Crypto assets saw sharp drops in 2022 from their all-time highs in November 2021. Since then, the entire industry seems to have hit a domino effect. Crypto hedge funds, lending platforms, and exchanges are all on the decline. Kraken CEO shares 5 big crypto trends for 2023, including what he believes will be leading use cases
“Two important lessons need to be learned from FTX’s decline”
cryptocoin.comEarlier this year, FTX was trying to bail out troubled companies. It was even being touted as the blue chip of crypto companies. But recent bankruptcy filings and fraud cases against founder Sam Bankman-Fried have taken many investors by surprise. David Ripley, COO of crypto exchange Kraken and the company’s new CEO, says price drops tend to expose those who don’t follow proper protocol. While FTX is currently making the headlines, there have been many more failures such as Voyager, Celsius and Genesis. These have all fallen. Ripley makes the following statement:
We’ve seen this happen in other markets as well. For example, falling property prices led to the bankruptcy of many of the largest banks in 2008 and 2009.
The Kraken COO says there are two important lessons to be learned from this decline. First, exchanges and crypto firms are required to show proof of reserve. This means they must provide transparency and evidence that client assets are properly supported. Additionally, security protocols must be prioritized to avoid major attacks. In line with this, Ripley says:
We think the events here actually point to the true value of crypto. This eliminates a trusted third party. And the failure of this trusted third party, FTX, highlights the need and utility of cryptocurrencies more than anything else. So it’s kind of ironic, I admit that.
Kraken CEO explains future trends in crypto
David Ripley finds it normal that progress is not on everyone’s mind amid the entire industry crash. That said, once things settle down, we’ll start to see new projects surface, he says. He notes that the investments poured into the space over the past few years continue to fund developers who innovate and create new use cases.
During the previous bull run, DeFi and Non Fungible Tokens (NFTT) came to the fore. But Ripley says the use cases only scratch the surface, especially for NFTs that are simply used like artwork. However, “It’s really about the underlying technology that can be used in ticketing systems and games, just to name a few. We will start integrating into more complex systems,” he says. Based on this, he comments:
What investors should think about this trend is that it will have a positive impact by growing this ecosystem to the extent that there are tickets and items fixed to NFTs that move on the Blockchain, such as the Ethereum network. In turn, this will also increase the price of ETH. The same goes for Bitcoin. The more people start using its network as a payment method, the higher its price will be.
One area where we have seen significant adoption is cross-border payments, particularly through the use of the layer 2 payment protocol, the Bitcoin Lightning Network. It will transform crypto from just a global payment mechanism into a fast and low-cost global payment network. Meanwhile, the network’s capacity has grown from 4,000 BTC to 5,000 BTC in July.
Another use case of crypto: Decentralized storage
Another important use case that Ripley believes will see significant adoption is decentralized storage. It’s kind of like a Dropbox that exists on the Blockchain, so it doesn’t require a third party. Kraken CEO points to Filecoin as a great example. Filecoin is an open source, public cryptocurrency and digital payment system intended to be used for digital storage and data retrieval.
Ripley takes a look at the major providers in the space. She says reliable and secure crypto companies will see an increase in their market share to meet demand. Traditional fintech companies like PayPal, Square, and Robinhood are also entering the field, she says. Ripley states that all companies, including banks, will eventually incorporate crypto into their business models. In this context, Kraken CEO notes:
Then, I think it will go beyond that. We have already seen some social media and online internet companies support cryptocurrencies. For example, Twitter, Facebook, Instagram all support the ability to view, approve and verify an NFT. Finally, we are seeing an increase in the self-custody part of crypto. This is great! Because that is the main benefit and basis of crypto in general and Bitcoin in particular.
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