Crypto Market Forecast 2023
The crypto market has been through much pain, gains, and turbulence in 2022. The largest cryptocurrency by market capitalization started with a continuation of a minor correction after hitting its all-time high of $68 789 in November 2021.
However, several events have collided and sparked meltdowns, bankruptcies, and crashes in market prices.
Ethereum, the network with the largest utility in the crypto space, also saw a massive drawdown and is now trading 74% below its all-time high in November 2021.
2021 saw the NFT & metaverse boom, but the severity of the nosedive among cryptocurrencies rippled over to these digital asset types. This is because these tokens and worlds are priced relative to cryptos or native tokens.
Bitcoin price pre-Halving view for 2023
The growth of Bitcoin, the largest cryptocurrency by market capitalization, is often used to predict the development of the entire market due to its significant market dominance. At the time of writing, data from the Gate.io exchange shows that BTC constitutes 35.5% of the market.
Although there are various macroeconomic impacts on the entire space, the Bitcoin chart can also inform us of the potential realistic performance of the crypto market.
In the Bitcoin short-term price projection, the asset shows no sign of strength in the monthly time frame. Bitcoin price shows from Gate.io is currently trading at $17,164, and the market sentiment may dive the support at $13,000 or the order block at the 10k zone.
According to JPMorgan, the bottom price is around $13,000, with “a cascade of margin calls.”
In the long-term chart, considering the upcoming Bitcoin halving, Bitcoin is showing a recovery sign as the market might follow the same pattern that follows the event. According to the chart below, we can see an offset to the right of the bear market bottom and the right side of the bull market tops relative to the Bitcoin halving. This pattern helps us see that the bear market always bottom-out between the year before and after the halving.
Bitcoin is currently sitting close to the end of this (4-year/ over 65% done) circle, and the year 2023 is on track to repeat the pre-halving bear market recovery.
The Bitcoin price history from Gate.io also showed that the pre-halving bear market drawdown from the all-time high was roughly 94%, 87%, and 84% for the first, second, and third halving, respectively. And at the time of writing, the Bitcoin price has already been pulled around 76%, indicating a trend of reduced volatility and the end of the bear market.
With these landmarks in view, if Bitcoin bottoms at the $13000 to $12000 zone, it still follows this trend, and we may see a recovery in 3 to 6 months.
The Macroeconomics impact & view give some hints.
Even though the price chart of Bitcoin shows some recovery signs against 2023, this winter might last longer than the above analytics says.
This is due to the impact of macroeconomic factors: rising borrowing costs, the 40-year inflation highs, impact of the wars.
In response to the overwhelming impact of these macroeconomics, the Fed has continuously hiked interest rates. Although Powell has hinted at a slow-down of these hikes, there’s still an enormous clean-up to be done.
If these hikes continue, the crypto & and the stock market will keep seeing deadly wiping away of liquidity.
“Most Wall Street firms expect the U.S. economy to go into recession sometime in 2023. Many believe forecasts for 2023 earnings have more room to get cut, and some believe those downward revisions mean lots of volatility for stocks in the early part of 2023.”- Yahoo finance.
On the contrary, if the Federal Reserve continues to slow down the interest rate, as indicated in December, we could head for a return to the bull market in 2023. Below is the correlation between Bitcoin price & the US inflation rate.
The DeFi space outlook for 2023
Just like Bitcoin, Ethereum has had its fair share of market turbulence. Although this calls for a slowdown in how investors pour money into the DeFi & NFT space, some investors are still confident that Ethereum will outperform Bitcoin in scalability and adoption.
Despite the downtrend, there has been ”…significant interest in Web3, with investments set to exceed $27 billion. Projects built on Layer-1, zero-knowledge roll-ups, and middleware received the most funds.”-Huobi Research.
In September 2022, Ethereum completed the long-awaited merge and is on its way to implementing other scalability upgrades to foster more adoption among emerging competitors.
Regulation is inevitable in 2023
Following the failure of Terra LUNA, Celsius, BlockFi & FTX, there have been severe concerns with trust-based solutions and algorithmic stablecoins. It has also called for tightened scrutiny & transparency among CEXs and DeFi solutions. US President and some G20 countries are looking into a comprehensive regulatory framework for Digital assets. With this in mind, many projects with low utility and transparency may fade out of the system by the end of 2023.
The financial markets have seen a long bull market from 2009 to late 2021, only briefly interrupted by the Covid-19 pandemic recession in early 2020. However, stocks and crypto suffered harsh conditions in 2022, mainly to political instability, massive liquidity crunches, and rising interest rates.
If we see more easing of inflation and falling rates, the crypto industry might be on its way to new all-time highs.