You have reached the 2023 Outlook Series presented by Kitco News. The financial markets continue to be plagued by uncertainty, which is made worse by the fact that monetary policies implemented by central banks are driving the world economy into a recession in an effort to reduce inflation. Keep up with Kitco News so you can get advice from industry professionals on how to navigate the choppy waters of the financial markets in 2023.
Anyone who has been paying attention can see that the year 2022 did not go as well as investors of cryptocurrencies had hoped it would. While the value of the overall crypto market cap dropped by more than $2 trillion, the price of Bitcoin (BTC) fell from $69,000 to a low of $15,599 in the beginning of November. This price drop occurred throughout the same time period.
There was a lot of optimism that this year would bring fresh all-time highs across the crypto market thanks to an influx of institutional investors; however, the collapse of Terra/Luna and FTX put a damper on any growth because they sparked contagion events that spread across the crypto ecosystem like wildfire. This put a damper on any growth that could have occurred.
According to Francesco Melpignano, CEO of Kadena Eco, who stated that “if the contagion from these meltdowns continues to resonate, the economy and BTC may continue to suffer for the time being,” it is likely that this weakness will extend into the year 2023. It will take some time for the market to recover, as we will continue to see the full scale of the crisis heading into 2023. This is because recent increases in interest rates and inflation are both contributing factors.
A lack of any major movement on the regulatory front also hampered the possibility of growth. The majority of institutional funds will remain absent from the cryptocurrency market until clear regulations are established and until money managers have a better understanding of the risks involved until clear regulations are established.
Melpignano made the suggestion that there might be a shift in the regulatory landscape in the coming year because “the repercussions of the crypto catastrophe in 2022 would force lawmakers and politicians to come to the table and implement tighter restrictions.”
According to Melpignano, “more rigorous laws normally signal an increasing trend in interest for entrepreneurs and companies to invest and expand in this field.” This has the potential to be beneficial for the cryptocurrency industry.
Even though the onset of a crypto winter is never a welcome sight, they do provide an opportunity to clear away the clutter and unproductive projects so that the top projects that have long-term viability can rise to the surface and get the attention they deserve. While the onset of a crypto winter is never a welcome sight, they do provide this opportunity.
According to Melpignano, “what took place in 2022 will ultimately push the industry in a direction that will be favourable for each and every business.” “These events shake out the bad apples and sweep away the neglectful enterprises so that crypto may accomplish what it was supposed to do,” which is “do what it was designed to do.”
Forecasts for Bitcoin for the Year 2023
As 2023 approaches, there is a lot of conjecture about how Bitcoin will perform moving forward and whether the market will have to wait until the next Bitcoin halving to see any kind of bullish momentum. This speculation comes as the market moves closer to entering the year 2023.
It is likely that the market will continue to be impacted by the events of 2022 as investors remain weary of diving back into cryptos. While many people may be hoping that a rapid rebound in the price of Bitcoin will start a new bull market, it is also likely that the market will continue to be impacted by the events of 2022.
According to Daniel Keller, CEO of the decentralised cloud infrastructure protocol Flux, “We are more likely to witness an extension of the bear due to the spillover effects of many crypto bankruptcies in 2022.” This prediction was made by Daniel Keller. “However, other factors such as the stock market’s resurgence, lower inflation, a ceasefire in the conflict between Russia and Ukraine, and even Elon Musk’s efforts to integrate Twitter and cryptocurrency might tip the scales in favour of bulls. Although it is possible that the market may reach new lows in the beginning of 2023, we should see a recovery to the $20,000 mark as the year progresses.
According to Dr. Youwei Yang, Chief Economist of BTCM, should the current weakness persist, it is feasible that one more market crash might result in Bitcoin falling to sub $13,000 in the first half of 2023. This prediction comes from Dr. Youwei Yang.
“from a combination of macro risk, some large crypto miner bankruptcy, a centralised crypto company bankruptcy (investment, exchange, or lending), stablecoin issues such as de-pegging or regulatory restrictions, security issues, and/or some sanction or lawsuit against a major player,” is one possible explanation for why such a crash could occur.
During an interview with Kitco News, Gareth Soloway, Chief Market Strategist at IntheMoneyStocks.com, also discussed the likelihood for prolonged deterioration in the price of Bitcoin. According to Soloway, there is a risk that Bitcoin might decline another 45% from its current price range of $18,000, a move that would be comparable to what Lehman underwent before to reaching its bottom in March 2009.
