3 things we will see from crypto as 2023 winds down to the end

As the holiday season approaches, the excitement in the crypto world increases for the annual event known as “Santa's Rally”. Market dynamics will change between these holidays. At this time, there are several factors that influence the final months of the year.

Institutional investment growth

Cryptocurrency prices surged in late 2020 and 2021, fueled by investor optimism and institutional interest. Major financial institutions and hedge funds began to view Bitcoin (BTC) not only as a speculative asset, but also as a hedge against inflation and devaluation. Big companies like Square and MicroStrategy have added major Bitcoin holdings to their balance sheets, further reinforcing this image shift.

Additionally, Bitcoin reached an all-time high fueling positive sentiment in the market. Additionally, institutional investment has been seen as businesses such as Tesla publicly announce large-scale Bitcoin purchases. Moreover, the introduction of several cryptocurrency ETFs and funds gave institutional investors a more convenient and familiar way to access the market.

Companies are providing the custodial services necessary to protect digital assets to institutional investors looking for secure storage options for their cryptocurrency holdings in the rapidly evolving financial landscape of 2022.

Related: Bitcoin is evolving into a multi-asset network.

Despite some ups and downs, the trajectory was generally upward in 2022. Once skeptical, traditional financial institutions began offering a variety of crypto services such as lending, trading, and protection. Institutional actors have recognized the emergence of decentralized finance (DeFi) and intangible tokens (NFTs), particularly venture capital firms and specialized funds looking for new investment opportunities.

For example, prominent financial institutions have teamed up to form EDX Markets (EDXM), a novel exchange designed to trade digital assets through trusted intermediaries. This platform caters to both institutional and retail investors, ensuring a secure environment for digital asset trading. Prominent entities supporting this launch, such as Charles Schwab, Fidelity Digital Assets, Paradigm, Sequoia Capital, Citadel Securities and Virtu Financial, strengthen the credibility and strength of the exchange in the market.

In the year In 2022, despite the crypto winter, the development in the crypto sector increased by 5%, which shows the continued interest in the technology. In addition, a Celent study found that 91% of institutional investors would like to invest in tokenized assets by 2022, highlighting the high demand.

The coming period may witness more institutional capital flow into the crypto domain, exemplified by entities such as MicroStrategy, which is expanding its crypto holdings by acquiring an additional 1,045 Bitcoin in treasury. Also, a survey by EY-Parthenon revealed that most institutional investors have strong faith in the sustainable value of blockchain technology and crypto assets, leading them to plan large digital asset investments in the next two to three years.

Moreover, the growing interest of investors to participate in tokenized financial assets prompts institutions to actively explore opportunities to tokenize their own assets in response to the evolving financial landscape. As the industry matures and gains legitimacy, new financial products tailored specifically for institutional investors may emerge, facilitating their entry into the market.

Regulatory transparency

In the year As the cryptocurrency market grows in 2020, it will inevitably attract the attention of regulators around the world. Some countries responded by enacting outright bans, while others took a more measured strategy and began the process of developing regulatory frameworks to regulate and control the rapidly expanding domain of digital assets.

In the year In 2021, US regulatory developments – particularly those concerning the SEC's stance on cryptocurrencies – have become central to the global narrative surrounding cryptocurrencies. The industry has been active in discussions about cryptocurrency regulations and pushing for Bitcoin ETF approvals. Likewise, there are significant market adjustments and talks regarding decentralization due to China's crackdown on cryptocurrency mining and trading.

The cryptocurrency regulatory environment began to evolve in 2022. After preliminary discussions, several nations established proper legal frameworks to regulate cryptocurrencies, Initial Coin Offerings (ICOs), and DeFi platforms. At the same time, there has been a flurry of activity in the international movement to create central bank digital currencies (CBDCs), with many countries introducing or experimenting with their own digital currencies.

This year, significant developments have changed the global cryptocurrency landscape. For example, the Securities and Exchange Commission of Thailand is poised to ease restrictions on retail investments related to ICOs, aiming to encourage digital investments and boost market growth.

Meanwhile, the European Union has taken a decisive step by approving the Regulatory Framework for Crypto-Assets (MiCA) in April 2023, ushering in a new era of comprehensive crypto regulations in the region.

Related: IRS proposes unprecedented data collection on crypto users

A landmark July 2023 ruling by U.S. Circuit Judge Annalisa Torres upholding Ripple's compliance with XRP sales on public exchanges marked a major legal victory for the cryptocurrency sector over U.S. regulators. However, she explained that Ripple violated securities laws by offering to protect XRP funds and institutional buyers.

In September, four members of the United States Congress were convened by Securities and Exchange Commission Chairman Gary Gensler to immediately approve Bitcoin's listing. As these events unfold, we've seen a growing interest in Bitcoin ETFs. This potential chapter holds the promise of introducing a clearer regulatory framework, which would provide a more structured and defined direction for the cryptocurrency industry and investors.

Integration of AI and Web3

The convergence of Web3 and AI technology began to dramatically change the cryptocurrency landscape in the waning months of 2020. The rise in popularity of predictive analytics and AI-driven trading algorithms has enabled institutional and individual investors to make data-driven choices in a streamlined cryptocurrency market. Using this technology, market analysis has improved, allowing investors to predict price movements and optimize their trading strategies in the process.

The relationship between Web3 and Artificial Intelligence (AI) will intensify in 2021. AI-powered DApps are increasingly prevalent, offering new solutions in fields such as NFTs and DeFi. As a result of this integration, the market received a boost, making product farming and NFT creation and trading more efficient. AI-driven sentiment analysis tools have also played a vital role, providing insights into market sentiment and trends, helping investors make informed decisions.

In the year In 2022, we will see the integration of AI and Web3 from projects like Aave using AI algorithms to streamline lending processes, Rarible trying to use AI to provide individualized NFT treatment. These initiatives have demonstrated secure, automated and trustless transactions, boosting investor confidence.

The interplay of AI and Web3 is set to redefine this Christmas season. AI algorithms will be further developed, enabling proactive trading decisions and real-time monitoring of market data. Web3 technologies are expected to support innovative investment models and decision-making processes, especially decentralized autonomous organizations (DAOs) and AI-driven management systems.

AI-generated content in crypto in the form of NFTs and AI-powered virtual reality experiences could be a driving force in the market in the coming months. That enthusiasm could contribute to newfound liquidity in the market and growth in the industry.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.