2023 Digital Dollar: The Fed broke digital asset markets. But imbalances in the digital ecosystem were also great – it was collateral damage. Markets enter 2023 with great hope that inflation will crater, and visibility will emerge on rate cuts. As the unemployment rate rises and inflation declines, political pressure for easing will follow. A debate is already emerging on the appropriate inflation target. How much unemployment is too great a sacrifice to reach 2% inflation? Markets won’t wait for the answer – longer-term inflation expectations can move well in advance, even during a downturn. The impulse to use digital assets may be subtle. Just as digital players emphasize bitcoin is not going anywhere, neither is the US dollar. They will have to learn to play nicely together. And this is where digital dollars get interesting. We will gain regulatory clarity on how private USD stablecoin enters the banking system next year. The dollar is the leading digital asset use-case. Nobody wants to hold a cash buffer with the forward possibility of being devalued more aggressively. The high velocity of digital dollars allows for a smaller cash buffer. And stablecoin is the epicenter of resilience this year – digital dollars stayed in the ecosystem. The top four USD stablecoin assets are $136 billion, a modest decline from the highs. Wallets with USDC balances of more than $1k, $10k, and $100k have all risen to historic highs. Utility assets are a natural candidate to take digital out of its downturn. They are useful – a powerful response to the most pronounced criticism of digital technologies.