Review and Prospects of the Crypto Assets Industry in the First Half of 2023

In the first half of 2023, the Crypto Assets industry experienced a series of significant events, but from the current perspective, there are not many truly impactful ones.

Key Event Review

Regulatory Environment Changes

In March, the collapse of a digital bank in the U.S. had a huge impact on the industry. This event led to the sudden disappearance of the primary trading channel between Crypto Assets and fiat currency, which had accounted for more than 70% of market traffic.

In June, U.S. regulators took legal action against certain large trading platforms, causing a brief market fluctuation. However, market sentiment quickly reversed as several traditional financial institutions began applying for Crypto Assets ETFs.

Technical Upgrades and Innovations

In April, Ethereum completed the Shanghai upgrade, which is a milestone update. After the upgrade, the Ethereum network introduced a secure and reliable underlying asset interest mechanism. Currently, nearly 20% of Ether has been locked in staking nodes. This change has also attracted traditional enterprises to build new investment strategies based on it.

Some institutional investors are starting to enhance their yields by purchasing Ether and staking it, which could become an important source of native funding in the future Crypto Assets space.

Regional policy changes

In April, Hong Kong adjusted its policies related to Crypto Assets, triggering a wave of activity. However, whether Hong Kong can replace the United States as an important bridge between the world of Crypto Assets and fiat currency remains to be seen. On June 1, Hong Kong's new Crypto Assets policy officially took effect, but so far its impact seems to be limited.

Industry Exploration and Innovation

In the first half of this year, there have also been some notable trends within the industry:

1. The launch of Move public chain caused a brief hype in February to March, but the bubble quickly burst.

2. The token airdrop of the Blur platform stimulated the NFT market, especially with blue-chip NFT projects experiencing significant increases in January and February. However, subsequently, some well-known NFT projects failed to meet expectations, leading to a sharp decline in prices. Currently, the NFT market is in a restructuring phase after the bubble burst.

3. From late April to early May, there was a wave of speculation surrounding MEME tokens. At the same time, the Ordinals NFTs and BRC20 tokens on the Bitcoin blockchain also fueled this trend. This reflects the current lack of a strong narrative logic in the industry, forcing investors to turn to more speculative assets.

Future Outlook

Looking ahead, the Crypto Assets industry is still searching for new narrative logic. The following three aspects are worth paying attention to:

1. The Ethereum network will undergo another upgrade in the second half of the year, aimed at improving performance. Meanwhile, multiple Layer 2 solutions are expected to launch on the mainnet within the next 6-12 months. These technological advancements are expected to enhance the Ethereum network's performance to thousands of transactions per second, and potentially even tens of thousands per second in the future.

2. Wallets without private keys based on MPC technology and on-chain AA smart wallets are expected to form a unified standard with the promotion of Layer 2 networks. This will significantly lower the user entry barrier and promote the popularity of applications.

3. Traditional financial institutions' applications for Crypto Assets ETFs may receive approval by the end of the first quarter of next year. This will reopen compliant funding channels in North America and inject new vitality into the market.

Overall, the current Crypto Assets industry is in a phase of repositioning and seeking growth points. With technological upgrades, improvements in user experience, and a gradually clearer regulatory environment, we may see a new wave of application explosions and user growth after the second quarter of next year.