What to expect from crypto markets in 2023

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If Bitcoin and crypto has taught us anything, it is the simple fact that it is impossible to make predictions about market trends in the short and medium term.

At the start of this year, the global crypto market commanded a total market capitalization of over $2 trillion. However, after a topsy-turvy year, we are now at a market cap of only $900 billion.

As of writing, Bitcoin is down almost 60%  this year. Looking further, major altcoins are down more than 90%.

As the numbers clearly show, this past year was an absolutely atrocious year for crypto. Amidst macroeconomic factors like interest rate hikes and surging inflation, liquidity in the markets quickly dried up. In addition, the Terra-Luna, Three Arrows Capital, and FTX collapses led to widespread contagions that forced many crypto companies into bankruptcy and put investors at a considerable loss.

There are also fears that we may see the collapse of other big names in the coming year.

With a year that had its fair share of crypto meltdowns, bankruptcies and chaos, the losses should not be surprising to anyone.

The real question that is now on everyone’s minds is whether these market conditions would continue into 2023, and how long the “crypto winter” could last.

The crypto community is deeply divided about whether there is going to be a surge or crash in the year ahead. 

A few analysts and technical indicators suggest it could bottom at a lower value than present in the months to come. This correlates with a volatile macroeconomic environment, stock prices, inflation and a possible recession that could last until 2024.

On the other side, the more optimistic influencers and crypto enthusiasts maintain that the price could skyrocket to $80,000 and beyond.

There is evidence to support both sides. A main problem could be that both parties are comparing two different time horizons. There’s a strong case to be made that Bitcoin is likely to drop sharply in the months ahead but potentially rise in mid-to-late 2023.

The last crypto bear market stretched out over two years. At present, we are only a year into this one, and the present macroeconomic climate is significantly worse.

The deflationary nature of Bitcoin, implemented through “halving” events, also encourages and leads to significant price increases over time. The next halving is scheduled to occur in April 2024.

The price of Bitcoin usually follows a four-year market cycle, which includes an accumulation (buying), an uptrend, distribution (selling) and a downtrend. We would generally expect the accumulation part of this process to begin in 2023, though some believe it could be delayed until 2024.

At the same time, we must expect large financial institutions to temporarily take a step back from crypto in the near term because of what happened in the recent past.

Regarding the price of other crypto, the price of Ethereum typically follows Bitcoin, and that has generally been the case so far.

As bad as it’s been for Bitcoin and Ethereum in 2022, the situation has been significantly worse for other speculative altcoins.

While the bear market is raging, altcoins are not where investors probably want to be, and that is unlikely to change soon. Altcoins which couldn’t establish legitimacy or any use case in the bull market are going to find it much harder to remain relevant in such a situation.

While established crypto like Bitcoin and Ethereum is expected to recover, it is most likely that altcoins will continue their downward trend. And much like earlier bear markets, many of them will cease to exist entirely.

As mentioned earlier, the first step for investors to understand is that Bitcoin moves in up and down cycles, and we are well and truly in the midst of a downcycle or a “crypto winter”.

While the exact duration of this downcycle cannot be predicted, it would be best to RCA, that is invest a sum of money regularly into Bitcoin – no matter how small, whether that is daily, weekly or or on a monthly basis.

Despite all of the market turbulence, investors should take comfort in the fact that Bitcoin’s deflationary nature results in price appreciation for long-term investors and they should continue to invest into Bitcoin in 2023.

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