Risks and opportunities in crypto for 2023

Thomas Perfumo, Head of Strategy at Kraken Digital Asset Exchange, shares what’s shaping the crypto space in 2022 and what investors might want to know about the industry heading into the new year. Perfumo also shares the biggest risks and opportunities for the space.

What were some of the biggest events and trends shaping the crypto space in 2022?

2022 was an extremely volatile and complicated year for the digital asset industry.

Earlier this year, crypto proved its usefulness during the Russia-Ukraine crisis, especially in providing humanitarian solutions and aid to those in need. The inherent value of cryptocurrency as a seamless, cross-border payment system has helped highlight some of the key issues and ongoing problems facing the traditional financial system during global conflicts.

In September, Ethereum (ETH) completed the long-awaited merger from the Proof-of-Work blockchain to the Proof-of-Stake blockchain. The engineering effort to complete this task was very significant – some compare it to rebuilding an airplane engine in flight. Since the merger, Ethereum’s supply inflation has fallen significantly, and the network is now set for further growth for mainstream use.

The collapse of Terra (LUNA) triggered a series of major changes this year. The dramatic decline in asset values ​​led to the collapse of several well-known crypto companies and likely contributed to FTX’s insolvency. As a result, the general public sentiment about cryptocurrencies has declined.

However, it is important to think about the difference between crypto technology and the failure of centralized businesses. During this volatile period, many crypto protocols and underlying decentralized applications functioned without interruption. The headline business failures were not the result of bad technology, but excessive risk-taking, and in the case of FTX, actual business malfeasance.

What is the outlook for cryptocurrencies in 2023?

This year will be focused on rebuilding trust in the crypto industry. The collapse of FTX has made it vital for crypto companies to provide real utility and solutions. Developers, including those at Kraken, will continue to dedicate their resources to building innovative products and services that accelerate cryptocurrency adoption and further foster financial freedom and inclusion.

What do you see as the biggest risks and opportunities?

The industry will face many challenges this year, including the continued spread of the disease. It is possible that we will witness additional failures among centralized crypto companies, which will put pressure on an already depressed market. Nonetheless, the new year brings opportunities for reputable and trusted players to initiate changes that will facilitate the next wave of cryptocurrency adoption.

Another industry concern is the hasty regulatory response. We at Kraken strive to comply with regulatory requirements and work closely with regulators, regionally and globally. But the demand for a remedy – most likely attributed to recent events – is putting pressure on regulators to enact rules that could stifle the industry’s ability to grow in the long term. Therefore, we will continue to actively cooperate with regulators from an educational perspective, with the aim of enabling the growth of technological innovations and solutions.

What should investors know about cryptocurrency in the new year?

We have always advocated that people do their own research into crypto assets before investing. Some investors may also consult a financial and/or tax advisor to construct a portfolio that meets their personal needs and risk tolerance.

Kraken always recommends people interested in crypto buy their assets from a reputable exchange. In addition to examining fee structures and assets listed on a centralized exchange, they should consider whether the exchange is recognized for its security protocols.

Where do you see Bitcoin (BTC) ending up in 2023?

We do not provide specific price predictions. Let’s just say we’re excited to see what’s next.

This interview originally appeared in our TradeTalks newsletter. Sign up here to access exclusive market analysis from a new industry expert every week. We’re also highlighting the must-watch TradeTalks videos from the past week.

The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.

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