State of Crypto in 2023: You NEED To SEE This Report!

What the heck is going on with the Crypto Market on the one hand crypto Regulations are getting worse and Interest rates are getting higher on the Other hand coins and tokens are hitting Multi-month highs and new crypto Projects are raising billions crypto VC Firm Andreessen Horowitz AKA a16z Unpacks this Paradox in its second state Of crypto report for 2023. it reveals Which issues are holding crypto back and Which cryptos are about to explode so Today I'm going to summarize a16z's Report explain what it says and tell you What it means for the crypto Market make No mistake this is a video you cannot Afford to miss The report I'll be summarizing today is Titled quote state of crypto 2023. it Was published by a16z earlier this month And I'll leave a link to the full report In the description I'll also leave a link down there to our Summary of a16z's first state of crypto Report it's still worth a watch if you Have the time Now this report begins with an overview Of what's been going on in crypto There's been progress in research and Development setbacks from crypto Companies collapsing prices have been Following the crypto cycle bad Regulation is creating uncertainty and Decentralization is becoming an

Opportunity note that all of these are Related Now most of the setbacks we've seen have Been due to centralization this Centralization occurred because some Entities wanted to maximize crypto Market cycle gains this has resulted in Bad regulations and decentralization is The only real solution to both problems The report's authors then go on to Explain that they see web 3 as being About more than Finance it's a quote Evolution of the internet they see Crypto blockchains as computers not Ledgers and therefore see crypto itself As a Computing platform not just an Alternative to the existing Financial System now this may be the case but I'll Note that replacing the existing Financial system should be the top Priority of crypto projects and their Backers if the existing Financial system Continues its current trajectory it will Result in Central Bank digital Currencies and Financial Freedom will Will be lost the other Tech won't matter In any case the authors explain that web 3 is built on decentralized Cryptocurrency blockchains such as Bitcoin and ethereum is governed and Owned by the communities of their Respective projects and a cruise value To the community rather than a Centralized tech company as is the case

With web 2. now the authors showcase the Contrast between web 2 and web3 Platforms with this infographic it's a Bit concerning because it makes it look Like tokens such as uni swap's uni are Analogous to stocks in a company now Obviously this is not the intention of The authors but it's how some Regulators Gary Gensler see it speaking of which The authors fail to mention that Regulators take issue with the high Concentration of voting power amongst Governance token holders in Decentralized autonomous organizations Or Dows this might be because a16z is One of the few entities which has Significant influence over popular Dows It also flies in the face of the idea That these Dows are truly decentralized And it underscores the reality that Decentralization means more than having Lots of validators or miners on a Blockchain the governance structures of Dows must also be decentralized and lots Of work is still needed on that front Anyways the second part of the report is About the crypto Market cycle according To the authors crypto Market Cycles are Caused by a positive feedback loop Prices go up which causes interest to go Up which causes new ideas to emerge Which causes new projects to emerge Which causes prices to go up the authors Say there have been four crypto Market

Cycles so far this is consistent with The market Cycles driven by the Bitcoin Halving which happens every four years And yet there is no mention of the Bitcoin halving and the important role It seems to play in crypto Market Cycles Instead the authors focus on financial And product Cycles which apparently also Follow a four-year cycle for anyone Wondering Financial Cycles are driven by Macroeconomic conditions such as Interest rates by contrast product Cycles are driven by supposedly Predictable consumer behavior and Tech Trends now I would say that consumer Behavior and Tech Trends are heavily Dependent on macro conditions after all Most of the funding for speculative Technologies happens during periods of Low interest rates as such if we enter a New period of higher interest rates it Could be bad for more speculative Cryptos This ties into the third part of the Report and that's crypto Trends to watch The authors highlight new layer 1 Cryptos like Solana and Aptos Application specific cryptos like Cosmos And polka dot layer twos like optimism And polygon and data storage cryptos Like Celestia as areas of Interest take Notes folks The only thing I'll add is that a higher Interest rate environment could take the

