The current year of 2023 has proved exciting and action-packed in the crypto industry. Several interesting, challenging, and promising developments have transpired in recent months. As always, the world of crypto is moving rapidly, and this article aims to provide an update on the biggest headlines and news taking place in the current year. Let’s delve into the primary developments!
Key Takeaways
- One of the headlines in recent crypto regulations is a cooling-off period law: crypto companies are liable to inform their customers about the possible risks and threats on the market.
- In general, regulatory bodies have introduced the highest volume of laws and regulations in 2023 regarding crypto, which has increased the uncertainty factor in the industry.
Laws and Regulations vs. Crypto
One recent headline in crypto regulations is the introduction of a cooling-off period law, which makes crypto companies liable to inform their customers about potential risks and threats in the market. This regulation dictates that crypto companies should educate and inform their customers on the potential risks, pitfalls, and other relevant details regarding their offerings.
Even though there are up to 450 million crypto users, numerous public members have regretted hastily purchasing the crypto offerings. The UK’s FCA (Financial Conduct Authority) has issued an interesting statement regarding this topic.
They believe that while crypto is an entirely legal and promising alternative to Fiat currency, there are inherent risks to be considered. After all, crypto remains somewhat unregulated and chaotic due to its reasonably short existence period of fourteen years. Therefore, new customers should be aware of all the relevant risks before they make their first purchase.
In the past, this obligation was tied to the customer. Still, as of October 8, crypto organizations will bear the responsibility to become significantly more transparent and forthcoming with the general market conditions of crypto.
The Pressure on Bitcoin
While the regulatory pressure to iron out the crypto industry might prove helpful in the long run, it has created some difficulties for the crypto market growth. So far, 2023 has been one of the busiest years for crypto development as major sovereign entities like the USA and UK are taking a broader interest in regulating this industry.
The goal of the regulatory bodies can be divided into two parts – ensuring that crypto users are safe and finding ways to tax this growing market. However, achieving these two objectives is easier said than done, which causes both regulating parties and crypto markets to go through turbulent times. As of the second quarter of 2023, major cryptocurrencies had to withstand several waves of regulations, which halted momentum.
The Impact of Regulations on Bitcoin’s Performance
In this case, Bitcoin might have suffered the most. After the turmoil of 2021 and early 2022, Bitcoin finally found its footing by the end of that year. All seemed well enough for the flagship crypto, with standard projections dictating that it would hit the $ 40-50 thousand range by the end of the year. And for a while, the predictions seemed to go as planned.
However, the regulatory onslaught of early 2023 stopped Bitcoin’s momentum. At first sight, it might seem counterintuitive that proactive government regulations would harm the Bitcoin valuation. The problem is that most of these regulations will inevitably nudge Bitcoin development in a particular direction. And, since the industry is still in its infancy, it is almost impossible to predict the impact of these regulations even in the short term.
The resulting uncertainty has motivated some owners to exchange or liquidate their Bitcoin assets. As of June 2023, Bitcoin remains relatively stable, but the uncertainty of regulatory influences has already caused it to veer away from projected growth. It will be fascinating to see if Bitcoin has enough momentum to recover swiftly and justify the hefty expectations.
Web 3.0 is Making a Comeback
It is no secret that Web 3.0 was excessively hyped in the 2021-2022 period. In late 2022, the momentum inevitably decreased since numerous startups and business ventures fell short. The reason for this was simple: overwhelming hype around Web 3.0 caused countless startups to enter the market without actual value propositions or realistic plans for the future.
But in 2023, Web 3.0 is making an anticipated comeback. This state-of-the-art technology enables businesses to get funded, enter the market, and develop digital products or services without third-party intervention.
Numerous industry-leading companies like Meta and Amazon have started experimenting with methodology, and we have seen the most significant inflow of startups focused on developing Web 3.0 even further. So, much like the Dot Com bubble in the early 2000s, we might be entering a second, monumental phase of Web 3.0 which promises to revolutionize the internet landscape again.
The NFT Market Has Finally Found Its Footing
Yet another target of trials and tribulations in the blockchain family was the NFT technology that soared high from 2019 to 2021 and then came to a sudden crash. While the downturn was swift, it was entirely predictable due to its inherent problem: most NFTs sold high due to the rising hype around the industry instead of having actual value and utility tied to them. While several startups tried to break the mold and offer generous benefits, the market suffered heavy casualties in 2021.
Almost two years later, we are witnessing a comeback from the NFT field, unlike the above-described Web 3.0 resurgence. The reason for this comeback is also akin to Web 3.0: as the hype disappeared, the industry started slowly appreciating the significance of NFTs.
From their inception, non-fungible tokens were designed to give promising digital (and traditional) artists a helping hand. This system of tying a digital asset to a crypto price perfectly serves independent artists, as they get compensated without needing to involve third parties. In 2023, the NFT market returned to this original premise and achieved a 38% growth rate in a calendar year.
Introduction of the First Crypto Exchange-Traded Fund (ETF)
First debuting on the NY stock exchange in 2021, the crypto ETF (Exchange-Traded Fund) offering is a tremendous achievement in the crypto industry. As of 2023, the SEC is nearing the finalization of ETF approval, giving aspiring crypto investors unprecedented freedom and options on the market.
