A growing number of pieces are in place for a significant rally for the crypto industry in 2023, with recovery highly likely.
- Many economic challenges that depressed the economic markets in 2022 have improved in recent weeks.
- Despite the prevailing selloffs, many businesses and financial institutions heightened their involvement in crypto in 2022.
- Currently, Bitcoin is comfortably trading above $20,000, a positive change in price proving significant in the first month of the year.
Last year proved a challenging year for the crypto industry. The total crypto market cap fell by over 63 per cent in 2022. Amid bearish crypto conditions, the two major cryptocurrencies, Bitcoin and Ethereum, lost more than 65 and 60 per cent, respectively. A series of unfortunate happenings also caught crypto enthusiasts off-guard.
The spectacular collapses of FTX, Terra, BlockFi, Voyager Digital and Celsius in 2022 dealt a significant blow to the crypto industry. Nevertheless, as bad as 2022 was for the crypto market, 2023 could prove better for the digital currencies industry.
Prices within the crypto industry have nigh-on bottomed out. Many economic challenges that depressed the economic markets in 2022 have improved in recent weeks. Consequently, the calamities and the stresses of 2022 will undoubtedly help certain sectors of the crypto industry gain greater prominence and value. Thus, a lot is in sight that signals a turnaround for the crypto industry in 2023.
Adoption and startups amid 2022 crypto bear market
As regards price action for the crypto industry, 2022 was a disappointment. Nevertheless, despite the prevailing selloffs, many businesses and financial institutions heightened their involvement in crypto in 2022.
Various banks launched cryptocurrency services in 2022 (joining the ranks of institutions that had already done so in 2021), as did various digital banks and finance apps. This shows that the potential size of the crypto market continues to grow, with its ecosystem and infrastructure expanding amid a bear market.
The number of businesses and brands that tried their hand in the Metaverse, Web3, and NFTs further reinforces this impression. This includes many fashion houses, a wide variety of sports teams and franchises, not to mention the arts and music.
Combined with ongoing plans by central banks globally to pilot or launch CBDCs, 2022 witnessed growing experimentation with and exploration of blockchain technology and cryptocurrencies. Even if the macroeconomic conditions remain unfavourable, the groundwork for an even bigger bull market with the crypto industry in 2023 is already laid.
Bitcoin’s early optimism for the crypto industry in 2023Currently, Bitcoin is comfortably trading above $20,000, a positive change in price proving significant in the first month of the year. At the time of writing, Bitcoin’s daily trading volume is well over the $30 billion mark. Notably, Bitcoin price showed positive signals after crossing the crucial $16,800 mark. The price again picked pace and has shown bullish signals ever since. Experts had previously predicted that once Bitcoin crosses the fundamental level of $19,500, it would aim to accelerate towards the $20,000 resistance level, paving the way for more gains.
With a closer look, technical indicators suggest that a new crypto bull market could be on the horizon. Indeed, the longer 2023 puts a new bull runoff, the more realistic it becomes. The most significant indicator for bitcoin is the relative strength index (RSI) which indicates either overbuying or overselling.
In July 2022, Bitcoin’s RSI fell below 30, more or less remaining below 40 since then. This RSI means that Bitcoin has oversold, selling at discounted prices. Towards the end of 2018, Bitcoin’s RSI fell below 30, staging a remarkable recovery in the ensuing months. The cryptocurrency’s price rose from just over $3,000 in early 2019 to nearly $13,000 mid that year. Comparable RSI falls (particularly in April 2020) also preceded rallies, suggesting that something similar could occur in 2023.
In Bloomberg Intelligence’s 2023 Cryptos Outlook report, analyst Mike McGlone observed that provided a Bitcoin 100-week moving average could be calculated, the crypto has never had a deeper discount than in November 2022 end. McGlone then predicts that it is just a matter of time before the nascent fundamental value of the world’s most significant decentralized digital asset prevails in 2023.
Inflation and rising interest rates largely contributed to the 2022 crypto bear market. Both of these factors started to tone down towards the end of 2022. For instance, inflation in the United States fell in the last three months of 2022, suggesting a downward trend that will continue into 2023.
Moreover, large investors, known as “Bitcoin Whales”, are accumulating Bitcoin again. Data from on-chain aggregator Santiment indicates that the large Bitcoin whales now hold between 1,000-10,000 BTC in their wallets, demonstrating that investors have been stacking their wallets with loads of BTC, which might indicate recovery remains in sight for the price of Bitcoin.
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Bitcoin’s halving event
One of the significant reasons why crypto experts remain bullish is that next year Bitcoin’s halving event will happen. The Bitcoin halving event occurs every four years, where Bitcoin cuts rewards to its miners get cut in half (the miner’s payout will reduce to 3.125 BTC). Many people consider this event a positive for Bitcoin’s price, as halving helps to contract supply. Historically, halving has been considered a perfect sign for bringing momentum to Bitcoin’s price.
Thus, past Bitcoin halving events have established long-term bullish drivers for Bitcoin’s price. The halving event has a direct link to Bitcoin’s deflationary tendency and squeezes its supply, helping the price rise further. Bitcoin, a decentralized crypto, cannot be printed by governments or central banks. Thus, the total supply of Bitcoin is limited.
Drivers for the crypto industry in 2023
Considering that a growing number of pieces are in place for a significant rally for the crypto industry in 2023, it is worth highlighting the blockchain platforms and cryptocurrencies that will remain key players.
Well, considering the thriving interest in Web3 and NFTs, Ethereum undoubtedly will remain one of the best-placed layer-one smart contract platforms in the crypto industry in 2023.
Ethereum already accounts for 58.8 per cent of the total value locked in of the entire cryptocurrency ecosystem. With the Merge completed in September, Ethereum will cement its position further in 2023.
Given Ethereum’s continued dominance, crypto investors should expect the most prominent layer-two scaling solutions to perform well in 2023. This includes Arbitrum, Loopring and Polygon, which provide cheaper Ethereum-based transactions during high-demand periods.
Such solutions are common in decentralized finance (DeFi), one central area set to grow significantly in 2023. This is primarily due to the fallout surrounding the collapses of centralized finance (CeFi) platforms, including Celsius and BlockFi and Celsius, fatally undermining trust in CeFi providers.
Similarly, self-custody will become much more prominent in 2023. Again, this is because the fall of big crypto exchanges such as FTX made many investors wary of entrusting their crypto funds with centralized trading platforms.
Moreover, retail investors will need fiat-to-crypto on-and-off ramps. Thus, the most significant remaining centralized exchanges, such as Binance and Coinbase, will consolidate their positions further. Such consolidation may go against crypto’s decentralization spirit. However, prominent names such as these will increasingly prove indispensable for the new retail investors who will likely steer the next bull market.
Of course, one of the exciting (if not frustrating) things about crypto remains its unpredictable nature. The foregoing provides a general overview of the crypto industry in 2023 (based on current trends). Nevertheless, it is almost certain that 2023 will also throw up more than a few surprises in the crypto sphere.
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