In January 2022, crypto was riding on a big wave, with the price of a Bitcoin just tipping over US$47,000. The spectacular collapse of Terra Luna, Three Arrows and FTX destroyed this ride, sent shockwaves throughout the industry, ushered in crypto winter and wiped out about US$2 trillion out of the crypto market. The price of Bitcoin slid to around US$18,000 at the time of writing.
Regulations governing crypto trading especially to retail consumers will tighten and are inevitable, say industry players, investors and trend watchers. They tell Deeptech Times that the winter chills will continue to be felt but crypto spring may appear towards the end of the year. The underlying technology of blockchain is growing fast as enterprises and governments deploy blockchains in a variety of uses from promoting cross-border trade and monitoring the providence of food supply chains to facilitating property transactions and investing in wine collections.
In the first part of Deeptech Times’ predictions for 2023 which focuses on crypto and regulations, the mood is naturally muted.
The widespread collapse of several crypto players eroded confidence in the market. President of the Blockchain Association Singapore Chia Hock Lai says the FTX saga has deepeened crypto winter. Institutions are now hesitant to enter or invest further in the sector.
Rebuilding trust among investors, regulators and business leaders will be key in 2023, say Dr Bo Bai, executive chairman and co-founder of MetaComp, a Singapore-based digital asset platform.
The reverberations of the major collapses will continue for some months and the market will need to take time to weather and recover from the aftershocks, says Dr Bai.
Zhuling Chen, CEO of RockX, a gateway for crypto finance and blockchain, believes that crypto winter will continue this year. However, as digital assets and the traditional equity market have become more correlated, he believes that crypto market sentiments are likely to be affected by the wider macroeconomic outlook which has had to deal with geopolitical tensions and growing inflation.
Regulatory changes are coming, says Cliff Beek, CEO of SpaceChain, which integrates space and blockchain technologies. But he cautions that businesses should not completely abandon the crypto market due to the actions of a few bad actors who failed or misused customer funds.
A crypto spring will emerge towards the end of the year, he expects, simply because the immense potential for innovative applications will see established financial institutions gradually returning to the market.
Geopolitical tensions and the state of the global economy will determine if the crypto winter will continue, maintains Khoong Hock Yun, partner of Tembusu Blockchain Fund.
Optimistic of early signs of “spring” this year, he points out that if a big market like China significantly re-opens itself economically and internationally, the situation may change.
“The hunger of crypto buyers and blockchain companies looking for international opportunities may provide the much-needed warmth to the global crypto market mitigating, or even overcoming, the ‘cold front’ from regulatory tightening actions.”
While the crypto ecosystem still has some ways to flush out the “toxins” of ill-conceived crypto market activities, Khoong expects that “many high net worth individuals and crypto whales will continue to show faith in digital assets technology and remain resilient in supporting the digital asset market”.
For Dr Bai of MetaComp, crypto can no longer afford to be the digital wild west. The growing participation of regulators should be seen as an opportunity to further collaborative discussions and set the tone to shape how the industry will be regulated.
This is necessary, he says, because to reach both mass adoption and maturation, “regulation is very much needed to ensure that consumers are protected as they engage with this new technology and asset class”.
The industry players, investors and the trend watchers Deeptech Times spoke to, believe that regulation, like in the early days of the Internet, will be needed to ensure the responsible development of blockchain and its maturation.
Amit Ghosh, head of Asia Pacific at R3, believes that strong regulatory frameworks will help blockchain technology to be a mainstay in the digital economy.
Across Asia, governments are at various stages of exploring and formulating policy frameworks, from digital asset legislation in Thailand to the beginnings of a legal framework on crypto and virtual assets in Vietnam, says Ghosh who is the global chief information and services officer of R3, a leading enterprise blockchain technology and services provider.
Then there is the Singapore-based Global eTrade Services (GeTS), which launched Open Trade Blockchain (OTB), an extensible blockchain service for trade communities that can make global trade highly efficient, secure and transparent. It is the world’s First Cross-Border Blockchain For Trade, linking ASEAN and China’s Digital Silk Road.
Blockchain deployment expanding
Blockchain technology has garnered much interest from governments and enterprises across Asia. According to estimations from management consultancy PwC, blockchain global economic impact will reach US$473.3 billion by 2030 in key areas such as identity and credentials, providence and traceability, securitisaton and payments, agreement thresholds and disputes, and loyalty and rewards.
This year the industry will see a tighter coupling of blockchain technology with artificial technology and machine learning to ensure greater integrity, especially when it comes to tracking the performance of assets over time.
All in, 2023 will be exciting as the world watches the recovery of the crypto sector and the exciting blockchain innovations.
Part 2 of Deeptech Times’ predictions on NFTs and metaverses on Thursday Jan 5.