No less than three renowned crypto institutions have recently their predictions for the coming year 2023 – and there seems to be one favorite: Ethereum. Other main themes for Coinbase, Darma Capital, and Cumberland include the migration of investors to quality projects, the burgeoning innovation from creative destruction, and some fundamental reforms for the crypto industry as a whole. The largest U.S. cryptocurrency exchange, Coinbase, estimates that crypto markets will not yet decouple from traditional financial markets in early 2023, with investors focusing on quality projects with sustainable tokenomics and mature ecosystems with liquidity.

Coinbase Predicts Ethereum Ecosystem To Flourish

Coinbase also predicts that the market for layer-1 competitors to Ethereum is oversaturated and that the coming year could be the year of layer-2 blockchains. Thus, Ethereum’s competitors will have a tough time, according to Coinbase. While ETH and the Binance Smart Chain (BSC) will hold up well, TVL will migrate to layer 2 solutions such as Polygon, Optimism, and Arbitrum.

Coinbase also predicts another boom for NFTs, which will see an evolution to integration with personalized IDs, ticketing, subscriptions, real-world assets (RWA) tokenization, and supply chain logistics. In addition, more companies will integrate NFTs for brand building and customer engagement. As a result of human error in the demise of FTX and other projects in 2022, the American exchange expects regulatory clarity to be critical to the next cycle. Perhaps surprisingly, to some, Coinbase also says institutional lending will sprout and flourish in 2023 with improved due diligence processes – once the bottom is reached.

As for the largest cryptocurrency by market cap, Bitcoin, Coinbase predicts that Mt Gox distribution will not be the big event in 2023, as some analysts claim. Those who wanted to sell have already sold. Moreover, the distributions will be staggered.

With regards to Ethereum, Coinbase shares a bullish outlook due to the Merge. ETH is able to be more efficient as a result of the move to proof of stake and is also deflationary. Moreover, the U.S. exchange predicts that the amount of liquid ETH will continue to decline once withdrawals from the deposit contract are possible after the Shanghai hard fork.

Darma Capital Predicts ETH To Outperform Bitcoin

Just like Coinbase, Darma Capital views the Ethereum Merge as a key development that will have a positive impact on the ETH price. The same goes for the Shanghai hard fork, which will lead to increased ETH staking.

On a technical level, Darma sees as a game-changer for ETH, while it expects innovations from Lido Finance and Obol Network. Fundamentally, Darma predicts that L2s will be key to adoption by the next wave of consumer-facing applications, mentioning Arbitrum, Optimism, and Immutable. “Vaporwave Chains” like EOS and Cardano will die out as they lose mainstream interest due to lack of on-chain adoption, Darma says.

The forecast for Bitcoin is not rosy either. According to the institution, BTC will lose market share to altcoins while Ethereum will accomplish the “flippening.” Responsible for this, according to Darma Capital, could be a lack of utility, ESG concerns, and a “failure as a digital gold.”

In general, the digital asset risk management advisor expects that the macroeconomic situation will result in a freeze on interest rate hikes by the U.S. Federal Reserve until the second quarter of 2023. Consequently, the crypto market will see another bull run in Q3 2023.

Three Emerging Narratives

Cumberland DRW LLC expects challenging market conditions and clear regulatory frameworks in 2023 that will lead to innovative solutions. With this in mind, retail investors will focus on exchanges that can score with transparency, spot trading without prefunding, ISDAs & CSAs, the institution says. As three emerging narratives, the company identifies Bitcoin and Ethereum as reserve currencies, NFTs for IP tokenization, loyalty programs, and customer engagement, specifically citing MATIC, LOOKS, XMON, and GameFi. At press time, the Ethereum (ETH) price stood at $1,218.

Featured image from Moritz Knoringer / Unsplash, Chart from TradingView.com