2022 may not have been a good year for stocks, but it was a terrible year for cryptocurrencies.
The S&P 500 is expected to be closed at a 17% loss by the end of this year, continuing this year’s long losing run for stocks. The situation for BTC and other popular coins is getting significantly worse.
BTC is down at the moment at 64%, while ETH is at 66.0%. The majority of other significant cryptocurrencies are fallen over 90% as the risk curve is extended.
Do you recall when prices were held at zero by the Federal Reserve and inflation was temporary? What a change a year can make. Bitcoin (BTC) and Ethereum (ETH) were each worth more than 3,800 USD and approximately 48,000 USD respectively in Jan 2022; the main cause of these two top currencies’ steep declines is the Fed’s battle with inflation.
Not just, though. Nobody should be surprised by the loss because the last year has been littered with crypto breakdowns, foreclosures, and mayhem. What remains to be seen is how lengthy the crypto winter might stay and whether the current state of the industry will remain chaotic in 2023.
Crypto Winter: How Long Will It Last?
Cryptocurrency has experienced cycles of ups and downs before. A brief glance at Bitcoin’s price development as the industry standard illustrates the point:
- BTC plummeted 84.0% to $3,000 in 2018 after a spectacular rise at about 20,000 USD.
- In November 2020, BTC reversed course and climbed to about 17,000 USD before surging much further.
- BTC saw a 50% decline in May 2021 before rising to record highs of about 69,000 USD late that same year.
Many observers think that the current retreat is unique because of the difficulties facing the bigger economy and platforms such as BitcoinEvolution are examples of such trends.
In fact, the stock market opened this year up more than a staggering seven times from the lows of March 2009, which was only two months after Bitcoin was launched.
But the stock and cryptocurrency markets have been hit hard by the simultaneous challenges of rampant inflation and Federal interest rate increases. When rates increase, risky assets like equities and cryptocurrencies suffer.
You must comprehend how long sustained high inflation will maintain the Fed’s aggressive monetary policy position in order to respond to the issue of how lengthy the crypto winter would persist. The only factors that can assist cryptocurrency right now are decreasing rates and decreasing inflation.
Forecast for Bitcoin in 2023
The price of bitcoin is roughly 16,800 Dollars towards the conclusion of the year, dropping from around 19,500 USD on the brink of the FTX crisis. BTC has additional room to fall if the effects of FTX’s collapse remain widespread. Even Cathie Wood, CEO of Ark Invest and a well-known Bitcoin advocate, acknowledges that large financial institutions may take a step back from crypto in the near term because of FTX.
In a previous Bloomberg article, Wood, who has maintained the BTC forecast of 1 million USD by 2030, said: “The one element that is going to delayed is potentially institutions pulling back and to just saying, ‘OK, do we fully comprehend this?'”
Further running downhill to the 10,000 USD mark for BTC in 2023 may not be far-fetched given that wider marketplaces are suffering and crypto’s reputation has been severely damaged by the catastrophes and controversies of 2022.
Experts at JPMorgan Chase & Company concur that the bottom is not yet in. With “a cascading of margin calls” occurring across the market as a consequence of the latest happenings, the world bank estimated that Bitcoin’s floor will be approximately 13,000 USD.
The cost of producing Bitcoin is another tool used by strategists to predict how low prices may go. The JPMorgan team wrote in a note that although the production cost currently stands at $15,000, it “is likely to return to the 13,000 USD level seen during the summer months.”
Forecast for Ethereum in 2023
Ethereum moves typically in the same direction as Bitcoin, at least up until now.
According to market cap, the Ethereum merger in Sept 2022 will result in a significant networking makeover for the 2nd largest cryptocurrency. Some experts expect that the price movement of the pair may soon dissociate.
According to Kemmerer, “ETH is yet to profit in value terms from the recently introduced proof-of-stake merging.” “The crypto winter is a contributing factor,”
Kemmerer thinks the price of the cryptocurrency might increase to $2,500 in the upcoming six months. Even if this is an extreme bull scenario, the same factors that influence Bitcoin’s value also affect ETH. For upward gains to resume, the business climate needs to be favorable.
If it doesn’t, Ethereum will probably decline much more. Given that the price of ETH fell under 1,000 USD in July, it wouldn’t be unexpected if it rose back to that level during the subsequent six months would additional unfavorable catalysts emerge.
Additional Cryptos to Monitor in 2023
The situation for other speculative altcoins has been substantially much worse in 2022 than it was for Bitcoin and Ethereum.
Altcoins aren’t where investors probably wish them to be whereas the bear market is rolling, and that situation won’t change anytime in the near future. The effort of establishing credibility for many altcoins during the bull market has proven more difficult now because there is less market stability.
Altcoins will keep declining as long as Bitcoin and Ethereum don’t rebound. And many will completely vanish, the same as bear cycles in earlier times.
An intriguing case for stablecoins in 2023. In September, the cryptocurrency exchange Binance delisted a number of stablecoins, among them USD Coin (USDC), the fifth-largest cryptocurrency by market cap with a 43 billion USD valuation. Soon after, Circle, the company behind USDC, declared that they would introduce a stablecoin backed by the euro on Solana in the first part of 2023.
Future Observations and Conclusions on Cryptocurrency
Some observers believe that rivalry may soon increase much further. The rise of government stablecoin ventures, sometimes referred to as central banking digital currencies, is to blame for this (CBDCs).
Early in 2023, the Japanese central bank will put out a test program involving large banks. Even Turkey said that it would introduce a stablecoin the following year, and many other nations are expected to follow suit. China is among them, significantly superior to the others.
China’s CBDC development has so far only affected small regions, but with wider adaptation in the coming year, that may change.
Competition is getting fiercer for existing stablecoin issuers like Tether (USDT), Circle, and Binance.
According to the Founder of fintech business Modulus Global, “Stablecoins are in a terrible place because there’s little doubt that the introduction of CBDCs is likely to eat up their market.”
It is equally challenging to predict the marketplace for stablecoins as it is to predict the price of Bitcoin. Cryptocurrencies like Ethereum are OK.
Risk in the cryptocurrency market is still very high, that much is obvious.