​When the crypto market returns to growth. Huobi analysts’ prediction

What’s new? Huobi Research, the analytical arm of the Huobi cryptocurrency exchange, has published a report with an overview of the global crypto industry and its key trends in 2022-2023. In the document, analysts conclude that the bottom of the cryptocurrency industry will be reached in Q1 2023. In addition, the global adoption of digital assets as a means of payment will continue in the near future.

The full version of the report

What is known about the company? Huobi Research Institute was established in April 2016. Since March 2018, it has been engaged in comprehensive research and study of various applications of blockchain technology. The organization works with governments, businesses, universities, and other institutions to promote a healthy and sustainable blockchain industry.

What other conclusions did the researchers come up with? The report reports that the market faced a massive drop in 2022 caused by an increase in interest rates from the US Federal Reserve System. The total market capitalization of cryptocurrencies declined by more than $2,2 trillion, and the size of institutional business in centralized finance declined by 71,4%.

Total value locked (TVL) in decentralized finance (DeFi) declined by more than 70% from its all-time high, and leverage has also declined. The capitalization of the market of non-fungible tokens (NFTs) decreased by 42%, and the number of active users decreased by 88,9%. The authors of the report note that the spheres of metaverse and GameFi are promising, but not yet sufficiently developed.

The bear sentiment was influenced by the collapse of the Terra blockchain ecosystem, bankruptcies, and liquidations of hedge fund Three Arrows Capital (3AC), the FTX exchange, the BlockFi trading platform, and the Genesis broker.

In 2022, approximately 320 million users own cryptocurrencies, with more than 40% coming from the Asian region. At the same time, the growth of new users compared to last year dropped from 194 million to 25 million. The largest number of visits to centralized exchanges (CEX) is in the US, South Korea, and Russia, with accumulative share of 22%. Cryptocurrencies are also used for payments and store of value in most application scenarios in South America and Africa, with more than 1/3 of the citizens using stablecoins daily.

This year, 42 countries around the world have adopted regulatory measures and guidance for the crypto industry. The share of positive measures exceeded the 2021 figure at 36%. A full-scale regulatory framework for the industry is on the agenda in those countries that are tightening CEX regulation rules and exploring the integration of blockchain into the governance system.

Based on the analysis of the entire market, Huobi experts presented a number of predictions for the industry over the next year:

• The market will reach the bottom in Q1 2023
• Major social Web 2.0 companies, such as Twitter, will continue to develop Web 3.0 and introduce a new paradigm of SocialFi
• Decentralized application (dApps) chains will enter a period of rapid growth
• The use of ZK networks will increase
• Demand for on-chain storage will grow
• Regulation of on-chain activity will intensify, and some protocols may be endangered
• Cryptocurrencies will be adopted or allowed as a means of payment by more countries

In November, analysts at crypto exchange Coinbase predicted the end of the crypto winter no earlier than 2024. Experts noted that the market has seen low volatility since early July, and the collapse of FTX amplified it, potentially prolonging the already long crypto winter. The lack of large buyers has also made the digital asset class vulnerable.