Wind out of competing layer ones given That they are arguably the most Speculative cryptos out there they're a Bet that ethereum will be dethroned in Some domain but that will be unlikely if We are in a high interest rate Environment that's simply because Ethereum has no shortage of layer 2 Scaling solutions that could replace Alternative layer ones while providing Even more security the authors seem to Suggest this by showcasing just how much Traction layer 2 scaling Solutions are Getting almost seven percent of all Ethereum fees are on l2s the authors Then applaud ethereum for cutting down Its energy use by 99.9 percent by Changing its consensus from proof of Work to proof of stake then rather than Compare ethereum and bitcoin's energy Use as almost everyone does the authors Compare ethereum and YouTube's energy Use an odd Choice it's also odd that the Authors applaud the fact that the more Than 400 billion dollars of assets on Ethereum are secured by just 40 billion Dollars of staked eth in theory this Huge discrepancy creates an incentive For an attack now in practice such an Attack would be unsuccessful but still Not the best look After reviewing the rising popularity of Zero knowledge proofs and nfts the Authors then examined the rapid growth

Of web3 gaming which hasn't been nearly As impacted by the crypto bear Market Participation in Dows has also been Steadily increasing but this might not Necessarily be a bullish sign from what I've seen the spike in Dow participation Over the last few months has been due to Increasing regulatory uncertainty as Well as all the exploits and issues that Have resulted in emergency proposals the Recent debegging of usdc is one of many Examples more about that in the Description I digress Regarding developer activity the authors Point out that the United States is Falling behind the percentage of crypto Developers in the country has been Declining for years now this is of Course due to the initially uncertain And now outright hostile regulatory Environment which could continue for Some time The authors then say to be on the Lookout for three proposed crypto Regulations including the bipartisan Crypto bill by Senator Cynthia Lamas and Kirsten gillibrand Seven pending crypto cases including the Sec's case against Ripple and three Proposed crypto rules including the Sec's crypto custody Rule and to really Drive the point home the authors include A quote from BlackRock CEO Larry Fink About how India Latin America and parts

Of Africa are adopting digital payments And how the US is falling behind Knowing what we know about BlackRock Larry probably isn't talking about Crypto in this quote anyhow the fourth Part of the report lays out a series of Crypto Market metrics The authors start with an image that Basically says if you build it they will Come in a more elaborate manner for Context this is a popular approach to Adoption in cryptocurrency and so far It's worked well for the most part now The first crypto Market metric is the Number of active developers the authors Found that the number of active Developers Rises during bull markets and Stays High during bear markets this is Consistent with the findings from Electric capitals crypto developer Report that will be in the description The second crypto Market metric is the Number of smart contracts not Surprisingly this number continues to Hit new all-time highs despite the Crypto bear Market this is not Surprising since smart contracts can't Be deleted once they've been deployed Which means their number always goes up The third crypto Market metric is the Number of academic publications related To crypto not surprisingly this number Spiked in 2021 and has come down Slightly ever since notice how the

Number of academic Publications also Spiked early last year something tells Me that has to do with terrorist Collapse The fourth crypto Market metric is the Number of people looking for crypto Related jobs based on related Search Terms this statistic hit its peak Shortly after the crypto Market did in Late 2021 similar to academic Publications the number of people Looking for crypto related jobs has Remained High since And this relates to the fifth part of The report which provides a list of Crypto adoption indicators The first indicator is the number of Active crypto wallet addresses which Continues to hit all-time highs now I am Highly skeptical of this especially Because it's easy to fake active crypto Wallets on newer blockchains The same is true for the second Indicator which is the number of crypto Transactions which also continues to hit All-time highs if crypto transactions on Newer blockchains didn't cost a fraction Of a penny I'd be inclined to believe These indicators but low costs means It's very easy to fudge the numbers The third indicator proves my point the Amount of transaction fees paid has been In the toilet since the crypto bear Market began this indicator has only

