Disclaimer:
The information presented in this report does not constitute financial advice nor is a recommendation to buy or sell.
Introduction
January 2023 (TL;DR)
- Market sentiment in crypto switched from “Fear” to “Greed” in January 2023.
- Investors are more optimistic due to a better outlook on inflation and interest rates.
- Despite setbacks, the crypto market remains a choice for investors with high-risk profiles.
- The Federal Reserve is progressing in fighting inflation but has a long road ahead to reach its 2% goal.
- Crypto lost 66% of its market value in 2022, but rebounded in January 2023 above the $1 trillion market cap.
- The number of global crypto users grew by 39%, surpassing 400 million in 2022, potentially reaching 1 billion by 2024.
- Ethereum is growing in popularity, with twice as many non-zero wallet addresses as Bitcoin.
- NFT trading activity slowed as investors focused more on established projects beyond the hype.
- News included more major brands entering web3 and numerous scams and hacks targeting prominent players like NFT God, Kevin Rose, RTFKT COO, and Azuki.
Market Overview
January 2023 Crypto Market Good News:
January 2023 Crypto Market Bad News:
Market Sentiment switches from “Fear” to “Greed”
Riskier assets have gained renewed confidence from investors in 2023 after facing one of the worst years ever for markets in 2022.
The improved outlook on inflation and interest rates has created a more attractive investment environment, increasing investors’ optimism.
Despite setbacks from major players such as FTX, Terra Luna, Celsius, BlockFi, Voyager, and others, the crypto market remains a popular choice for investors seeking for opportunities with a higher risk profile.
The Fed is starting to see progress in the fight against inflation
Inflation is slowing down as the Federal Reserve is continuing to raise interest rates. Nevertheless, there is still a long road ahead before it can hit its 2% goal from the current 6.5% annual inflation rate.
Global recession remains a possibility, but signs of a rebound are becoming more robust. That would be good for a more stable crypto market in the long run.
The crypto market lost 66% value in 2022
S&P 500 Performance, 2022
NASDAQ 100 Performance, 2022
Crypto Market Cap, 2022
After a stellar 2021, the cryptocurrency market saw a drastic decrease in capitalization in 2022. The total value of crypto dropped by two-thirds, from $2.2 trillion at the start of 2022 to $750 million by the end of the year.
Crypto followed the bearish overall stock market trend as investors faced significant macroeconomic uncertainties, except the downturn was much more drastic.
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Crypto rebounded to $1 trillion in January 2023
S&P 500 Performance, Jan 2023
NASDAQ 100 Performance, Jan 2023
Crypto Market Cap, Jan 2023
After a difficult 2022, the crypto market showed life signs in January 2023, regaining one trillion dollars in market capitalization.
In the first 30 days of 2023, it saw a boost of $250 million. This translates to a 30% increase year-to-date compared to the 5% and 9% increase of the S&P 500 and NASDAQ 100, respectively.
Blockchain Adoption
Crypto saw a 39% user growth in 2022 despite the bear market
The number of people worldwide who own cryptocurrency surpassed a new milestone of 400 million in 2022. While the collapse of FTX and its domino effect have increased skepticism over the space, institutional adoption has never been faster. Big brands like Starbucks, PayPal, Apple, Nike, and new innovations kept driving millions of new users to the blockchain.
However, there is still a long road ahead to reach mainstream adoption. That requires the user experience of web2 and web3 to be fully blended, and more importantly, secure.
Crypto on its way to one billion users by the end of 2024?
If the blockchain adoption trend continues to grow at the same rate as the internet adoption has in the past:
Crypto could reach one billion users within the next two years.
Ethereum is steadily becoming more popular than Bitcoin
Over the past five years, the Ethereum ecosystem has experienced a tremendous surge in user and developer adoption. In 2023, Ethereum reached more than 90 million non-zero wallet addresses compared to less than 45 million addresses holding Bitcoin. This remarkable growth has cemented its position as a leading cryptocurrency.
Ethereum surpassed Bitcoin regarding unique wallet addresses already in 2019 despite its shorter existence. Moreover, the successful implementation of The Merge reduced the carbon footprint of Ethereum by 99.9%, making its future look even more promising.
NFT trading activity has slowed down as investors start looking past the hype cycle
In Q4 2022, there were about 2 million unique NFT traders, which is lower than in the previous quarter and the same quarter of the previous year.
Users seem to focus more on established projects with experienced teams. Execution becomes more important than roadmaps and promises.
Monthly Learnings: Secure your coins! And respect the community!
96k
Lessons learned:
NEVER enter your hardware wallet seed-phrase anywhere but in its dedicated software
NFT GOD Hacked
On the 15th of January, Twitter influencer NFT God (@NFT_GOD) announced the loss of all his assets, despite using a Ledger cold wallet to secure his assets.
Unfortunately, due to some easily misunderstood wording during the MetaMask setup on a new computer, his Ledger’s seed phrase got imported into MetaMask and thus exposed to the internet. He later downloaded and installed malware through a malicious Google ad. The virus then used his exposed seed phrase to transfer all of his assets to the hacker’s account.
Find the full coverage on our blog here
Kevin Rose Phished
Another influencer to lose most of his assets this month is Proof Collective and Moonbirds co-founder Kevin Rose.
In an apparent social engineering attack, an unknown party tricked him into signing a transaction on a fake mint site. They used his signature to create a bundle of assets on OpenSea that was transferred to the hacker. It is estimated he lost at least $1.1m in assets.
It appears he only lost assets that had approvals set on OpenSea’s Seaport contract – one more reason to periodically check your outstanding approvals and remove those you no longer need.
1.6m
Lessons learned:
NEVER mint using your cold wallet.
Always revoke unneeded approvals (with e.g. revoke.cash).
PORSCHΞ: How not to launch an NFT
On the 23rd of January, German car brand Porsche launched their highly anticipated NFT collection – at a price point of 0.911 ETH (~$1475) per NFT. While the community was quick to point out several issues with pricing, marketing, and utilities, the mint went live anyways – and only sold about 1700 of 7500 NFTS before announcing an early end.
Damage control
After announcing that the mint would close early and supply would be limited, Porsche subsequently sold another ~600 NFTs, bringing the supply to 2,363 NFTs.
Floor Prices for the NFT peaked at 3.33 ETH (~$5,300) after Porsche announced more details about their plans to provide utility to holders.
Lessons learned:
ALWAYS listen to your community. Offer clear utility your fan base can appreciate. Web3 is not a quick cash grab anymore.
What web3 experts say:
Porsche should have thought more specifically about the target group. With Discord access, dynamic NFTs, and a community that co-creates together, you won’t reach traditional Porsche drivers. To claim that the project is for the Web3 natives is not reflected in the too high mint price of 0.911 ETH, as well as the much too high supply of 7,500 NFTs. Porsche is a luxury car, but its concept only appeals to the Web3 market to a limited extent.
We should not forget that this is a large corporation whose steps have to be approved internally – but this kind of lack of transparency does not fit in with the ethos of our new Internet culture – especially if you use the word “community” in every third sentence. The lack of communication just before, during and after the mint is one of the biggest points of criticism.
We are learning that every brand, no matter how successful it is in Web2, has to start at 0 and figure out for what purpose it wants to use blockchain technology.
Vicktoria Klich, Co-Founder w3.fund
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