Binance Research has identified some key trends and themes for the coming year in its 2022 report.
Binance Research is the research arm of Binance, the world’s most popular cryptocurrency exchange.
The paper titled ‘Full-Year Review 2022 and Themes for 2023’ pointed to a sharp decline in Total Value Locked (TVL) as a result of what it termed ‘exogenous market events’. TVL is defined as the total value of cryptocurrency locked in a smart contract and is used to measure the health of DeFi protocols.
Currently, TVL is valued at approximately US$40B, or about 25% of what it was at the start of the year. The report also suggests that DeFi has already entered a bear market in 2022. A picture that the wider Web3 ecosystem would follow only months later.
The late-spring collapse of the UST stablecoin started a flight from the DeFi ecosystem that has still not reversed.
Q3 and Q4 were tough for NFTs, says 2022 report
The 2022 report is disastrous for the NFT market, with 83% of sales occurring in the first half of the year, representing $18.3 billion. However, the market saw a year-on-year growth of 10.6%. The market hit its bottom in October before very modest gains in November and December. By the end of the year, sales were a tiny fraction of January’s figures.
The explosion of the UST stablecoin and the transition from Three Arrows Capital have been cited as reasons.
According to Google Trends, interest in NFTs peaked in January before declining throughout the year. A relatively small number of enthusiasts also kept the market going. The number of unique buyers and sellers has almost halved compared to the beginning of the year.
Furthermore, blockchain-based games continue to develop, but at a slower pace. Many play-to-earn games have received criticism regarding the quality of the gameplay and the robustness of tokennomics. After Bumper 2021, interest in the metaverse has also declined.
Things to see in 2023
As growth opportunities become harder to come by from within the crypto ecosystem, Binance Research anticipates that tokenization of assets will become a bigger focus. The industry has also lost a significant amount of trust with regulators.
Governments look less kindly on Web 3 than they used to. Thus, the rules will be stricter than before, but the industry will get more clarity on many fronts. A positive development for long-term growth.
According to the paper, NFTs will increasingly become about utility and will overtake profile-picture NFTs. Real world use cases will be the next driver of adoption.
You can read the full report on Binance Research’s website.
disclaimer
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