Crypto trends to watch for in 2023

Yahoo Finance crypto correspondent David Hollerith looks ahead to some of the crypto trends expected in 2023, including the outlook for decentralized finance and Sam Bankman-Fried in his FTX fraud trial.

Video transcript

- Well, it has been a very, very tough year for crypto, but let's talk about what we could expect over the next 12 months. David Hollerith has been looking into this for us. And, David, the biggest things that you're watching in the new year?

DAVID HOLLERITH: Yeah. The most optimistic sources I've spoken with have said that they expect crypto's bear market to continue through the first half of 2023, with retail investors largely staying on the sidelines. But front and center heading into next year, there's much anticipation, sort of waiting for, you know, another shoe to drop in terms of crypto's collapse from 2022, and most are waiting for the one known company that hasn't really answered since showing signs of liquidity issues-- Genesis Lending, which paused withdrawals last month following FTX's collapse.

As we know, Genesis' parent company, Digital Currency Group, is trying to raise between $500,000 and $1 billion, and if that doesn't happen, the company will likely file bankruptcy. The industry is also clearly in the process of rethinking corporate business models and governance, given all of the-- given how many of last year's star players have failed. Now Binance and Coinbase have emerged as crypto's two largest centralized exchanges, and I'd argue that has made them increasingly important survivors for the industry. And the trajectory of those two companies is largely going to define what happens to crypto in 2023.

And then on the other side of that, decentralized exchanges, or the DeFi, area of the market has always been said not to be as easy to use, but there's been a lot to be said about DeFi's resilience during this collapse. And that's going to be something to watch in terms of whether or not those DeFi protocols are taking market share from centralized exchanges. And finally, I just want to hit on Ethereum, which obviously had a success story with its merge upgrade. There's still more to look for in terms of updates on the protocol going into 2023.

- And, David, just thinking about the bankruptcy process in general, very protracted. We know-- I think Lehman Brothers was only resolved a couple of years ago. What are we expecting from the legal side with respect to FTX and Sam Bankman-Fried?

DAVID HOLLERITH: Yeah, Jared, it's hard to keep track of all the cases, and I think speculating about a deadline for any of them has been sort of what all legal sources I've spoken to have sort of tried-- tried to avoid doing. But that being said, there are five different bankruptcies. Then also, notably, this criminal case of FTX founder Sam Bankman-Fried.

Now, if we start from the first to last, the next conference for SBF case kicks off on Tuesday, and sources are waiting to see if Bankman-Fried will either plead guilty or not. If he doesn't, the court will schedule the agenda for next steps in terms of discovery, and that will mean likely a lengthening of the court hearing. And then in terms of the bankruptcy cases, we can't expect creditors to understand what money they will get back in 2023.

However, there's going to be a lot more clarity to understand what customers-- what rights customers actually have with the exchanges in terms of bankruptcies. So that's something we clearly want to watch.

- Well, best of luck to all the customers out there. It could take a little while. David Hollerith, thank you for that report.