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How much will bitcoin or an altcoin cost in 2023? Great question. Even professional traders cannot foresee the price of crypto due to multiple impact factors. But as an investor, I want to think about something else. Are those who have already buried the crypt right, or is last year’s market crash not over yet?
Related: Now that Crypto has crashed, what’s next for The Metaverse?
Bugatti for bitcoin — failed
In February 2021, bitcoin’s capitalization passed $1 trillion for the first time. The first cryptocurrency grew 900% in a year and traded at $54,000 per coin.
Despite the record price, there was no release from investors. For example, the Square payment service, owned by Jack Dorsey at the time bought more than three thousand bitcoins.
Amid the soaring bitcoin price, in March 2021, the founder of the Kraken cryptocurrency exchange, Jesse Powell, made a sensational prediction: by the end of 2022, one bitcoin can buy a Lamborghini, and in 2023 a Bugatti.
The prediction did not come true: today you can only buy a Kia Rio or a Mitsubishi Mirage for a bitcoin. And this is after the rise of ETFs, NFTs, DeFi and stablecoins. So what went wrong?
Related: Everything You Need to Know About NFTs and Cryptocurrency
High interest rates – done
In 2022, blockchain technology growth rates remained high. For example, we witnessed the modernization of the Ethereum protocol: now the blockchain uses Proof-of-stake instead of Proof-of-work algorithm. After the change, the network will to consume 99.95% less energy.
However, this event was overshadowed by others – the bankruptcies of the Terra project, crypto banks Voyager Digital and Celsius Network, hedge fund Three Arrows Capital, BlockFi and FTX exchanges.
Also, inflation in the US reached 7% in 2022, as it did in the early 1980s. To curb inflation, the Federal Reserve raised interest rates seven times a year. The basic rate is between 4.25% and 4.5%, the highest figure in 15 years.
The Fed’s policies affected the value of risky assets, namely stocks and cryptocurrencies. The dollar strengthens as interest rates rise, but risky assets fall. Because of this and the bankruptcy of major crypto projects, the cryptocurrency market collapsed. The media again started talking about the beginning of the crypto winter – a reduction in the cost of all coins and a long bearish trend.
But I disagree that due to the fall (over the past year, according to the Coinmarketcap chartsthe market cap has more than halved – from $2 trillion to $800 billion), this segment can be put to rest.
When it comes to crypto, price fluctuations are the last thing to watch out for. I look at less obvious factors to understand the market outlook.
Venture capital impact
Venture capital activity has declined significantly by the end of 2022. This information may panic beginners, but let’s read the news more carefully.
How has the timing of project entry changed investor enthusiasm? Seed and early stage crypto startups receive bigger checks in 2022. Investors are buying up young startups, which means the game is not over and money will be poured into the sector.
Moreover, the cryptocurrency market is only evolving. You can fail at school, but get to college on the first try. So the failure of 2022 is not a sentence, but only growing pains.
Related: Decentralized Venture Capital Will Transform Startup Investment Forever
Development of Web3
Web3 is a new blockchain-based decentralized and tokenized incarnation of the internet. They are both financial applications and NFTs. But the most dynamic segment of Web3 is blockchain games.
The crypto winter did not affect the growth of game shows based on distributed ledger technology: in 2022 the number of transactions in gaming blockchains increased by 94%.
It’s such a strong trend that only full power cuts across the planet can bring it down. The entire blockchain sector is thus becoming less speculative and more hands-on.
Return of NFTs
After COVID-19, even people far from business learned that the most affected sectors were actively recovering after the crisis. This is exactly what should happen with the NFT segment.
In 2022, it decreased by 97%. But the decline is not a trend – unlike the arrival of major players in this market. NFTs were launched as part of a loyalty program from the giant Starbucks. By the end of the year, the list of majors launching NFTs was up supplemented with Reddit, Meta, Nike, Disney and Coca-Cola.
All these companies have invested in developing their own projects based on Web3 and will continue to develop them in 2023. I suspect that other companies will pick up on the trend, so the revival of the NFT market is only a matter of time.
Related: 5 ways to maintain and expand your wealth during the cryptocurrency slump
Accumulation trend
In December 2013, a user, GameKyuubi, on the Bitcointalk forum wrote a after with a typo in the title – “I AM HODLING.” He criticized traders who use bitcoin to get rich, contrasting their position with his own – to hold the crypto even when market signals indicate the need to get rid of the asset.
The term HODL became a meme and the change in the number of hodlers became the data for analytical platforms to evaluate the development of the industry.
New stats from Glassnode to show a sharp increase in the accumulation addresses in the Bitcoin blockchain. These hodler wallets have received at least two transfers in the past seven years. Yet no funds were ever withdrawn from these addresses.
The number of such wallets reached nearly 800,000 – an 18% increase over the year. The figures show that the number of users involved in the service is growing.
Hodlers don’t make money off bitcoin. They believe in its potential as a universal currency. And user growth is a major factor in bitcoin’s global adoption. I am sure that while some faithfully collect crypto and those who develop the blockchain and projects based on it, seasonal and annual jumps are just ripples in a pond. The most exciting things happen in the depths.
