2022 has been a difficult year for investors, with the stocks and shares market taking some dramatic hits and cryptocurrencies sent tumbling to terrifying lows thanks to ongoing economic uncertainty across the globe.
Following the collapse of a number of high-profile exchanges, Bitcoin plunged by 64 per cent in value earlier this year, with the likes of Ethereum and other popular alt coins faring even worse, and traders have had to make some tough decisions about whether to stick, twist or take advantage of the low prices and buy up large amounts of their chosen cryptocurrencies.
The fact that cryptocurrency prices can experience such volatility is nothing new, and is in fact, a known characteristic of these modern digital assets – so while we’ve certainly seen a certain level of panicked sell-off amongst investors, the more seasoned have remained unphased. And in fact, we’ve even seen an uptick in the number of new sign ups to trade Ethereum with the Ethereum Code app and to other cryptocurrency trading platforms this year – so it’s clear that overall, they are still seen as valuable and viable assets.
Back in 2021, things looked very different, and despite the pressures of the global pandemic, the crypto market was booming, with the Federal Reserve holding rates at zero and inflation considered only transitory. But, in just a year, the picture has changed dramatically, and it has left many traders wondering just what lies ahead as we head into 2023.
After 12 months that have been fraught with crypto meltdowns, bankruptcies and utter chaos across the board, it would be tempting to assume that things can only get better – but is that really the case? Here, we take a look.
An end to the crypto winter?
The current crypto winter has many investors concerned, but others, not so much. Bitcoin and the like are no strangers to dramatic peaks and troughs in price, with the world’s largest cryptocurrency, BTC, rising as high as $20,000 USD back in 2018 only to tumble by an eye-watering 84 per cent just a few months later. After rallying once more in 2020 when it climbed back up to $17,000 USD, prices fell once more in 2021 by a hefty 50 per cent – before not only recovering, but reaching an all time high of nearly $69,000 USD later that year.
With all this in mind, it’s easy to see why analysts remain optimistic – but due to the wider economic struggles happening across the globe, this time, recovery could be somewhat more complicated and less linear than it has been before.
With inflation at a 40-year high, borrowing costs on the rise and the ongoing political instability sparked by the Russian invasion of Ukraine, there are a number of factors at play as we head into 2023, and these could mean that unfortunately, the crypto winter is far from over.
Until recently, we haven’t seen previous crypto market downturns coincide with a wider financial bear market, so it’s difficult to predict exactly how the current scenario could play out.
In order for the crypto market to recover, we’ll need to see an easing of inflation and the falling of interest and borrowing rates, and how and when that might happen remains to be seen. The last bear market lasted for more than two years, and with an entirely different storm to weather this time around, it seems this one could last significantly longer.
That said, the longer-term outlook is more positive, and many analysts believe that it isn’t a case of ‘if’ the market will recover, but ‘when’. As every seasoned crypto investor knows, success is all about playing the long game, so while there mightn’t be any sizable returns on their way any time soon, those who hold their nerve may well be rewarded in the longer-term.
2023 forecast
As the year heads towards a close, Bitcoin is sitting at around $16,800, which is a far cry from its previous highs – but there is still further left for it to fall, and this could well be what happens as we head into 2023. In light of the high-profile ongoing liquidation of Bahamas-based exchange FTX, we could be about to see large financial institutions opt to distance themselves from crypto in the short term. Some experts see Bitcoin’s ‘floor’ being as low as $13,000 in 2023 – but the good news is that many are continuing to stand by their longer-term predictions that Bitcoin price could still exceed $1 million by 2030.
As for the top-playing alt coins, we can widely expect them to follow a similar pattern to Bitcoin, as has been the case historically. But in the case of Ethereum, this could be about to change, with its September merge leading to a major network overhaul that could eventually see the latter come out on top. With the crypto winter in full swing, this is still yet to be seen, but there is certainly reason for it to rally should it manage to overcome the current macroeconomic climate. It’s no small feat, and we could have to wait beyond 2023 to see the eventual benefits take hold price-wise. But longer term, the forecast is looking good.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.
