Cobo Shen Yu: Seeking a New Narrative Logic in 2023
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Cobo Shen Yu: Seeking a New Narrative Logic in 2023
Looking ahead to 2023, accompanied by the interest rate hike cycle and these industry-driven factors, a market hotspot is expected in Q2, with another wave likely starting in Q4 of the second half.
Navigating Web3 tides with focused insightsAuthor: Su Zhu, Co-founder and CEO of Cobo
On Interest Rate Hikes and FTX
First, the biggest macro factor in 2022 was interest rate hikes, which put pressure on global assets including cryptocurrencies. Combined with internal market events such as the collapse of FTX, the crypto market suffered a major blow.
The FTX incident had the greatest impact on the existing exchange ecosystem. This ecosystem will continue to evolve to address trust issues in centralized exchanges. Industry players, including Cobo, are working toward building a more transparent and healthier trading environment.
Decentralized exchanges (DEXs) represent one direction, while regulatory compliance is another possible path. As a custody platform, Cobo aims to help restore institutional confidence in trading by launching SuperLoop, which will separate trading, custody, and settlement while maintaining trading efficiency.
Cobo Loop Alliance Members
In 2019, Cobo launched the first cross-platform cryptocurrency clearing and settlement network—Loop Alliance—enabling alliance members (such as exchanges and trading institutions) to conduct off-chain instant settlements. The Loop Alliance will be upgraded to SuperLoop, becoming an OTC custody and settlement network for exchanges, allowing trading teams to trade on exchanges while keeping funds independently custodied.
On DCG
Currently, the DCG situation does not appear likely to escalate further—in particular, there is no indication that Grayscale’s hundreds of thousands of Bitcoin holdings will be forced into liquidation. Therefore, from the perspective of key drivers behind market declines, there is no significant risk of large-scale forced selling at this stage.
On Ethereum
The second clear development is that the Ethereum Foundation has confirmed the Shanghai upgrade will proceed as scheduled in March. The Foundation has made it clear that even if other features are delayed, the Shanghai upgrade will go ahead.
This provides a strong boost to the industry. Over the past three months, the main focus in crypto asset management has been staking. The liquidity risk associated with staking that plagued investors in 2022 will be resolved smoothly with the Shanghai upgrade in March.
Looking back at history, the Ethereum Foundation has consistently timed its major strategic decisions—be it EIP-1559, the Merge, or now the Shanghai upgrade—to align with favorable external macro conditions. Thus, March represents another critical juncture.
Third, we are seeing many Layer 2 solutions, especially ZK-based L2s, announcing plans to launch testnets or mainnets in Q3 or Q4 of 2023.
Overall, from an industry standpoint, the next year appears free of major hidden risks, with two clear catalysts—one in March and another in Q4. Therefore, there is little basis for event-driven market declines at this point.
On Market Cycles
Additionally, two other developments are relatively certain. First, Bitcoin’s halving is just over 470 days away. If we look at the historical impact of past halvings over the last decade, this suggests a new bull cycle could begin by the end of this year.
Second, from a broader crypto market cycle perspective, bull markets tend to be short while bear markets are long. Since March last year, we have been in a bear market phase lasting just over a year—meaning we are nearing its end.
Based on this analysis of macro and industry factors, looking back at the past year, the most painful and sharply declining phase of this bear market is likely behind us. We are now entering a period of gradual market recovery, regaining confidence, searching for new narratives, and consolidation.
Looking ahead to 2023, driven by the end of the rate hike cycle and positive industry developments, we may see a market uptick in Q2, followed by another wave starting in Q4.
Unless there is an extreme black swan event or a significant deterioration in external macro conditions, the bottom of this crypto market cycle may already be in place. We expect a concentrated period of strong upward momentum to emerge next year.
A brief reflection at the turn of the year—a greeting for the new year. Finally, wishing everyone steadfast resolve and happiness in 2023!
Su Zhu
January 26, 2023
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