Macro:
mild recession with good balance sheet in both consumers and corporations
Bonds:
interest to bonds re-emerge and bonds are likely to perform in the first half year.
current short-term yield would higher than inflation rate and would be better than stock dividends, and yield competitiveness would go further in next few years.
Stocks:
Climate Change: Bullish for renewable energy; and for traditional resources like oil.
Reshoring of supply chains: should be a key theme as Europe and US become less dependent on China.
Others: automation, digitization, healthcare infra, financials, and bond-like equity sectors for defend: utility, consumer staples.
Portfolio Strategy:
value and small-cap stocks could outperform growth and big-cap stocks in 2nd half 2023 after Fed pulse and interest rate peaked.
market volatility in early 2023 could be an opportunity to rebalance and reposition for recovery.
Trends for 2023
Polygon has declared that it is “on the front lines of developing new use cases for blockchain” and that token sales will be useful for more than fundraising going forward.
Big focus on GameFi - Polygon developers stated that 2023 announcements will include a game development studio. Some anticipate the project to be similar to WAX and WAX Studios.
The All-Mighty User ID - A portable, sovereign identity. Polygon ID seems to be a mix of the impulse of a soul-bound token with the lure of a single sign-in.
Protecting Your User Data - Lens Protocol promises to let you take control of your social media platform – unfortunately, near-term this only seems to apply to Web3 data and virtually no one is using Web3 social media.
Also Monetizing your User Data - “Acentrik, a strategic initiative by Mercedes-Benz, is building a decentralized data marketplace that will make it easy for enterprises to share and monetize data across domains.” Since Polygon doesn’t acknowledge a possible conflict with the previous point made, it remains to be seen what this will really mean long-term.
Polygon is Going Big on Defi – Based on the “financial shocks” of 2022, Polygon is expecting the sentiment to swing to a greater focus on decentralization. Polygon listed possible new entrants to their DeFi ecosystem including: Lemon Cash, Gains Trade, Teller, Ovix, Timeswap, Atlendis, Clearpool, Quickswap V3, and Synquote.
Polygon believes 2023 will be “the year of ZK technology” – zkEVM is anticipating mainnet release in Q1 and Polygon Zero, and Miden plans to launch in 2023.
Polygon goes hard on “Not your keys, not your crypto!!” – Developers say self-custody is the obvious choice to unnamed centralized exchange disasters. FTX is a prime example of the collapses witnessed in 2022.
Flight to quality:
We expect digital asset selection will transition towards higher-quality names like bitcoin and ether based on factors like sustainable tokenomics, the maturity of respective ecosystems, and relative market liquidity.
Ethereum’s successful Merge of its consensus and execution layers in September 2022 has also strengthened the case for ambitious future upgrades, despite the trend towards long-term core protocol ossification.1 In our view, this supports the fundamental narrative for Ethereum as a leader in a multichain world, particularly since nearly all networks are competing for the same pool of users and capital.2 Some chains/ecosystems are doing better than others, and we believe user and developer activity will aggregate to a smaller number of chains in 2023 compared to 2022. However, Ethereum’s dominance could still be challenged in other ways, as the network relies on layer-2 scaling solutions to extend its blockspace, which have their own set of risks.3 This includes centralized sequencers, a lack of fraud proofs, and a lack of cross L2 interoperability, to name a few.handled well given its on-chain, auditable properties. Of course, DeFi comes with its own risks like smart contract exploits, which could put more scrutiny on how different decentralized applications are managing their protocol risks.
The movement towards self-custody and decentralized finance (DeFi) protocols (i.e. decentralized exchanges or DEXs) will likely accelerate after the developments in 4Q22.
Areas for creative destruction
Meanwhile, we think investors’ willingness to accumulate altcoins has been severely impacted by the deleveraging in 2022 and may take many months to fully recuperate. Newer projects have been hit particularly hard by recent events. In particular, some of these protocols loaned out their tokens to market makers who had used FTX as a liquidity pool. Overall, market depth has come down sharply across exchanges, according to Kaiko (November 14, 2022). Those projects must now wait until bankruptcy proceedings are finalized in order to recover their assets, meaning they may be unable to access a big part of their treasuries’ native tokens for several years. This could have important implications for developer retention and future application development.
we would expect the bitcoin mining industry to consolidate even further in 2023
Future participation could also be driven by new forms of utility outside of art/collectibles including digital identity, ticketing, memberships/ subscriptions, tokenization of real-world assets, and supply chain logistics.The debate surrounding the enforcement of royalties at the token level may also pick up in 2023, as it is a hot button issue for the creator community. If royalties are increasingly ignored by market participants, we believe that it could threaten the adoption of the technology more broadly.
Regulatory
We believe the next market cycle in digital assets will be shaped in significant part by the development of standards and frameworks for regulated entities. Clear guidance is necessary to avoid driving innovation to regions where regulatory requirements are weaker and customers may be at greater risk. In the US, we expect the new Congress to continue working on one or more of the current legislative proposals that had drawn bipartisan support, such as the Digital Commodities Consumer Protection Act (DCCPA), which would empower the CFTC to oversee spot markets in digital assets, and/or the McHenry-Waters draft bill on stablecoins.
Bitcoin
Bitcoin's resilience amid major stress suggests its long-term success is not dependent on any centralized entity either pumping or dumping it.
The Lightning Network is a layer-2 protocol built on top of bitcoin that can theoretically scale to millions of instant transactions per second that cost fractions of pennies to send.
Ethereum
There is still a healthy distribution of overall rewards among validators at the moment – keeping per capita earnings high. That staking ratio is low in part because stakers cannot withdraw their ETH until after the Shanghai Fork.