In this article, we will talk about the evolution of the crypto market in 2023 as derivatives continue to grow. Let’s take a look at the reports, what awaits the crypto money market in the new year.
How did the cryptocurrency market perform in 2022?
One of the worst years ever for cryptocurrencies was 2022. Since the beginning of the year, the total value of the market has dropped by an average of 70%. There are two main reasons for this decline:
- A belated correction was necessary after the cryptocurrency market suffered two years of extreme bullishness. Therefore, prices have dropped.
- FTX and other cryptocurrency exchanges went bankrupt in 2022 due to poor fundamentals. As a result, most investors sold their shares to lock in profits, outpacing other investors. The Bitcoin market suffered FUD as a result.
Reasons for the evolution of crypto in 2023
In the continuation of the article, let’s take a look at the developments that give clues about how we can get out of the environment described above.
Growth of crypto derivatives
The amount of cryptocurrency derivatives depends on two factors. The development of appropriate infrastructures such as decentralized finance (DeFi) applications, and secondly, the entry of more experienced and reputable intermediaries. The latter will eventually result in the involvement of additional institutions.
The crypto market is still in its infancy
2023 will undoubtedly be a turning point for cryptocurrency derivatives. There will be continued development of new crypto primitives such as structured vaults, perpetual options and derivatives, an increase in both centralized and decentralized options infrastructure. Meanwhile, most derivatives trading takes place on Binance, OKX, and Bybit, which are not US-based and regulated.
Also, derivatives can attract more traditional investors. Since these products can offer predictable returns comparable to fixed income, they are more favored by institutional investors. These processes are carried out using various products such as bull or bear. Additionally, institutional investors can set a risk limit. For options bets, they may be combining call and put options without the risk of liquidation.
Big companies will continue to buy small, derivatives businesses
It is becoming more difficult to distinguish between individual and corporate demand. Some of Wall Street’s biggest and most experienced firms are responsible for the individual-focused businesses that cryptocurrency exchanges acquire. For example, as we quoted as Kriptokoin.com, Coinbase acquired FairX, a small Chicago futures exchange, in January 2021. The deal was made to make it easier for investors to enter the derivatives markets.
DeFi altcoin derivatives market expands
Perpetual futures make up as much of the decentralized derivatives volume as centralized platforms. The daily volume of decentralized derivatives is approaching $3 billion per day. Despite strong growth, less than 5% of the total volume of crypto derivatives is decentralized sustained volume.
Will 2023 be a good year for the cryptocurrency market?
Another factor contributing to the growth of cryptocurrencies is the increasing adoption of Blockchain technology. The decentralized, secure nature of Blockchain has made it an attractive solution for a wide range of industries, from procurement Blockchain management to voting systems. According to analysts, this increased adoption of blockchain technology will likely drive further growth and adoption of cryptocurrencies.