“That puts my goal at just a hair under $10,000, and bear in mind that the most agony is inflicted when even numbers are breached.” As a result, a great number of stops will be run at $10,000. When it breaks into the $9,000 range, that could be the bottom of the market,” Soloway said.
As proof that the risk of further decline remains significant, Dr. Yang pointed to the ongoing developments connected to the collapse of FTX and the continuous fear, uncertainty, and doubt (FUD) campaign against Binance. “If the inquiry regarding unlawful money transfers by some U.S. officials or worldwide regulatory collaborations against Binance or comparable scale firms come to fruition,” Dr. Yang said, “that may be terrible for the industry, and it would take longer for the industry to recover.”
Dr. Yang predicted that the price of bitcoin might reach $25,000 in the first half of 2023 and $35,000 in the second half of that same year if things started to improve in a reasonably short amount of time. This might be brought about by the Federal Reserve deciding to reduce the amount of stimulus they are providing in the form of rate hikes.
According to Dr. Yang, “The U.S. Consumer Price Index statistics that were reported in practically every month of Q4 2022 were below market projections and are in a downward trend.” This provides the Federal Reserve with more confidence to slow down rate hikes and tapering. “Similar patterns are evident in European countries,” the author writes. “Major central banks appear as though they will finish quantitative tightening, and the global macro conditions may soften a little bit by then.”
Along with a potential conclusion to the conflict between Russia and Ukraine, the economist cited the end of China’s Zero-Covid policy and the openness of its economy as factors that contributed to the decline in global inflation.
“As a result of this, I anticipate that the winter of risk assets, including the crypto winter, will continue until about the summer of 2023. However, there is a possibility that the availability of liquid funds will stay constrained for some time until the end of quantitative easing (a rate decrease), which may not occur until later than 2023 or even 2024, according to Dr. Yang.
According to Dr. Yang, despite the fact that advances connected to the regulatory landscape are now ongoing, it will take time to execute these changes, which could delay a substantial shift in the market.
The analyst from BTCM pointed out that the next Bitcoin halving, which is scheduled to take place in May 2024, could act as a possible market stimulus for bulls because it aligns with the macroeconomic cycle.
“The regulatory landscape may shift, and this process takes time. For example, increasing clarity on tax, token issuing and trading, and environmental, social, and governance considerations of cryptocurrency mining. Additionally, the institutional infrastructure for investing in digital assets is being developed, and it is possible that it will be available at the same time as the legislation,” he said.
Dr. Yang made the observation that “all things considered, the actual bull is more likely to happen around 2024.” “The price of bitcoin might steadily go to $20,000, $25,000, or $35,000 in the year 2023. Throughout the year 2023, freshly established cryptocurrency projects, also known as Alt Coins, will keep creating and delivering, which means there may be some minor pumps here and there.
Having said that, it’s possible that the increase in adoption won’t happen for some more time. Dr. Yang came to the conclusion that a solid foundation for future bull runs might be laid if economic conditions were more stable in 2023 than they had been throughout the course of the previous few years and if regulatory certainty was provided for the cryptocurrency industry.
Better risk management
According to David Lifchitz, managing partner and chief investment officer at ExoAlpha, “over-leveraging” was another prevalent factor that contributed to the collapse of the cryptocurrency market in 2022. This factor played a role in the failure of both Tree Arrows Capital and FTX, as well as Terra/Luna.
“These firms were so leveraged that when the US FED began its monetary tightening cycle, the tiniest grain of salt triggered a chain reaction of liquidations which snowballed very quickly,” Lifchitz pointed out. “When the US FED began its monetary tightening cycle, the tiniest grain of salt”
The events of 2022 have resulted in Bitcoin failing to live up to its promise as an inflation hedge and instead acting more similarly to other risk assets. This is due to the fact that Bitcoin has failed to keep pace with inflation.