While SEC was strictly against greenlighting crypto ETFs for several years, the executives believe that the industry is finally nearing the level of maturity to support ETFs. The following months will shed light on this decision and let us know if this monumental decision was made at the right moment in the crypto development timeline.
Key Takeaways
- Layer 2 smart contracts offer higher speed, limitless scalability, and decreased transaction fees. The trade-off here is compromised security, but the jury is still out on the final performance of layer 2.
- Properly developed layer 2 technology could drastically increase crypto adoption due to its increased functionality.
The Rise of Layer 2 Smart Contracts
Even though major cryptos have been around for only a single decade, the initial ecosystem is already showing several things that could be improved. The initial layer of blockchain technology that supports leading currencies like Bitcoin and Ethereum, called layer 1, has become slow and cumbersome due to an increasing load of transactions over the years.
It’s important to remember that blockchain technology is essentially a problem-solving mechanism that requires significant computing power to execute each transaction. This initial model was not created to support such massive volumes and has rapidly become problematic. However, leading innovators in the crypto field have already introduced a handy alternative to layer 1, aptly named layer 2.
The naming here is precise – Layer 2 is a second layer of protocols built on the solid foundation of Layer 1. This new ecosystem harnesses the power of core Blockchain technology without overloading or stressing the computational power. In short, Layer 2 optimizes power usage and executes protocols efficiently.
As a result, the smart contracts developed on the Layer 2 tech are much faster and cost a fraction of the Layer 1 transaction fees. This development has piqued the interest of numerous industry-leading organizations, letting them consider the utility of smart contracts more actively. After all, SMs often serve as improved alternatives to traditional contracts and have multiple use cases.
The Crypto Industry Continues its Efforts Towards Green Energy
It is no secret that mining cryptocurrencies is not a completely digital process. The execution of Blockchain protocols results in sizable carbon emissions around the world. While this side effect was minuscule in the last decade, crypto globalization has dramatically increased the carbon output.
However, unlike most industries worldwide, the crypto landscape has been transparent regarding this environmental issue from day one. Industry leaders like Bitcoin and Ethereum have invested substantial funds to modify their mining process and introduce eco-friendly alternatives.
As of 2023, up to 50% of Bitcoin is mined with renewable energy (water, wind, and nuclear), a significant uptick compared to previous years. While carbon emissions are still high worldwide, crypto decision-makers are going in the right direction.
Ethereum 2.0 and Its Future Prospects
The Ethereum 2.0 concept has been around for several years now. As we discussed above, the oversaturation of the crypto market has been increasing for quite a while now. This has resulted in increased transaction fees and slower speeds, significantly decreasing the inherent crypto values and dissuading potential investors.
Ethereum 2.0 has promised to bring crypto closer to the original promise. However, this process has proven to be easier said than done. Ethereum developers are working hard to finalize their new Proof-of-stake concept and replace the established proof-of-work methodology.
While this is excellent news for the acceleration of crypto trading, the proof-of-stake methodology poses threats to the rock-solid security and anonymity of crypto. However, industry experts believe that, with enough refinement, Ethereum developers could make this transition smooth, sacrificing only a negligible amount of customer security in the process. As of June 2023, we have yet to see this transition in real-time, but Eth 2.0 promises to deliver on its promise.
The Corporate World is Adopting Crypto
One of the most exciting news in the crypto landscape has been an uptick in crypto adoption by market-leading corporations. Several big names like Google and Amazon are devoting colossal funds to test out their crypto offerings on the market. Crypto technology is still far from reaching its maximum potential, and large-scale organizations are finally confident enough to get a taste of Blockchain methodology.
Gaining Trust in the Public Eye
This recent trend has several positive implications for the crypto field. First of all, this development signals the reliability of cryptocurrencies. As with any other innovation, the crypto market needed to acquire support from global organizations to validate its foothold. Now, this has finally come to fruition, shifting the perception of the general public positively. Now, with companies like Disney acknowledging the value of crypto, potential investors worldwide will feel more confident to finally make their first purchase.
Decreasing the Volatility of Crypto
Acquiring such strong support also leads to stability in the market. To visualize this point, let us look at a simple scenario. Imagine that you have purchased Currency X with your investment savings. So far, Bitcoin has fluctuated somewhat but remained primarily stable.
However, you found out that several strict regulations are about to affect the Currency X market, which could lead to a price decrease.
All things being equal, it would be wise to sell your stock and mitigate the losses. But let us now imagine that Currency X was adopted by several global conglomerates like Nike, Tesla, and Apple. Now, currency X has a much higher likelihood of negating the upcoming price volatility due to recent regulations.
Development of Blockchain Technology
Disruptive blockchain tech has come a long way since 2009, but many experts believe it is far from a finished product. According to industry insiders, the journey of crypto development is still in its infancy, and we should expect significant changes in the upcoming years. This process could accelerate dramatically with the involvement of industry titans since they can allocate colossal resources to this endeavor and deliver the technology breakthroughs rapidly.
