Crypto 2023: further crisis or new rise?

8 min
Crypto 2023: further crisis or new rise?

By the end of December and beginning of January, many crypto investors began to rethink the results of this tumultuous year for the entire industry. After the cryptocurrency price spike in 2021, with the entire market nearing a $3 trillion valuation, a series of high-profile incidents have shed light on how risky the industry really is, causing the market to lose more than two-thirds of its value. The editors of collected both negative and positive forecasts regarding the future of cryptocurrencies, as well as the opinions of leading investors and experts.

Further crisis and collapse

As of today, there is no doubt that the collapse of FTX will delay the “crypto spring”, as investor confidence in cryptocurrencies has been hit hard and the effects of this event will continue to be felt for a long time to come. It is safe to say that liquidity problems may persist at least until the end of 2022.

After warning a BlackRock chief executive about the start of the “next generation for the market”, analysts at Standard Chartered Bank (LON:STAN) warned that the price of BTC could drop to $5,000 next year, causing BTC’s market capitalization to drop to around $100 billion and sow crypto. -chaos.

In addition, the decline in tech stocks in 2022 correlates with the fall in the price of BTC. As Eric Robertson, Global Head of Research at Standard Chartered notes,

“While the bitcoin selloff is slowing down, the damage has already been done.”

At the same time, a further decline in the price of Big Tech shares will accelerate the fall in the price of BTC, which means that even more bankruptcies of crypto companies should be expected. While Robertson was quick to note that the liquidity shortage scenario that more and more crypto companies are facing, leading to new bankruptcies and a drop in investor confidence in digital assets, is not the most likely, but such a possibility is currently present.

His opinion is also shared by analysts at Saxo Bank, who predicted a jump in gold prices, predicting that the price of the “yellow metal” could “break a double top around $2075 and soar to at least $3000 in 2023.”

Economists at the Danish bank noted that

“Any hope of a return to disinflationary pre-pandemic dynamics is impossible due to the start of a global war economy, with every major power in the world now struggling to shore up its national security on all fronts; be it in a real military sense due to severe supply chain, energy and even financial security insecurities.”

An important and very negative factor could be the defeat of Ripple in the confrontation with the SEC. Ripple Labs has been in a legal battle with the US Federal Securities and Exchange Commission (SEC) since 2020 over its XRP token. The SEC claims that XRP is an unregistered security. Due to the importance of Ripple and XRP in the digital asset space, the outcome of the case could have far-reaching implications for the entire industry.

Ripple itself enjoys the backing of major industry players, including Coinbase and the Blockchain Association. However, in November, the SEC won its lawsuit against blockchain-based publishing company LBRY. If this case is used as a precedent, the likelihood of Ripple winning the battle against the SEC is markedly reduced.

Experts also agree that in 2023, stricter regulation of cryptocurrencies by supervisory authorities around the world is expected. This point clearly stems from a number of highly publicized failures across the crypto industry related to Celsius, Voyager, Terra Luna and FTX. These adverse developments have shed light on how complex, confusing and opaque many large digital asset ventures are.

Therefore, the immediate goal of legislators is to increase trust and transparency, as well as protect investors. The tightening of the regulatory stance in the US will have an impact, in particular, on Coinbase, which is based domestically and has been a public company since April 2021. Instead of circumventing the laws of the country by registering abroad, as FTX did, Coinbase is already operating within existing securities regulations, which should solidify its status as a trusted broker and exchange.

New rise and prosperity

In the event that a bull market occurs in the industry, Bitcoin, as the oldest and most valuable cryptocurrency with a market capitalization of approximately $330 billion, is likely to become the main leader in this asset class for both individual and institutional investors. The capital that has left the market this year is waiting for any positive changes.

And don’t forget about new investors who don’t yet have positions in any cryptocurrency, who may rush into BTC in a recovering market. An additional incentive may be the fact that it is incredibly easy to buy BTC today. The recovery of the market will depend on the monetary policy of central banks, the macroeconomic picture and just the general attitude towards digital assets.

In addition, the crypto market has already experienced significant downturns in the past. If we trace the trajectory of bitcoin, we will see the following: BTC rose to about $1160 in November 2013, then fell for more than a year, and by January 2015 was already selling for $150. In 2017, the price of BTC broke the last high of 2013, and at the same time reached a new peak at around $19,600. By December 2018, the price of bitcoin was already only $3,100. In December 2020, it overcame the resistance of 2017 until it peaked at $68,000 in November 2021. Since then, we have seen significant declines followed by much more negative sentiment as well. Today we can conclude that the current situation is just a repetition of history.

The corollary follows smoothly from the paragraph above: every BTC bear market was followed by a long bull run. Yes, indeed, the cryptocurrency market is extremely unstable, and after a significant price reduction, an equally significant increase follows. The bull rallies that accompany bear markets also last quite a long time and eventually overcome resistance.

Former BitMEX CEO Arthur Hayes is convinced that the current cycle lows are the bottom. He argues that the wave of sell-offs has already reached its peak, since all the crypto companies that were threatened with bankruptcy have already gone bankrupt.

Experts believe that the price of bitcoin may rise again also due to the fact that the US Federal Reserve will suspend the rate increase due to a real decrease in inflation, while printing money and the country's state budget deficit will continue.

Investor Kathy Wood argues that the collapse of FTX will fuel the accelerated growth of the DeFi sector. This is because in a transparent and decentralized business environment, questionable transactions are impossible:

“I think through FTX we have learned how much more important fully transparent decentralized networks will be for financial services in the future. FTX, Celsius, 3AC were all closed networks. opaque systems. You couldn't see what was going on."

According to Brian Gross, network manager at ICHI crypto platform, decentralized finance (DeFi) and decentralized autonomous organizations (DAO) have every chance to become the fastest growing areas of the crypto space. If DeFi aims to recreate traditional financial products without intermediaries, then DAO can be considered a new Internet community.

DeFi is part of a larger trend called Web3. Proponents of Web3 argue that it is a new, decentralized version of the internet, including blockchain and non-fungible tokens. This is where the spread of Web3 games can play a role.

In Web2, players don't actually own assets outside of the games they are used in, which can be overcome with the use of non-fungible tokens (NFTs) in Web3-level games. What makes Web3 games different is that you can and should make money there, which is especially attractive to players from developing countries, who can make a significant income from games. However, while such games are not known to the general public for their user experience or creative worlds, as they are utilitarian, which drastically limits their appeal.

According to Rick Edelman, founder of The Ascent Digital Asset Finance Council, by the end of 2023, more than 500 million people worldwide will own bitcoin due to greater clarity and better understanding of the industry, which will contribute to the wider adoption of crypto assets.

Financial institutions will use more than $10 billion worth of off-chain blockchains to simplify storage and settlement while reducing costs for customers. Already today, MakerDAO plans to invest $1 billion in US bills and other government securities through BlackRock and Coinbase. The amount of real loans on the platforms Goldfinch, TrueFi, Maple and Clearpool is $300 million. And KKR tokenized one of its private funds in partnership with Avalanche and Securitize. Among the open source blockchains, Ethereum, Polygon, Avalanche, Polkadot, and Cosmos occupy the best positions.

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