Top 5 Cryptocurrency Trends to Watch in 2023
The crypto industry is constantly evolving and as adoption is rising, several key cryptocurrency trends are going to redefine the landscape. From regulatory changes to the development of layer 2 solutions, and the adoption of crypto by major businesses, the remainder of 2023 and onward promises to be transformative. Let’s take a closer look at 5 cryptocurrency trends to look out for and what they could mean for the industry going forward.
1. Increased Crypto Regulations
Governments and regulators around the world are starting to focus more on cryptocurrencies as the industry expands. As of February 2023, 8 countries have banned crypto, including China who made cryptocurrency trading and mining illegal in 2021 (Cloudwards). Other governments are starting to regulate it more heavily. For example, in the United States, the Securities and Exchange Commission (SEC) has moved towards regulating the crypto industry with its recent lawsuits against Ripple’s XRP as well as two popular crypto exchanges, Coinbase and Binance.
In the European Union, 5th and 6th Anti-Money Laundering Directives (5AMLD and 6AMLD) are in effect to tighten KYC and reporting obligations. Also, the Markets in Crypto-Assets Regulation (MiCA), which acts as an all-encompassing legal framework for crypto assets’ regulation in the EU and is aimed to be fully in effect by December 2024 (Legalnodes). On the other side, two countries have adopted Bitcoin as legal tender alongside their own fiat currencies – El Salvador and the Central African Republic.
The heightened regulatory measures within the crypto space could have many implications. For example, increased regulations have the potential to discourage illicit activities and enhance overall security. A regulated crypto market may also become more attractive to investors, as clear guidelines can instill a sense of confidence. These shifts present opportunities for the crypto industry to mature and become more widely adopted by the broader public.
2. Wider Business Adoption
The cryptocurrency industry has witnessed profound growth in recent years, marked by a notable trend of major businesses embracing crypto payments. Industry titans like PayPal, Visa, and Mastercard have paved the way by allowing their customers to use cryptocurrencies. In fact, as of April 2022, over 15,000 companies worldwide were accepting Bitcoin as a form of payment (Zippia).
In 2023, we now see more and more brands adopting Bitcoin and crypto payments. Some noteworthy names include Microsoft, Starbucks, AT&T, Twitch, Norwegian Air, Subway, and Home Depot. You can find a more detailed list of products and services you can purchase using Bitcoin here. In August 2023, PayPal launched its own stablecoin PYUSD for payments, helping the continued adoption of digital assets (TechCrunch).
This trend is likely to continue going forward. As more businesses integrate cryptocurrencies into their payment systems, the everyday use of crypto is becoming increasingly accessible. This encourages more individuals to explore and embrace digital assets and as cryptocurrencies take on a more prominent role in our daily financial transactions, they have the potential to become a trusted and widely accepted medium of payment.
3. Development of Layer-2 Solutions
One of the critical challenges facing blockchain networks today is scalability. The Bitcoin blockchain can only process 7 transactions per second and the Ethereum blockchain 20 to 30 TPS, compared to VISA who can process up to 24,000 transactions per second (Crypto.com). This means that cryptocurrencies need to increase their transaction capabilities in order to facilitate mass adoption and seamless everyday use.
In recent years, Layer 2 solutions have emerged to address this scalability issue. They are built on top of blockchain networks and can help to increase the speed and reduce the cost of transactions. Some notable Layer 2 solutions are Arbitrum, Polygon, StarkNet, and Optimism. In August 2023, we saw Shiba Inu launch their Layer-2 blockchain Shibarium, which runs on top of Ethereum blockchain and uses SHIB ecosystem tokens as fees (AnalyticsInsight). Additionally, Coinbase launched their innovative Ethereum Layer-2 solution Base, which reached the milestone of 1 million addresses in only 11 days (CurrencyAnalytics).
Going forward, we can expect to see continued development of Layer 2 solutions as well as other innovative scaling solutions emerge to make cryptocurrencies more practical and adaptable for everyday use.
4. The Rise of CBDCs
CBDCs, or central bank digital currencies, are digital versions of fiat currencies that are issued by central banks. CBDCs are still in their early stages of development, but they have the potential to affect the way we use money.
According to the latest research and CBDC tracker by Atlantic Council, a staggering 131 countries and unions, representing 98% of global GDP, are actively exploring digital versions of their currencies; some of them have already launched or are in the pilot phase, including the Bahamas, Nigeria, China, Switzerland, the United States, the United Arab Emirates, and Jamaica.
The development and rise of CBDCs could have many effects on the cryptocurrency market. On one hand, they could increase financial inclusion, offering better access to the unbanked populations. Additionally, CBDCs could help accelerate widespread adoption of cryptocurrencies and bridge Web3 to Web2. However, a prevailing sentiment within the crypto community is a sense of caution, driven by CBDCs’ centralized nature, which counters the core of decentralization underlying the Web3 and blockchain technology. In addition, CBDCs could compete with cryptocurrencies for use as payment methods.
5. Crypto Going More Green
A lesser-known, but potentially pressing trend for the crypto industry is the energy and climate change implications. Cryptocurrencies have faced criticism due to their possible negative impact on the environment. However, recently there have been significant attempts and actions towards sustainability through the use of renewable energy sources to power crypto mining, like solar, wind, and hydropower.
For example, a hydro-powered Bitcoin mining data center by GDA has been opened in the north of Sweden (Cointelegraph). Moreover, stablecoin issuer Tether invested in El Salvador’s $1 billion renewable energy project to build the world’s largest Bitcoin mining farm that will use solar and wind energy to power the mining operations (Tether).
Bitcoin is estimated to have an annual electricity consumption of more than 113 TWh (terawatt hours), which is comparable to the power consumption of the Netherlands (Digiconomist). The problem mainly lies in the cryptocurrency mining system or consensus mechanism called Proof-of-Work (PoW), which requires miners to solve complex mathematical problems through high computing power to verify transactions. In September 2022, Ethereum launched The Merge, transitioning from PoW to Proof-of-Stake (PoS) consensus mechanism, which reduced its energy consumption by 99.8% (Defiant). PoS is a newer technology that requires validators to hold a certain amount of crypto. However, Bitcoin’s network of miners currently has no plan to move to PoS as that could affect the reliability and security of the protocol and PoW helps to keep the cryptocurrency centralized as it incentivizes a large number of miners to participate (FullyCrypto).
These 5 cryptocurrency trends will certainly shape the future of the cryptocurrency industry. Given the innovative and evolving nature of the crypto market, staying informed about these developments will be pivotal for making well-informed investment decisions. Swapin is always monitoring the latest cryptocurrency trends and industry developments to adhere to the newest regulations and ensure that we deliver new innovative solutions to our customers, such as the latest Dedicated IBANs feature, which allows users to make crypto-to-fiat payments in their name. To find out more about Swapin’s products, you can visit our website here.
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