Cryptocurrencies have become increasingly popular recently, with thousands of new users entering the market daily. While this has been a great boon for the industry, it has also led to extreme volatility. But they can also offer some highly lucrative returns when you make smart investments. By risking only a fraction of your total portfolio today and keeping an eye out for market movements, you could find yourself reaping substantial rewards during this upcoming winter season.
Here, we will provide essential knowledge on where cryptocurrencies stand currently & what financial markets professionals should take note of heading into Crypto Winter 2023. So you can make informed decisions in the future.
Wild Year of 2022 For Crypto Assets:
The wild year of 2022 has been tumultuous for the crypto industry, with myriad macroeconomic factors (rising borrowing costs, highs in inflation, political instability) and geopolitical pressures adding to investors’ fears. The Nasdaq 100 dropped 33 percent between January and September, while the S&P 500 saw its worst annual performance since 2008 due to the pandemic. With many investors still worried about inflation, especially in the U.S., the Federal Reserve Bank has raised interest rates aggressively but is yet to see any positive results.
The story began when leading cryptocurrencies such as Bitcoin and Ethereum suffered huge price losses due to a tightening of US Federal Reserve policies. CNBC reported that Bitcoin fell by 58 percent during the second quarter of 2022, making it the poorest quarterly performance since 2011, and its market cap sunk below $1 trillion in September.
This drastic decrease in value caused a domino effect across the broader crypto market, plunging it into a deep bear market. Investors panicked as fears of government regulation further shook confidence, sending shockwaves throughout the industry.
The subsequent fallout of TerraUSD, resulting in the wiping out of more than $200 billion in market cap, has provoked immense shockwaves within the crypto community. The catastrophic failures of Three Arrows Capital and lending juggernaut Celsius Network sent the market into a death spiral, nearly precipitating an industry-wide collapse of crypto lending services.
To make matters worse, FTX – once a highly respected crypto exchange – suffered an epic downfall that led to its default and bankruptcy. Former Treasury Secretary Larry Summers referred to this dramatic turn of events as the “Enron Moment.” The entire crypto asset space is now at a watershed moment; what the industry does in the coming year to reverse this course will be central to its future success.
Changing For the Better – Crypto Market Downturns
The cryptocurrency industry is changing its perception, shifting away from being associated with get-rich-quick schemes and high-risk strategies. A recent NBC News poll found that one in five Americans has invested in, traded, or used cryptocurrency in some form, showing a marked increase in adoption since the invention of Bitcoin back in 2008. Despite this, public opinion on the legitimacy of cryptocurrencies remains largely neutral (56 percent).
To create a more professional atmosphere and adhere to higher standards of integrity, the industry must take steps towards re-establishing trust with its investors. We must be reminded of Bitcoin’s core values – decentralization, personal financial security, and the goal of transforming the financial system for the better.
In doing so, investors will be more likely to invest in crypto again, and the industry can begin to see a recovery from its current state.
Bitcoin Forecast for 2023 – What’s Ahead in 2023?
As Bitcoin ends the year at around $16,800, putting it down from about $19,500 on the eve of the FTX crisis, experts suggest that if contagion continues to reverberate from the cryptocurrency exchange’s bankruptcy, there is more room for BTC to fall. This sentiment has been echoed by Cathie Wood, CEO of Ark Invest and a prominent advocate of Bitcoin.
In a recent Bloomberg interview, she admitted that large financial institutions might take a step back from crypto soon due to FTX’s struggles. Despite her prediction that Bitcoin could reach $1 million by 2030 – made before the FTX crisis – Wood believes this goal may be delayed as these organizations reassess their understanding of crypto and its associated risks.
Furthermore, with cryptocurrency reputation already dampened by numerous crises and scandals throughout 2022 and wider markets struggling under broader economic issues, many experts have proposed that BTC could drop to as low as $10,000 in 2023 – far below its current market price.
JPMorgan Chase & Co. analysts have stated that the bottom is not in for Bitcoin and that prices could fall to around $13,000. They argue that recent events may trigger a “cascade of margin calls” across the market. Strategists from JPMorgan believe it is likely for Bitcoin’s production cost to revisit its summer low of $13,000, which currently stands at $15,000. Such a decline could cause panic selling and further put downward pressure on prices.
Ethereum Forecast For 2023:
Ethereum usually followed Bitcoin in the past, but that hasn’t always been the case.
After the Ethereum merger in September 2022, a major network overhaul for the second-largest crypto by market capitalization, some analysts speculate that the pair’s price action could potentially decouple.
Crypto expert Kemmerer believes that Ethereum could rise as high as $2,500 in six months due to the same developments driving Bitcoin’s price. While this would be an incredibly bullish case scenario, there remains a great reliance on macroeconomic conditions cooperating to ensure upside gains return.
