As hard as it is to believe the year 2022 is quickly coming to an end. November has already snuck up on us and soon everyone will be shifting their focus ahead to what’s next in 2023.
In order to understand what might happen next year, it’s critically important to remember what happened this year as well. 2022 was a year that will be remembered forever. In terms of crypto, it was probably a year that many of us would much rather forget. It was this exact time last year when Bitcoin reached its all-time high price of $69k. At that time when looking ahead to what might happen during 2022, our dreams of the bull run were still intact. Most people had extreme confidence that Bitcoin would definitely reach prices of at least $100,000, and that was being conservative. We were anticipating Ethereum’s climb to $10,000 off the hype of their upcoming merge. But as we know now, in terms of prices, 2022 was a year of disappointment. Since November of last year, prices have seemingly done nothing but go down. That isn’t even the worst of it. For those of us who have been in crypto for several years now, that is all something that you have become accustomed to. After living through each 4 cycle of bullish and bearish patterns.
If 2021 in crypto could be summarized, it would be called the year of over-leverage, greediness, or self-inflicted wounds. Those who participated in those types of activities were punished and taught a difficult lesson that we won’t soon forget.
We saw some of the largest funds and companies in the market become insolvent and big crypto projects go nearly to zero. For example 3AC, Celsius, Voyager, Vauld, LUNA/UST, and more. Even if you weren’t liquidated by partaking in risky high-leverage trading. There is a good chance that you got caught up in either one of the crypto lending services going under, or had money invested in Luna/UST. Which resulted in either your funds being frozen on those services or the value of your crypto becoming worthless. We were all given a rough reminder of how risky crypto can be and how important it is to take custody of your own crypto. While it is great to earn interest on your crypto, the most important thing is actually surviving the money and not losing your coins.
Looking Ahead to 2023
While the world will likely be a mess for quite some time, and many people will suffer financially because of that. On the crypto front, there is finally some hope that is beginning to build up.
The FED Pivoting
The reason for that momentum of hope is that most experts are predicting that the US FED will soon be pivoting from their hawkish interest rate hikes to attack inflation. Which has been one of the main reasons why risk-on financial markets such as Bitcoin, crypto, and tech have been tumbling this year. The US is heavily and debt and cannot afford to continue aggressively raising rates. It would cause the economy to break. Everyone knows that the US will need to adjust its strategy sooner than later, and until then all eyes are watching this situation.
All it would take is one sentence from FED chairman Jerome Powell saying that the FED will begin to wind down its rate hikes or be less aggressive in doing so. When that happens, it has been predicted that the stock market will see an instant 10% or more increase in value. If that is what happens with stocks, we can only imagine what will happen to the more volatile crypto assets. A one-day increase of 30% or more is not out of the question.
This won’t happen today, and may not happen next week or even next month. But, it will be happening within the next 3 to 6 months.
The World is Reminded of the Real Value of Bitcoin
Throughout most of Bitcoin’s history, it acted as an uncorrelated asset when compared to other traditional financial assets. When there were global fears of panic about war or inflation, we would see the price of Bitcoin soar up.
That hasn’t been the case during the last year, but in my opinion, that won’t last forever. Even with governments trying their best to combat and contain inflation. It seems that it is having little to no effect, and is arguably still increasing. Those who are holding their hard-earned savings in cash are being robbed. More and more people are beginning to wake up to this fact out of necessity and look for the best option to protect themselves. They might first look to gold, but it hasn’t performed how many would imagine a safe-haven asset performing during this type of macro situation. Then maybe they will begin looking to Bitcoin. An asset that is similar to gold in many ways, but much better.
It’s likely that the rich have already begun to transfer their wealth to Bitcoin. Recently there was a giant Bitcoin withdrawal from Coinbase of more than 50,000 BTC. We can only speculate who withdrew this Bitcoin. But it is likely to either be someone extremely wealthy, or a company/country putting Bitcoin on their balance sheet.
One thing is certain, the world looks at Bitcoin much differently than it did during the last bull run in 2017. People are beginning to understand its true value, and the public image of it is much better as well. It takes time for a young asset to gain the trust of people to invest in it. But this isn’t an “if” type of scenario, but rather a “when.”
Continued Effects of Ethereum Merge
The Ethereum merge has come and gone. Most would admit that it didn’t have quite the effect on prices that we thought it would. But, it’s important to remember that there was extreme macro turmoil at the time of the merge. It may have been the only thing that prevented prices from falling further.
The key thing is that since the merge, the Ethereum inflation rate has dropped by over 95%. The effects of the merge may not be felt today, tomorrow, or next week. However, perhaps even more than a Bitcoin halving. There will come a time a few months later when the market begins feeling the supply shock. That is the time that Ethereum’s value will begin going up and will pull up the rest of the market with it.
Approaching the Bitcoin Halving
The Bitcoin halving is only about 17 months away. While the halving won’t happen next year, it is important to remember how the market traditionally behaves as we approach the halving. Every 4 years the halving takes place and cuts the inflation rate of Bitcoin in half. About 5 months after the halving BTC’s price begins to go up, sending us into the next bull run. Green prices last for about a year, followed by another year of bearish price movements. And the prices go sideways and begin climbing up as we approach the next halving. We have now been in bearish prices for over a year, which puts us in the sideways to climbing up portion of the market. Similar to the ETH merge, we will not be able to see the effect of the approaching BTC halving in a single day. But it will gradually affect the market.
The main hurdle that crypto is contending against during the short-term future will be macro. If the markets become more dovish, or the war were to come to an end. Crypto could recover faster than most can imagine. All it would take is a few bullish months. While things may not seem optimistic today, it's important to zoom out and remember that this will just be a small blip in the history of crypto. Nothing has changed, and I would argue that crypto adoption has sped up rapidly during the last 2 years. By 2030, we will all be looking back to this time and wish that we had boughten more.
How about you? What are the important things in crypto to consider for 2023?
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