On the first working day of 2023, we are delighted to share some of our thoughts on the market forward.

# 1 Macro environment

With China opening its border and lifting quarantine policies, its commerce, services, finance and tourism will give a strong impetus to the development of the East Asian economies.

Obviously, with the expected recovery of the Chinese economy on one side and the expected recession of the European and American economies on the other, it is believed that the Federal Reserve will not stand on the sidelines, so the path to recession in the US economy will not be smooth. However, the inertia of the bear market pulled by market sentiment will still be in the shadow of the risk capital markets in 2023.

# 2 BTC

The current crypto market cap of \(800b is down 73% from its peak of \)3000b, and BTC’s recent price of \(16.7K is down 76% from its peak of \)69K. It wouldn’t be a bull market for BTC in 2023, but the entire Crypto market will see a monthly rally and shakeout due to macro sentiment.

# 3 AltCoins

In addition to the shuffling of the top 50 market cap, it will be a year when the price of new blue chip projects’ token is under pressure. GMT, OP, DYDX, TOKE and many other tokens with large FDV, small market cap in circulation and cliff expiry will see another decline as they are unlocked.

A list of tokens that will see a lot of unlocks in the coming year is attached here: https://docs.google.com/spreadsheets/d/1Cbt58yiBVL7_qeHTn4pFRnIV7cWgRmx8u-QJbtTGBQQ/edit#gid=1400459975

# 4 Layer1 Battle Ends, Layer2 Arena Opens

The battle for public chain sovereignty will evolve into a fight for Ethereum’s Layer 2. After EIP-4844, we will see a huge performance boost on Layer2 and other EVM chains will be squeezed again. For ETH, using market forces to develop Layer2 is a better strategy than using its strengths to make Ethereum bigger. The market needs a secure, decentralized and high-performance infrastructure. Decentralization has no monopoly; if ‘Ethereum + Layer2’ can solve the impossible triangle problem, do we still need an Alts chain?

# 5 The application layer continues to be the bull narrative

The application layer narrative is still the central theme of the next bull market, but it won’t be GameFi leading the way. Besides finance and gaming, the track closest to the virtual scene is social, and SocialFi will explode as the social puzzle is completed with NFT, DID, Socialgraph and AIGC.

# 6 The emergence of entry-level applications

Improved versions of smart contract wallets, MPC wallets, or other lower barriers to using Web 2.5 versions of wallets will be more likely to capture more users, and the emergence of entry-level applications will create structural market opportunities. In the end, DEX may not kill CEX, but wallet applications with strong open capabilities, compatibility, convenience, and ease of use.

# 7 LSD will thrive

The LSD (Liquid Staking Derivatives) market will boom with the entry of ETH. The number of pledges of ETH has gradually increased since PoS, but there are still several times more room for growth than other earlier PoS chains, such as BNB. The market value of ETH assets is several times the sum of assets on other PoS chains, so projects such as LDO, SSV and RPL still have tens of times more business space.

# 8 DEFI derivatives

In the current market, DEFI remains at the infrastructure of the application layer asset exchange, and innovation in the derivatives segment, such as GMX, continues to rise and fall. 2023 is a non-bull market; the opportunity for DEFI derivatives is in the decentralized options track, with structured products targeting volatility and real yields a markeneedst need in a downturn.

About us

Basics Capital is a global blockchain industry fund focused on the primary market to fuel the development of early-stage application layer projects, with investments from over 30 countries and regions around the world, including Southeast Asia, the Middle East, Europe, the US, Canada, Australia, Vietnam and Russia, covering Wallet, NFT, DeFi, GameFi, DID, SocialFi and LaunchPad across various segments of the application layer.

Email: basicscapital@gmail.com

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Website: https://www.basics.capital

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