Dennis Diatel Photography / Getty Images

Dennis Diatel Photography / Getty Images

The crypto market has been battered since 2022, and it has been a rollercoaster for several assets. Implosions, fears of contagion and ensuing confusion have put an enormous strain on several of them.

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Yet, while it’s too early to tell whether it has recovered, crypto seems off to a better start in 2023. Take, for example, the Solana blockchain and its native coin (SOL).

Solana’s ‘Rocky Six Months’

Following the collapse of FTX — with which Solana was entangled — Solana’s asset value was one of the most impacted. Its market capitalization dropped by 70%, according to a Messari report.

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Yet, over just the past two weeks, SOL has rebounded and was up 8.1% as of Feb. 27, according to CoinGecko, hovering around $24. It is up a whopping 133% year to date, according to CoinDesk data. On the other hand, it is also down 91% from its Nov. 6, 2021, all-time-high of $259.96, according to CoinGecko.

“Solana has had a rocky six months, from its association with Sam Bankman-Fried to this recent forking incident,” said Christopher Alexander, chief communications officer of Liberty Blockchain. “The market clearly believes in Solana’s long-term vision. If you believe in coins that are building infrastructure like Ethereum, it makes sense to support that chain.”

In terms of the forking incident that made the asset’s price drop, Alexander attributes it to the fact that Solana prefers to move fast and that comes at a price, while Bitcoin and Ethereum have a strategy to proceed with caution.

“Speed allows innovation that means Solana leaps ahead of its competition in the Layer 1 [blockchain] space,” he said. “The downside is that they can fail or succeed spectacularly and the timing of something breaking now is unfortunate for them.”

Other Coins and Trends To Watch

Experts say there are a few other assets and trends worth watching this year, each for different reasons — even though everyone is proceeding with extreme caution.

According to Hayden Hughes, co-founder and CEO of Alpha Impact, Polygon (MATIC) is one of them. It has been warmly received by the investor community, notably on the heels of announcements by Instagram and JPMorgan that they’ll be using the blockchain for settlement and trading of digital assets.

Another one to watch, according to Hughes, is UNI.

“The Uniswap token shares its name with the largest decentralized exchange on the market,” Hughes said. “Although the token is not used directly in Uniswap’s ecosystem, this is rumored to be changing. The team is focused on building utility for the token.”

Another Focus: Liquid Staking Derivatives

Another area of interest according to several experts, is liquid staking derivatives (LSDs). Lido (LDO), he said, is the largest of the so-called LSDs, which allows users to deposit locked assets, with the view of bringing liquidity to the assets that previously were not interchangeable.

Matt Maximo, research analyst at Grayscale, noted that he too sees LSDs as an area of interest this year. Lido’s stETH offers investors a way to gain exposure to Ethereum (ETH) and staking yield, while also being compatible with DeFi.

“For many users, investors and traders, it may be more advantageous to hold the LSD derivative of Ethereum,” Maximo said, “as it provides liquid exposure to ETH and staking yield, instead of just holding ETH or locking it up in a validator.”

With the Shanghai hardfork, Ethereum’s next upgrade, expected in the next few weeks, LSDs have performed extremely well this year. The largest tokens — such as FXS, RPL, LDO — have gained more than 125%.

“I expect this trend to continue long term into and beyond the Shanghai hard fork,” Maximo said. “Granted, there may be some short-term volatility with ETH unlocks and macro headwinds.”

Layer 2, RWA and More

Additional areas of interest for 2023 include significant growth in Layer 2 scaling solutions, which was reaffirmed by the recent launch of Coinbase’s L2 solution “Base.”

Finally, Maximo said real world asset (RWA) tokenization on the blockchain is a process that may seem gradual and unassuming, but once it reaches a critical mass, it is bound to surprise and captivate everyone with its immense growth and impact.

“Stablecoins serve as a notable illustration of the potential value of tokenized RWAs within the crypto landscape,” he said. “Beyond stablecoins, other RWAs such as bonds, Treasury bills, real estate, commodities and more can also be tokenized and transacted on a decentralized network.”

In addition, crypto experts such as Dara Albright note the emergence of “next-gen self-sustainable altcoins in the Participate-2-Earn space that enables individuals to be compensated for their participation in their routine activities such as learning, exercising, binge-watching.”

Albright, an expert with crypto marketplace Earnity and host of the Decent Millionaire podcast, pointed out Health Hero, a Health-2-Earn company that incentivizes users for staying healthy.

“Not only because it possesses a long-term, supportable pricing support system for its token that taps into $15 billion of healthcare-related real-world assets,” Albright said, “but because of the healthcare benefits it could bring about on a macro level.”

Focus on Utility

All in all, while the crypto space seems to be slowly regaining ground following the depths of the seemingly never-ending crypto winter, lessons from the FTX bust have been learned and experts are proceeding with caution about what the future holds.

Transparency, viability and utility are taking precedence over short-lived, hyper-hyped trends.

As Calanthia Mei, co-founder of Masa Finance, noted, trends are fueled by the narratives that drive them; and, like the seasons, they are constantly changing.

“We’ve seen some absolutely wild trends historically,” Mei said. “Flashback to DeFi summer, where coins named after food which could be yield-farmed were all the rage. To meme coin madness, where coins named after every breed of dog imaginable were skyrocketing.

“While these trends were fun, fast-paced and extremely volatile,” Mei added, “we see this year as a new chapter for crypto and a turning point for the industry. As investors separate the signal from the noise, we see a focus on real utility, scalability, network adoption and value being key to the next cycle.”

The sentiment is also echoed by Arie Trouw, co-founder of XYO Network, who also said it’s better to focus on trends within the crypto industry that offer sustainable value for the longer term.

“There are so many flash-in-the-pan pumps that focusing on any one coin could be dangerous for investors,” he said, “especially those who are new to the industry.”

With this in mind, infrastructure projects that aim to solve real problems are a good start, he added.

“This includes, for example, oracle projects that serve as the key data feeds connecting blockchains with the rest of the world, as well as blockchains with other blockchains,” Trouw said. “Indeed, as blockchain networks continue to grow, they will increasingly need data for a wide variety of purposes.”

Trouw added that the blockchain networks themselves — Ethereum, Solana and Polygon, etc. — are all experiencing solid user growth and technical development.

“In turn, developers are increasingly attracted to them because they know that there’s growing user interest,” he said. “The more developers and the more users a chain has, the better the longer term will look. Overall, it’s hard not to be bullish on the space, but it behooves investors to do their research before getting exposure to any particular project.”

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This article originally appeared on Solana, Other Altcoins and Crypto Trends To Watch in 2023

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