. However, digital channels only account for 1% of total transaction volume. Remittances to East Asia, the Pacific, and South Asia increased by 0.7% to 3.5%. But the differences between the various nations in this enormous region are still very great.
Around the world, central banks are already starting to use digital assets to address these problems, and this year, more than 20 nations are anticipated to make significant advancements in the creation and testing of their own central bank digital currencies (CBDCs). Although CBDCs and stablecoins are still in their early stage, they hold a lot of promise. Their successful implementation will depend on funding, regulation, and adoption. Although, this will probably take a few years to play out.
4. Beware of Inaccurate Information
Given the events that led to the FTX collapse and the protracted Crypto Winter, fear, uncertainty, and doubt (FUD) are expected. The industry’s resilience will shine through like it does every winter, the clouds will part, the chill will melt away, and new projects will start to appear in the spring.
Investor confidence may not be as high as it once was, but financial institutions are still drawn to the technology’s fundamentals. However, as evidenced by the billions of dollars that have already been invested in the sector. As a result, significant advancements in the field are undoubtedly going to continue. As a result, when taking into account the enormous potential that blockchain technology still has to realize. However, it’s crucial to not throw the baby out with the bathwater and to maintain a longer-term perspective.
Also Read: What Is Crypto Fear And Greed Index? How Does It Work?
The post Digital Assets Outlook For 2023, What Will Be The Biggest Change? appeared first on CoinGape.
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