Original author: Shenyu, Co-Founder & CEO of Cobo
On Interest Rate Hikes and FTX
The dominant macro story of 2022 was rising interest rates, which put pressure on all global assets—cryptocurrencies included. This pressure was compounded by internal market shocks, most notably the collapse of FTX, which dealt a severe blow to the crypto sector.
The FTX incident was the single biggest shock to the existing centralized exchange (CEX) ecosystem. This ecosystem will continue to evolve to address the trust issues it highlighted. Industry players, including Cobo, are actively exploring ways to build a more transparent and healthy trading environment.
Decentralized exchanges (DEXs) are one path forward, while greater regulatory compliance is another. As a custody platform, Cobo aims to help separate the functions of trading, custody, and settlement—without sacrificing trading efficiency—through our upcoming SuperLoop initiative. This is designed to restore institutional confidence in crypto trading.
Cobo Loop Alliance Members
Back in 2019, Cobo launched the Loop Alliance, the first cross-platform cryptocurrency clearing and settlement network. It allows alliance members (exchanges, trading firms, etc.) to settle trades instantly off-chain. The upcoming upgrade to SuperLoop will transform the Loop Alliance into an over-the-counter (OTC) custody and settlement network. This will enable trading teams to execute trades on exchanges while maintaining independent custody of their assets.
On DCG
The situation with DCG currently appears unlikely to escalate further. By "escalation," we mean a scenario that forces the sale of Grayscale's hundreds of thousands of BTC. Therefore, from the perspective of primary market risks, there is no imminent threat of large-scale liquidations from this front.
On Ethereum
Secondly, the path for Ethereum has become clearer. The Ethereum Foundation has confirmed the Shanghai Upgrade remains on track for March, stating it will be prioritized even if other features are delayed.
This decision provides a strong confidence boost for the industry. Staking has been a central topic in crypto asset management discussions over the last three months. The Shanghai Upgrade in March will smoothly resolve the staking liquidity risks that plagued the market throughout 2022.
Historically, the Ethereum Foundation has consistently timed its major strategic moves—like EIP-1559, The Merge, and now the Shanghai Upgrade—to align with favorable macro conditions. March represents a critical milestone in this strategy.
Thirdly, numerous Layer 2 solutions—particularly ZK-based L2s—have publicly announced plans to launch testnets or mainnets in Q3 or Q4 of 2023.
Overall, from an industry-specific perspective, the coming year harbors no major latent risks. Instead, we see two positive catalysts on the horizon: one in March and another in Q4. Consequently, significant event-driven downward pressure seems unlikely at this stage.
On Market Cycles
Furthermore, two highly predictable developments are worth watching. First, Bitcoin's next halving is approximately 470 days away. If historical halving cycle patterns hold, a new bull market could begin to take shape by the end of this year.
Second, the broader crypto market cycle typically follows a pattern of "short bull, long bear" phases. Since March of last year, we have been in a bear market, which is now approaching its end after roughly 13–14 months.
Based on our analysis of both macro and industry-specific factors over the past year, we believe the most painful and rapid decline of this bear market is behind us. Markets are now gradually rebuilding confidence, searching for new narratives, and consolidating.
Looking ahead to 2023, even with ongoing rate hikes, we anticipate these industry catalysts could drive a market rally in Q2, followed by another potential surge starting in Q4.
Barring any extraordinary black swan events or a severe deterioration in the external macro environment, the bottom of this crypto cycle may already be in. We expect a concentrated upward phase to become prominent next year.
These year-end reflections also serve as our New Year's greeting. Finally, we wish all members of our community unwavering resolve and abundant happiness in 2023!
Shenyu
February 5, 2023 (Lunar Calendar)