Emerging DeFi Trends to Keep an Eye on in 2023
In 2022, some DeFi trends had adverse effects on the crypto markets, with market values dropping by over 50% following the 2021 bull market. However, crypto wasn't alone in facing challenges, as U.S. stock values declined by more than 15%, and bond markets also saw a decline of over 20%.
At the start of 2022, traditional finance was contending with high interest rates. This prompted more investors to explore speculative investing in crypto, especially after Bitcoin (BTC) and Ethereum (ETH) reached all-time highs in 2021.
During the second quarter of 2022, market liquidity in traditional finance decreased due to rising interest rates. As traders sold riskier assets, the crypto market's capitalization dropped by $1 trillion.
The collapse of the FTX exchange platform added to the crypto market's struggles. FTX, which had supported several struggling start-ups during the initial market dip, was discovered to have commingled customer deposits and funds. Its insolvency was revealed in November, leading to a mass market exodus. FTX's native token, FTT, plummeted from $26 to $1 in value within days.
Despite these challenges, there were significant developments in decentralized ledger technology. Notably, Ethereum's transition from a proof-of-work to a proof-of-stake blockchain, known as "The Merge," reduced the network's energy consumption.
Looking ahead to 2023, there are several trends to watch, with a focus on finding a balance between decentralization and regulatory systems.