“The reasoning that Bitcoin could be a hedge against inflation is that it has a finite supply, and would therefore keep its value when expressed in a currency of infinite supply,” Lifchitz said. “However, up to this point, the majority of people who are interested in Bitcoin are essentially considering it as a speculative trading instrument, and have paid little attention to its longer-term possible inflation hedge.” “Moreover, the fact that the US Federal Reserve has been on a rate-hiking spree in order to contain the devaluation of the US dollar has also been a big headwind for Bitcoin’s ability to be a US dollar inflation hedge,”
According to Lifchitz, a relief rally in risk assets is possible if the activities of the Federal Reserve in 2023 are in line with the current forecasts of a pause in rate hikes sometime in the second quarter of 2023.
“In such a situation, the first significant upside goal for Bitcoin would be the level of $30-35k,” which would represent a gain of about 100% from where we are today. “However, it won’t travel there in a straight line, with numerous pullbacks along the way,” the analyst said.
Lifchitz indicated that there is evident support in the vicinity of $10,000 to $12,000, which indicates a correction of 30% to 40% from its current price. This support is located on the downside of the market. The Chief Investment Officer (CIO) issued a warning that “considering the (relative) durability of Bitcoin in the face of the newest wrench that had been thrown at it (FTX’s collapse), such a target may be impossible to accomplish, unless of course the Regulator makes a very harsh action.”
The release of 145,000 BTC that are now held by Mt.Gox is one potential event that could take place in the beginning of 2023 and generate extra difficulties for the leading cryptocurrency. The now-defunct exchange’s former customers have until January 18th, 2023 to specify how they would like their compensation distributed to them before the deadline.
Even at the “depressed” value of $17k today, that would result in a nice lump sum being received by these “mom’n pop” investors, who may decide to liquidate them right away in order to get some financial relief from the raging inflation they have suffered from in 2022 so far, Lifchitz warned. “As their Bitcoin was worth about $500 by the time Mt.Gox collapsed, even at the “depressed” value of $17k today,” that would result in It’s possible that this will result in a tsunami of people dumping Bitcoin, but it’s more probable that buyers will rush in to buy on the dip.
In conclusion, Bitcoin may “remain under pressure (like other risk assets) in 2023 until the US FED blinks, at which point it might see some good upside from today’s level if there are no extreme movements from the Regulator,” according to Lifchitz’s projections.
Prediction for Bitcoin of $250,000
And finally, for those people who are perpetual bulls and are seeking for high-priced predictions, billionaire venture capitalist Tim Draper has maintained his position that the price of Bitcoin would reach $250,000 by the middle of 2023, despite the severe decline that was observed in 2022.
Draper had earlier forecasted that the price of Bitcoin would reach $250,000 by the end of 2022; however, he changed his outlook on the matter in early November during the Web Summit tech conference in Lisbon, when he stated that it would take until June 2023 for this price target to be reached.
On December 3, CNBC checked in with the venture capitalist to see if he still had the same stance. In response to this question, he stated unequivocally that he did not change his mind.
I have added an additional half year to my prognostication. “My amount has not changed; it’s still $250,000,” Draper told CNBC in an email. “I anticipate a flight to quality and decentralised cryptocurrencies such as bitcoin, and I anticipate that some of the lesser coins will become antiques.”
Draper is optimistic about the price objective because he believes that the low level of participation from women will improve in the not-too-distant future, which is the reason for his optimism. “My thesis is that, given that women control 80% of retail spending and just 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said. “My assumption is based on the fact that bitcoin wallets are currently controlled by men.”
He also pointed to increasing future adoption from shops, who can save approximately 2% on purchases made in Bitcoin. He said this would encourage more people to use Bitcoin. Draper went on to say that if merchants understand that a 2% increase in sales may double their profitability, bitcoin will be widely used. People are also able to avoid the intermediaries in the payment sector, who might charge fees as high as 2% for each transaction they facilitate when using Bitcoin.
“When people can buy their food, clothing, and shelter all in bitcoin, they will have no use for centralised banking fiat dollars,” Draper said. “When people can buy their food, clothing, and shelter all in bitcoin, they will have no purpose for bitcoin.”
The management of fiat currencies is centralised and haphazard. When a politician makes the decision to spend $10 trillion, the value of a single dollar drops to approximately 82 cents. The Federal Reserve would then have to raise interest rates to compensate for the spending, and “those arbitrary, centralised decisions create an inconsistent economy,” he continued.
In order for Bitcoin to fulfil the price projection made by Draper, the cryptocurrency’s price would need to increase by around 1,400% from its current level, which is close to $17,000.