Seen a slight increase over the last few Months this is much more consistent with Off-chain crypto indicators such as Search Trends and price action the same Is true for the fourth indicator which Is the number of mobile crypto wallet Users which also continues to decline on That note if you're not trading crypto Or being a d5d gen you should keep it on A hardware wallet and you can get big Discounts on the best ones using our Deals page in the description Speaking of which the fifth indicator is The amount of trading volume on Decentralized exchanges or dexes Dex Volume has been on the rise recently but This is likely due to a Crackdown on Centralized exchanges the most recent Spike in Dex volume is likely from curve Finance when usdc depict What's harder to explain however is the Sixth indicator and that's nft buyers The number of nft buyers has mooned over The last few months this could be Because nfts have gone down in price and New buyers have been buying the dip or It could be because nfts have been safe From regulations The seventh indicator is stablecoin Trading volume which continues to grow This could be due to the Crackdown on Centralized exchanges along with the Loss of trust crisis that occurred after FTX collapsed last Autumn what's strange

Is that stablecoin trading volume Rebounded last summer before FTX hmm Anyhow the last part of the report is Aptly titled What's Next The authors commenced by estimating that Crypto adoption is where internet Adoption was in the 1990s specifically The mid-90s assuming crypto adoption Follows the same trajectory it will take Until 2031 for crypto to hit 1 billion Users I can't help but laugh because there Were so many crypto projects that Promised to have more than one billion Users by a much sooner date well I Suppose it's still possible but this Ultimately depends on how long it will Take for crypto regulation and education To go mainstream this will take years at The very least Regardless the authors list 12 things They expect to happen in crypto in 2023 And Beyond the first expectation is that Some of the best web3 products and Protocols will be developed during the Remainder of the crypto bear Market keep In mind that some of the best ones are Out there already The second expectation is that smart Contract Security will improve and Unfortunately the authors don't discuss The role of AI in this equation if you Watched our video about chat GPT you'll Know that it can be used to create and

Audit crypto code this will supercharge Crypto development and security The third expectation is that zero Knowledge proofs will continue to become More popular this makes sense Considering institutional investors Require Financial privacy and this is Something that zero knowledge proofs can Provide let's just hope that there Aren't any major zero knowledge exploits The fourth expectation is that big Tech Will continue to take greater control of The web 2 internet and this will show The average person just how important Web 3 is this is something we've been Talking about a lot recently in the Context of Internet censorship Decentralized social media could be the Only solution now the fifth expectation Is that web3 gaming will become more Popular this is also something we've Been talking about a lot recently in Short there are three reasons why people Adopt crypto speculation necessity or Entertainment that third category of Adoption has yet to be tapped but it's Coming The sixth expectation is that there will Be more crypto specific Hardware Particularly for zero knowledge proofs This is a bit concerning because a Centralization of Hardware could well Lead to centralization issues then again Some would say that crypto is already

Suffering from hardware centralization Issues The seventh expectation relates to the Fourth and that's that decentralized Social media will become popular due to Issues with centralized social media I'll take this as an opportunity to Stress that internet censorship is Coming Trust in institutions is declining and The only way to stop it is to contain The truth The eighth expectation is interesting And that's that light clients will make It possible for mobile devices to become More involved in crypto infrastructure As a fun fact over ninety percent of People access the internet from a mobile Device logically this means bringing Crypto to mobile is a massive untapped Opportunity the ninth expectation is That there will be new kinds of Community governance in Dows well I Certainly hope so because existing Token-based voting systems are just Leading to centralization what's Required is a radically new approach to Governance and I may have a few ideas But that's a topic for another time the 10th expectation is that governments Will pass bipartisan crypto regulations This is a direct reference to U.S crypto Regulations but I reckon it applies to Crypto regulations in other countries

