Shenyu 2023 Prediction: DCG is not a big problem, and a new market may emerge by the end of the year

First of all, the biggest macroeconomic factor in 2022 is the interest rate hike, which puts pressure on global assets including cryptocurrencies. Coupled with events such as the FTX collapse within the cryptocurrency market, the cryptocurrency market has suffered a huge blow.

The biggest impact of the FTX incident is on the existing exchange ecosystem, which will continue to evolve to solve the trust problem in centralized exchanges. Including Cobo, industry organizations are currently trying to promote a more transparent and healthier trading ecosystem.

Decentralized exchanges are one direction, and compliance is also a possible direction. As a custody platform, Cobo hopes to help achieve the separation of trading, custody, and settlement through the upcoming SuperLoop, while ensuring the efficiency of transactions, thereby restoring the confidence of trading institutions in transactions.

About DCG

At present, the DCG incident is not expected to expand further. The expansion here refers to the situation where Grayscale's hundreds of thousands of Bitcoin assets are forced to sell. Therefore, from the perspective of the main driving factor of the market decline, there is no risk of large-scale liquidation.

About Ethereum

The second thing is actually quite clear. The Ethereum Foundation has announced that the Shanghai upgrade will basically arrive on time in March. The Foundation is determined to ensure the Shanghai upgrade even if several other features are put on hold.

From this point of view, Ethereum has injected a shot in the arm to the industry. In the past three months, the entire market has been focusing on asset management in the crypto market, and the focus has been on Staking. Therefore, the Staking liquidity risk that has troubled everyone in 2022 can be successfully resolved through the Shanghai upgrade in March.

Looking back at history, the entire Ethereum Foundation will take the initiative to choose the timing and select some favorable external macroeconomic environment when making major strategic decisions, whether it is 1559, mergers, or Shanghai upgrades, so March is also a relatively important time node.

Third, we have seen that many L2 projects, especially those based on ZK, have expressed their intention to launch testnets or mainnets in Q3 or Q4 of 2023.

In general, from the perspective of internal factors in the industry, there are no major potential risks in the coming year. In addition, there are two positive factors, one in March and the other in Q4. Therefore, at this level, there are not many factors that could cause a decline due to events.

About the cycle

In addition, we need to note that there are two relatively certain things. One is that Bitcoin will be halved in more than 470 days. If we replicate the impact of the entire halving cycle of the past decade, it also means that a new round of market conditions may be born at the end of this year.

Another thing is that from the perspective of the entire cryptocurrency market cycle, the entire cycle is short bull market and long bear market. We started to enter the bear market phase in March last year. This cycle is basically just over a year and is almost over.

Based on the above analysis of macro and industry factors, looking back at the entire industry over the past year, we have passed the most painful or rapid decline stage in this bear market. We are now in a stage where the market is gradually regaining confidence, looking for new narrative logic, and sorting out consolidation.

Looking ahead to 2023, with the interest rate hike cycle and these driving factors within the industry, it is expected that there may be a wave of market hotspots in Q2, and another wave starting from Q4 in the second half of the year.

If there are no special and extremely bad black swan events or deterioration of external macro factors, the bottom of this round of cryptocurrency market may have appeared, and we expect that large upward periods will appear more frequently next year.