Ethereum will likely be impacted just like Bitcoin if these conditions do not cooperate and lead to further decline. Having dropped below $1,000 in June, it would not be surprising to see a three-digit price for ETH again in the next six months, should more negative catalysts crop up.
Other Cryptos To Watch in 2023:
While Bitcoin and Ethereum have had a difficult year in 2022, other speculative altcoins have worsened. With already limited liquidity in the market, altcoin investors have found themselves in a particularly difficult position during this bear market. Many of these coins have suffered great losses, some possibly facing complete extinction due to their cryptic nature and lack of credibility.
Until Bitcoin and Ethereum recover, altcoins will continue their downward trend. Much like past bear cycles, where many coins ceased to exist entirely, we could expect more of the same this time.
Stablecoins present an even more interesting case for 2023, with major developments already taking place. Crypto exchange Binance delisted several stablecoins in September 2020, including USD Coin (USDC), the fifth biggest cryptocurrency with a market cap of $43 billion.
In response to this, Circle-the creator of USDC-announced shortly after that they would launch a euro-backed stablecoin on Solana (SOL) during the first half of 2023. This move has been driven by the growing number of state-sponsored stablecoin projects known as central bank digital currencies (CBDCs).
That means more competition for stablecoin issuers like Tether (USDT), Circle, and Binance.
“Stablecoins are in a tough spot because CBDCs will be eating into their market,” says Richard Gardner, CEO of Fintech Company Modulus Global.
The market for stablecoins is highly unpredictable. Just as it is difficult to predict how Bitcoin, Ethereum, or any other crypto asset, one thing is uncertain: Risk in the crypto sector remains elevated.
What You Need to Know Before Investing in Cryptocurrencies -2023
With the rise of cryptocurrencies over the past few years, more and more people are considering investing in digital assets like Bitcoin, Ethereum, and Litecoin. However, before you decide to jump into the world of crypto investing, there are a few important questions you should ask yourself first.
1. Have You Set Aside An Emergency Fund?
Before investing your hard-earned money into any asset—crypto or otherwise—it’s important to ensure that you have enough saved for potential emergencies. Suppose something unexpected were to happen, and you needed cash quickly. In that case, it’s much smarter to rely on your emergency fund than to sell off a portion of your cryptocurrency holdings at an inopportune time.
2. Do You Have a Long-Term Outlook?
Cryptocurrency investments can be very volatile in nature; prices can swing wildly from one day to the next. Therefore, it’s important to consider whether you’re prepared for such volatility. If so, it could make sense for you to enter this market and invest with a long-term outlook that considers both the highs and lows of cryptocurrency prices over time.
3. Cryptocurrencies: Will They Be Included in Your Diversified Portfolio?
It’s also important to consider how much of your portfolio will be allocated towards cryptocurrency investments; diversification is key to managing risk effectively over time. Make sure you’re not putting all your eggs in one basket by allocating too heavily towards one specific asset class (like crypto). Instead, consider spreading your investments across multiple assets so that if one type performs poorly, other portions of your portfolio could help soften the blow.
4. Have You Made a Plan Yet?
Before diving headfirst into crypto investing, you must have some plan or strategy laid out ahead of time. This plan should include factors such as when and how often you plan on buying/selling crypto assets (and why), as well as what percentage of your total portfolio will be allocated towards cryptocurrencies at any given time period (to stay diversified).
Having these things thought out ahead of time can help reduce stress levels while trading and also give you peace of mind knowing there is a clear path forward regarding your investment strategy and goals.
5. Are You Aware of the Risks?
Finally, it’s important to understand the risks associated with investing in cryptocurrencies before committing any money. Cryptocurrency prices are extremely volatile; individual coins could fail, and exchange platforms could be subject to hacking or other security threats that could put your money at risk. Investors must understand all these potential risks before taking the plunge into crypto investing in 2023.
Investing in cryptocurrencies can be an exciting but risky business – understanding these risks is key before taking the plunge! Before deciding whether or not cryptocurrencies are right for your portfolio, consider these 5 questions and prepare for the volatile crypto winter of 2023. Answering these key questions will help clarify decisions about whether crypto is right for you to come in 2023! By doing so, investors can set themselves up for success on their investment journey!
Final Verdict – In 2023, Will All This Market Chaos Continue?
Crypto Winter 2023 is certain to be a challenging period for all crypto investors, whether they are beginners or experienced traders. Bitcoin’s and Ethereum’s prices may continue to sink further, possibly reaching record lows. Stablecoins will also come under pressure from introducing CBDCs, and many altcoins could face extinction. The good news is that this downturn will eventually end like in past bear cycles. Investors should remain vigilant and seek reliable investment advice from trusted sources before making any decisions during these turbulent times.
We hope this article has given you ideas on preparing your interest rate hikes for Crypto markets in 2023. Please check back often for more updates! Thank you for reading. Have a great day! 🙂