Too It won't take long for politicians Everywhere to realize that crypto is an Economic and social opportunity never Mind all the crypto lobbyists running Around these days the 11th expectation Ties into the fifth and that's that Non-speculative crypto use cases will Emerge I only hope that these Non-speculative use cases are related to Convenience and not necessity if they End up being related to necessity then It's probably because we're dealing with Some seriously dystopian stuff the 12th Expectation is a relatively new Phenomenon and that's that hiring Treasury management and sustainable Funding will be a focus for dows This seems to be a subtle reference to a New crypto Niche called refi or Regenerative Finance which involves Investing in tokenized carbon credits So this brings me to the big question And that's what a16z's report means for The crypto Market From where I'm standing the report Reveals a lot more about how Institutional investors are seeing the Crypto Market rather than how the crypto Market is doing or how it's likely to Perform in the future naturally Institutional investors are interested In being on the bleeding edge of web3 And cryptocurrency however they're also

Interested in ensuring that they have Some say in how these projects and Protocols are run This is fundamentally at odds with their Decentralization imperative this is also Why institutional investors are so Focused on crypto regulation hot take But I don't think they care about how Much these regulations impact things Like actual Financial Freedom all they Want to know at the end of the day is How they can legally invest in and Influence these projects and protocols Now the incumbents are hyper aware of This which is why they're actively Trying to prevent sensible crypto Regulations from being passed They know that the actual endgame of the Crypto lobbyists is to replace the old Financial system with a new mostly Centralized Financial system not a new Decentralized one take Circle for Example The stablecoin issuer has been Aggressively lobbying politicians around The world to pass regulations that set Up its own stable coins as the gold Standard and ban the circulation of Decentralized stable coins that's not Very crypto actually it's the exact Opposite it's tradfy tactics that said Crypto adoption isn't going to happen Overnight most of the crypto regulations Being proposed may be inconsistent with

Crypto's core philosophies but they are A necessary first step over time the Centralization issues they cause will Become clear and better crypto Regulations will be passed more Importantly the average person will Start to understand the importance of Things like decentralization but before They understand the importance of these Things they must first know what they Are and be comfortable with the Associated Tech this will take years per The author's projections The Silver Lining to this situation is That we are in fact still in the early Stages of crypto's adoption this can be Hard to believe when you look at the Prices of cryptos like BTC and eth Compared to their lows but it's easy to Believe when you look at the near Absence of crypto regulations in Developed countries now at the end of The day crypto regulations are required For institutions to invest in the Industry and institutions are the ones With most of the money only they can Turn crypto into a multi-trillion dollar Asset class and what we saw during the Most recent crypto Bull Run was a Glimpse of what's to come the best part Is that retail investors like us will Eventually have the advantage because Most of us understand that there's more To crypto than paper profits

The institutions don't see it that way And this means that they will sell every Time a coin or token hits some arbitrary Number in fiat currency terms meanwhile Retail investors will continue to buy Regardless of the paper price and for Once they won't be the ones getting Dumped on the money institutional Investors get in return will lose value Until it's converted into a cbdc and all Their assets will be tokenized on a Blockchain the government controls and When their cbdc's and tokenized assets Are frozen because they did or said Something against the state they'll Realize that crypto is the only asset That offers true Financial Freedom by Then of course it'll be too late and all The retail investors who realized this Early on will become the new Institutional investors you heard it Here first And that's all for today's video if you Found it informative smash that like Button to let me know if you want to Make sure you don't miss the next one Subscribe to the channel and ping that Notification Bell down below if you want To make sure this information gets out Share this video before you go and if The crypto Market has been messing you Up chances are the coin Bureau deals Page can take the edge off it's got Dozens of discounts on crypto hardware

And software as well as thousands of Dollars of trading incentives on the top Cryptocurrency exchanges You can find the link in the description Thank you all for watching and I will See you next time [Music]


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