crypto strategy

2023 Predictions for Crypto-VCs, Bitcoin Mining, and Stablecoins – Tearsheet

From entire stablecoin ecosystems collapsing to multiple centralized exchanges declaring bankruptcy, 2022 has been Armageddon for the crypto industry. The DOJ and SEC took no prisoners in enforcing the regulations, except for SBF.

As the crypto cleanup phase ensues in 2023, it’s worth turning to crypto insiders, seasoned survivors, for predictions: where do we stand? One such crypto veteran is Ryan Selkis, CEO of Messaris, a crypto data research and analytics company.

In the sixth edition of Crypto Theses for 2023, Selkis highlights key trends, people, projects and companies to watch this year. We discuss his predictions on the state of venture capital investments, the future of Bitcoin mining, and the case for more stablecoins.

Venture capital investments in H1 vs H2 2022

Similar to traditional fintechs (TradFi), crypto investments took a hit in 2022. On the back of a hot market in 2021, the first half of the year saw $29 billion in investments. The bulk of the investment went to centralized finance (CeFi) projects – think Celsius, BlockFi and centralized crypto exchanges. No Bueno.

After the Terra Luna total eclipse in May, funding investments fell off a cliff in the second half of 2022. The crypto sector only received $6.6 billion in investments, a reduction of almost 80% compared to the first half of the year.

For obvious reasons, the biggest loser was CeFi. Investments in the second half fell by 95% and the number of financing rounds fell from 186 to just 50.

Venture capital funding forecast for 2023

According to the report, 2023 will likely bring the following scenarios:

  • Companies that demonstrate long-term usage and protocol business models will drive the next cycle and attract the most investment.
  • Startups that survived the bear market, demonstrating robust business models, might be able to capitalize on some epic M&A opportunities.
  • The “heights” of 2021 are behind us, and incompetent projects will be acquired at massive discounts or go out of business altogether.
  • Selkis argues that generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) for digital assets are long overdue.

Bitcoin mining and the energy crisis

As the price of bitcoin has fallen, bitcoin miners are struggling to sustain their operations profitably. Average mining costs are around $17,000while the price per bitcoin is currently around $20,000.

However, the report shifts our attention to the energy crisis, a big issue in 2022. Bitcoin mining produces tons of electronic waste, and only 17% of this waste is recycled. Nearly 60% of all Bitcoin mining operations use coal and gas, and only 39% of mining operators use renewable energy sources.

Bitcoin Mining Predictions for 2023

In the report, Selkis predicts the following for Bitcoin mining:

  • The trend to take advantage of wasted and stranded energy sources will continue. He writes: “Bitcoin miners have increasingly collocated to capture burnt methane, stranded geothermal energy, waste coal, and even recycled used tires.”
  • He also predicts that Bitcoin miners will be prime targets for offloading because they are “centralized and easy to spot.”
  • And finally, he boldly predicts that Bitcoin will be an ESG asset very soon. While he acknowledges that the narrative is against cryptocurrency, the drive and innovation to use renewable energy is strong and will persist so that 100% of Bitcoin mining uses renewable energy sources.

The case for more stablecoins

When the price of bitcoin fell, crypto traders placed their funds in stablecoins. Another factor driving the stablecoin trend has been rising inflation. Many people in developing countries preferred to store their wealth in US dollars – and stablecoins offered the easiest access.

But no, 2022 has not left any crypto industry unscathed. The Stablecoin Wars ensued. Binance has automatically converted its users’ stablecoins to BUSD. And later, Coinbase encouraged users to switch their USDT to USDC, luring them in at no cost.

But of course the worst was the UST collapsethe algorithmic stablecoin of Terra Luna.

Stablecoin Predictions 2023

  • As the inflation problem persists, we will likely see the construction of more stablecoins that will help preserve the user’s purchasing power.
  • Selkis also predicts that we will see inflation resistant stablecoins or IPC tokens. The concept stems from the minting of tokens whose price moves at the same rate as the consumer price index.
  • Finally, it paints a dystopian picture of CBDCs and central bank intentions to “bank the unbanked.” His argument is based on the article by Circle’s Head of Policy, Dante Disparte titled The Case Against Central Bank Digital Currencies. In a nutshell, Disparte argues that issuing CBDCs would force central banks to compete with retail banks instead of regulating monetary policies. In his own words, “A CBDC would be tantamount to the Federal Aviation Administration flying planes and building jet engines, rather than defining safe and competitive passage through the skies.”

#Predictions #CryptoVCs #Bitcoin #Mining #Stablecoins #Tearsheet #crypto strategy

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