Drama, Contagion & Hope in Cryptocurrency Outlook 2023
The bitcoin industry saw a dramatic shift last year. Landmine occurrences in 2022 highlighted the Crypto industry’s or not-so hidden weaknesses. Bitcoin (BTC) as well as Ethereum (ETH) simultaneously lost 64% and 68% of their value after the first crash of Terra Luna. No one anticipated the Cryptocurrency market valuation to drop below US$ 727.58 billion in the last weeks of 2021, after peaking at US$ 3 trillion. The repercussions of FTX-failure Alameda’s were disastrous, but they were also nearly entirely predictable. A huge amount of confidence in the environment as a whole was broken, making this more than simply a failure.
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Numerous unfortunate occurrences during the year will most likely have lasting effects into the next year. Because of the linked nature of Crypto firms, many market observers believe the domino effect will resume. Ordinary participants also have experienced significant losses from the different instances in 2022, which might prompt countries that have been sluggish to regulate Crypto to take actual efforts to govern the sector in 2023. The possibility of a domino effect from the Cryptocurrency industry spreading to more conventional forms of money has also been brought up as a justification for tighter oversight. Therefore, 2023 might well be remembered as the year when Cryptocurrency markets were finally regulated.
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There can be no question that the bitcoin market of 2023 will need to duck and cover from a few potential threats. Looking at how the Cryptocurrency market has done over the last several years, it’s clear that it moves in cycles that mirror Bitcoin’s. A bullish year, a year of market adjustment, a solid year, and finally a great year make up a normal market cycle. After the bull market of 2021 and the “Crypto winter” of 2022, optimistic forecasts are being made for 2023 in the Cryptocurrency market. Even though 2023 is expected to be a rough year for the Cryptocurrency market, there will be at first when chances to invest in both major and minor markets. In the next cycle, developers are likely to place a premium on topics like zero-knowledge proofs, NFT infrastructure, and web3 gaming.
About CBDCs
Central Bank Digital Currencies (CBDCs), on which several nations have been working for years, might see significant progress in the near future. Nations already have announced their plans to use blockchain technology to compete with the Cryptocurrency industry. Therefore, CBDCs may represent a new battleground in the war against Cryptocurrencies. Despite the negative sentiment that drove many institutional investors to pull money out of the market in 2022, a number of large financial institutions nonetheless finally agreed to increase their involvement in the Cryptocurrency sector and formed new tactical alliances with other companies in the field. Depending on the state of the global economy, these changes in the next year might pave the way for institutional money to once again enter the Cryptocurrency market.
Investment Thesis for 2023
Investors in wealthy economies would look at Bitcoin as a hedge against M2 inflation, which is more stealthy than CPI inflation, and a long-term store of value. Given that India’s Ministry Of finance has been publicly advocating for global coordination on Crypto legislation, we see the country as a possible pioneer in the field. Many conversations already have taken place regarding the potential for more industry recognition and regulation now that India is chairing the Group of Twenty. Regulating centralized Cryptocurrency participants, who are vulnerable to abuse by their masters, is essential for the full realization of the environment’s capabilities.
More weight is given to remittances and non-dollar alternatives in developing nations. If the crisis we foresee materializes, the Federal Reserve is likely to defer increasing interest rates since inflation is expected to fall even while the government keeps printing currency as well as running budget shortfalls. Assuming no more bad news about Cryptocurrencies, Bitcoin’s value can theoretically recover to $25,000 without any further panic selling. As the United States central bank tackles persistently high inflation, most Federal Reserve members expect the benchmark interest rate to rise beyond 5% in 2023. After a brief hiatus in rates in 2024, decreases are forecast to resume the following year. This development is consistent with the overall storyline and represents an improvement above the median forecast of 4.6% for September 2023. Both the long-term as well as median forecasts for 2022 have stayed steady at 2.5% as well as 4.4%, accordingly.
The sector is also fighting for more decentralized infrastructure to be developed and used, so that digital assets may be traded and managed in a more safe and transparent manner. With so much planned for the next year, supporters of Cryptocurrencies who’ve already maintained their optimism as well as skeptics who remain to doubt their feasibility both have reason to be optimistic.
The Bottomline
What can’t be ignored is the fact that disturbing things will probably keep happening in 2023, as they did in 2022. Because of liquidity constraints and worries of contagion, the Crypto business may continue to feel the heat in 2023.
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.
