Despite Macro Headwinds, Crypto’s Investment Thesis is Playing Out
Hashdex, a leading global crypto-focused asset manager, released its 2023 Crypto Investment Outlook. The report provides Hashdex’s views on the future of crypto, lessons from 2022 and what investors should be watching for in the coming year.
“Despite the dramatic challenges of 2022, we see the past year as anything but negative for crypto,” said Marcelo Sampaio, Co-Founder & CEO of Hashdex. “While we can’t deny that recent events have hurt the industry, we are optimistic about the long-term investment case, maintain that the recent problems are fixable and believe the underlying technology is intact and improving. As crypto continues to evolve and patterns emerge, there are informative trends developing for specific crypto assets as well as for segments like DeFi, Web3, and Digital Culture.”
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In the report, Hashdex’s experts provide insight into key issues impacting the crypto space and what to keep top of mind next year. The following topics are the seven most important themes Hashdex identified and believes investors should pay attention to in 2023:
- Bitcoin’s investment case strengthens. Despite its poor price performance, Hashdex believes 2022 was a year of strengthening bitcoin fundamentals and that its long-term investment case remains as strong as ever. For 2023, Hashdex expects Bitcoin to continue evolving across a variety of fronts including progress in environmental discussions, with guidelines emerging that bring together governmental agendas and the mining industry. Particularly in the United States, the firm also remains confident that bitcoin’s regulatory clarity relative to other crypto assets will keep nurturing its adoption by institutional investors.
- Regulatory clarity will accelerate in the wake of FTX. In 2023, Hashdex believes regulatory strides will be made to reflect the reality that crypto assets are here to stay, and solid public policy is needed to ensure that investors are protected from bad actors. The firm is hopeful that, in the year ahead, focus will be on regulation that requires the segregation of trading and custody service providers, as well as increased market transparency. Many positive regulatory initiatives, from Latin America to Asia, are likely to progress in 2023, which may have a more limited impact on adoption and the demand for crypto assets, but also contribute to positive global regulatory outlook for 2023.
- Blue chip DeFi fundamentals grow stronger. Hashdex notes the failing actors in 2022 have been CeFi (centralized finance) institutions, whereas blue chip DeFi protocols functioned extremely well, proving that transparent, auditable, and highly predictable smart contracts can be much more efficient during stressful times. The firm believes that blue chip DeFi protocols with strong revenue will get stronger on the back of their well-designed tokenomics, as many of them seek out new business models. Other areas where Hashdex expects growth include the deployment of DeFi services in scaling solutions, greater diversification of liquid staking alternatives, and a growing role for Bitcoin as more DeFi solutions on its blockchain gain traction. The establishment of a framework for regulating stablecoins in the U.S. and EU is expected for 2023 – the importance of which cannot be underscored enough.
- Ethereum: an emerging crypto-native risk-free rate. Despite ether’s significant price drawdown, 2022 was one of the most important years in Ethereum’s history with the effective transition to Proof-of-Stake (the Merge). In 2023, Hashdex will be keeping an eye on how the demand for ether will be influenced by new developments in Layer-2 solutions, such as rollups, as well as if Ether gains increased institutional interest as data regarding its energy consumption post-Merge becomes more widely available.
- Scalability strengthens old guard blockchains. This year’s challenges haven’t slowed developments in the smart contract platform niche. 2023 promises to be the year in which the “old guard” of blockchains – namely Bitcoin and Ethereum – become increasingly modular and scale without compromising security, thanks to rollup-based solutions. Ultimately, although new architectures and governance models for bridges are not beyond consideration, Hashdex believes the tone for 2023 has to revolve around the development and deployment of these scaling solutions, with their incentive models being one of many questions that need to be answered.
- Strategic partnerships may push NFTs to a broader mainstream audience. The past year in Digital Culture has disrupted expectations as many believed blockchain gaming would be a strong use case to drive mainstream crypto adoption. In 2023, Hashdex believes the main trends to watch with greater attention are (i) traditional gaming companies delivering blockchain-based blockbuster products – a prominent factor for optimism around adoption – and (ii) the birth of social media platforms that can use decentralized infrastructure and NFT technology to challenge the current business models displayed by Meta and other big tech companies.
- Crypto will benefit from more “ordinary” macro conditions. Crypto is no longer a small, niche investment – it’s an asset class with a significant portion of institutional investors exposed. For better or for worse, crypto will react to the same shocks in risk aversion or preference for liquidity as traditional risk assets as crypto will not decouple from traditional risk assets. Ultimately, Hashdex anticipates that 2023 will be a remarkable year for crypto assets, as long as macro conditions stop weighing down the asset class.
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Mr. Sampaio added, “For crypto investment to thrive, our industry must set the highest bar when it comes to standards for trading counterparties, custodians, and other service providers. This is something that Hashdex was founded on and takes incredibly seriously – that is why we have spent the last five years building the necessary infrastructure and processes to protect our investors. Our highest priority remains ensuring that client assets are secure and nothing has changed with our commitment to our values and our mission: giving investors access to crypto through simple, secure, and regulated products.”
Hashdex Executed Major Milestones Throughout 2022 and Expects 2023 to Bring More Opportunities
The developments seen throughout 2022 are further driving crypto’s long-term investment case. Hashdex has maintained the same core mission as it did in 2018 – giving investors simple and secure access to the crypto ecosystem. Over the course of the past year, Hashdex has continued to deliver on this mission while also expanding its global footprint to Europe with the launch of the Hashdex Nasdaq Crypto Index Europe ETP and the Hashdex Crypto Momentum Factor ETP. The firm also launched three thematic ETFs in Brazil, and a first-of-its-kind Bitcoin Futures ETF in the United States.
The ultimate goal of crypto is to develop a global, neutral, social and economic infrastructure for the instant transfer of information and value devoid of trusted parties, that can be used by anyone in the world.
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