Crypto making limited inroads into mainstream finance

Significance

The market capitalisation of crypto assets has fallen below USD1tn, from USD3tn in November 2021. FTX's collapse has reminded investors that the market is driven by speculation, that crypto use in everyday transactions remains very limited, that crypto use for theft and fraud is substantial, and that the market's operating structures are opaque.

Impacts

• All major asset classes bar the US dollar and commodities have posted negative returns in 2022; amid volatility, this will continue in 2023.
• Stablecoins have fallen sharply but will play a role in connecting mainstream and crypto markets by tracking assets such as the US dollar.
• Sentiment is improving due to signs that the US Federal Reserve will slow the pace of rate hikes; bond markets see rate cuts later in 2023.