What trends will dominate the crypto-related industry in 2023?
2022 has been a tumultuous year for cryptocurrencies and Web3-related companies. Even industry enthusiasts were forced to accept the harsh reality of its shortcomings.
But many of the venture capitalists (VCs) who have invested billions in Web3 believe in the potential of blockchain technology. The cryptocurrency crash of 2022 was painful, they say, but it was effective in wiping out speculators looking for short-term gains. And finally, the time has come for startups with legitimate products and services to shine.
SC Moatti, founder and managing partner of Mighty Capital, said:
“We are doubling down on blockchain and are steering aggressively in that direction.
Insider asked 13 VCs investing in the crypto space what industry trends are likely to come in 2023. Here are their predictions:
Fundraising stagnant at least in the first half of 2023
The “winter era” in the cryptocurrency world is likely to continue for some time.
VC investment has fallen since 2022 and is likely to continue in the first half of 2023, multiple VCs say.
David Pakman, Head of Venture Investments at CoinFund, said:
“2022 has undoubtedly been a very difficult year for the self-harm of the crypto ecosystem, which is already evident in the slowdown in institutional investment in crypto. ”
However, some believe that VCs will also re-accelerate investments in cryptocurrencies and Web3 in the second half of 2023. Race Capital partner Edith Yeung expects the fundraising to pick up from August.
As Mindset Ventures partner and VC3 DAO co-founder Jules Miller puts it: “In a bear market, invest now and get out of the way. We should be able to get an outrageous return,” he said.
Web3 gains wide adoption among large enterprises
There is a growing movement among major financial institutions to enter Web3.
Financial firms such as JP Morgan and KKR are already showing signs of embracing cryptocurrencies and Web3. That trend is likely to accelerate in 2023, says Nisa Amoils, managing partner at VC firm A100x.
Tighter regulation would also make it easier for more financial institutions to enter the cryptocurrency business, said the president of blockchain firm Ava Labs, an investment arm of the firm. John Wu, who leads a certain Blizzard.
“Big financial institutions and retail banks will all start experimenting with blockchain,” Wu said.
Dan Abelon, a partner at Two Sigma Ventures, sees the trend of B2C internet brands entering the Web3 business continuing into 2023.
“We’re excited to see a growing experimental movement to make Web3 mainstream, as Reddit and Instagram have recently done,” Avellon said.
Mighty Capital’s Moatti said he expects the Web3 companies to expand into B2B software as well.
“We expect apps that will increase productivity and reduce costs for businesses to become popular,” Moatti said.
The new token bubble has completely burst
In 2022, the selection of new tokens progressed.
Even investors who are bullish on cryptocurrencies and Web3 acknowledge the market excesses that have led to the current “winter age” for cryptocurrencies. One of them was the rush of fledgling startups to launch tokens (the value of which plummeted in 2022).
VCs interviewed by Insider say many of these tokens are likely to go bankrupt across the board, with far fewer launches in 2023.
“About 80% of the coins in circulation will be obsolete. Well, most of them were speculative, so that’s good for the industry,” Wu said.
Similarly, as investors place more emphasis on due diligence and corporate governance in the crypto industry, they will look more carefully at tokens when considering deals, said Miller of VC3 DAO.
NFT revived with a different name?
NFTs are widely accepted as a new monetization method for creators.
Like altcoins, NFTs have gone through a bubble-bust cycle over the past year. Multiple VCs may have lost the novelty of the monkey avatar image (note: the NFT collection “Bored Ape Yacht Club”, which began selling in April 2021), but NFT It has the potential to thrive in other ways.
According to M13 partner Latif Peracha, companies like Reddit, Ticketmaster and Starbucks don’t necessarily call themselves “NFTs” (Reddit calls them “collector’s avatars”). ), and they are still experimenting with NFTs.
“I think NFTs will come back in a different form, even though they may not be called NFTs anymore by then,” Pellacha said.
Moatti explains that the potential for artists to increase their income by selling their digital work is still attractive.
“For creators, NFTs are a new way to monetize their work,” Moatti said.
Struck Capital founder and managing partner Adam Struck said real estate could be the next big use case for NFTs. Companies such as Roofstock onChain are creating tokens for real estate properties to facilitate property purchases and financing.
The end of centralized cryptocurrency exchanges
Regulations are expected to tighten in 2023 following the bankruptcies of major cryptocurrencies in 2022.
In 2022, bankruptcies of major cryptocurrencies followed. As a result, VC expects that regulatory authorities will tighten their crackdown in 2023. This regulation will change the structure of financial institutions that handle cryptocurrencies.
“In 2023, I think the identity of centralized cryptocurrency companies will be revealed to more industry players. That’s right,’ says Andy Kangpan, principal at Two Sigma Ventures.
Tyler Griffin, managing partner and co-founder of Restive Ventures, similarly said, “Unregulated centralized exchanges are dead.”
Campan expects decentralized finance (DeFi) to gain momentum. DeFi aims to provide customers with financial products such as loans without going through traditional banks.
But there are also objections.
“My view is that DeFi is exciting and will drive a lot of innovation over the next few years, but ultimately it won’t be viable,” Moatti said.
Web3 social media and Universal Internet ID are coming
In 2023, the rise of Web3 type social media is expected.
The furor surrounding Elon Musk’s acquisition of Twitter has sparked speculation that a new social media giant may emerge.
Abba Labs’ Wu sees growing calls for more autonomy over one’s online data as a catalyst for Web3 social media adoption.
“Web2 social media will come under more scrutiny, and Web3 native social media platforms will gain market share,” Woo said.
Shine Capital partner Ethan Daly, Hannah Gray founding partner Jessica Peltz Zatulove, A100x’s Amoyles and others I expect Web3 services that allow you to prove your identity and credentials will grow in popularity.
“The advent of on-chain authentication will allow community members and virtual workers to verify the authenticity and reputation of their credentials and build broader trust.”
Attention is also focused on climate tech and Web3 games
There is also a growing movement to apply blockchain technology to climate issues.
Climate tech (technology focused on climate change countermeasures) will begin to attract investors’ attention in earnest from around 2021, with funds such as Union Square Ventures specializing in this field raising funds. bottom.
Some companies are also looking to apply blockchain technology to climate change, including technology that offsets the carbon footprint of cryptocurrency holders. Mercury Fund principal Samantha Lewis says the trend will continue in 2023.
“Climate change is a hot topic everywhere. Web3 unlocks a lot of what we need,” Lewis said.
Lewis and several other VCs point to Web3 games as another segment that has the conditions to show excitement in 2023. Gamers are already accustomed to buying virtual goods, and they are well suited for Web3 apps such as NFTs, Pacman said.
“There are a ton of exciting Web3 games in the works right now,” Pacman said.
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(Edited by Ayuko Tokiwa)
Source: BusinessInsider
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