The price increase is due to the selling exhaustion of sellers FTX’s collapse, an improving macroeconomic outlook for risk assets, and the impending arrival of positive catalysts for the crypto industry in 2023.
- The price increase is due to the selling exhaustion of sellers FTX’s collapse, an improving macroeconomic outlook for risk assets, and the impending arrival of positive catalysts for the crypto industry in 2023.
- The industry has grown enormously, announcing airdrops, new projects, token sales, and a rise in Web3 investment activity.
- The insolvencies and deleveraging events of crypto in 2022 resulted in a confidence crisis.
Crypto industry’s fresh breakout
In 2023, the crypto industry has experienced a new beginning! The previous year ended with turbulent lows rather than highs, but this year has begun positively. The cryptocurrency market is making the most of this year. The industry has grown enormously, announcing airdrops, new projects, token sales, and a rise in Web3 investment activity.
In the first quarter of 2023, the crypto industry rebounded significantly. Bitcoin and Ether have seen their most significant quarterly price increases since the first quarter of 2021. The price increase is due to the selling exhaustion of sellers FTX’s collapse, an improving macroeconomic outlook for risk assets, and the impending arrival of positive catalysts for the crypto industry in 2023.
Many have compared the accelerated growth of crypto in the first quarter of 2023 to the period preceding the FTX collapse. Experts now believe the crypto market’s difficult times in 2022 are behind it. However, Q1 2023 was not without obstacles. Conventional finance’s persistent challenges have posed a significant threat to the cryptocurrency markets.
The crypto industry has felt the ripple effects of the banking sector crisis. Crypto remains primarily an investment tool. Therefore, the global financial market’s struggle against inflation, which could lead to a recession, has affected crypto. The threat could be neutralized, but these circumstances have created an unfavourable cryptocurrency market. However, from a different angle, traditional finance (TradFi) challenges can also boost adoption and confidence within the crypto industry in 2023.
Bitcoin’s rise gets the crypto bull market underway
In January 2023, the crypto industry continued to flourish despite a period of volatility and the cascading effects of the FTX collapse, BlockFi bankruptcy, and Galaxy debacle. A mediocre performance in February and several peaks in March followed this expansion.
Bitcoin’s momentum has eventually produced results in 2023 after a struggle to stay out of the market winter of 2022. The principal digital asset has emerged as the best-performing asset class in the first quarter of 2023, outperforming other investment products by more than 70 per cent. This dominance made Q1 2023 the most incredible quarter for Bitcoin since Q1 2021. In addition, the outperformance suggests that Bitcoin is gaining popularity as a digital store of value correlated with gold prices.
This is an extraordinary change of fortune, given the crypto industry’s performance in the fourth quarter of 2022. It is also remarkable, considering the milestone came amidst a bleak economic outlook. Also, Bitcoin overtook gold, with the precious metal registering gains of 9 per cent in the first quarter of 2023. Silver’s returns were 0.3 per cent, according to Finbold data.
Despite regulatory whirlwinds, the crypto industry in 2023 has shown great resilience. According to Coinmarketcap, the total market value of all cryptocurrencies increased by 49 per cent in the first quarter of 2023 to $1.19 trillion. Between the end of 2022 and the last day of Q1, Bitcoin rose 73 per cent to $28,440, while Ether, the second-largest token, rose 53% to $1,830. Furthermore, sources have reported that nearly 1,000 new currencies entered the crypto industry in 2023 alone, demonstrating renewed optimism.
The crypto industry in 2023 out to salvage its reputationOver the past year, the endless stop-and-start trend in financial markets has made it difficult for allocators to deploy capital effectively across most asset classes. But in particular, for cryptocurrencies, the insolvencies and deleveraging events of 2022 resulted in a confidence crisis. As a result, many dreaded that the situation could prolong the cycle for the crypto industry in 2023 by at least several months.
Nonetheless, after a series of prominent crypto firms imploded in 2022, the industry is angling for an audacious rebranding. Formerly adored crypto personalities, such as Do Kwon and Sam Bankman-Fried, are now considered personae non gratae. Before the collapse of their companies, their former devotees contended that these crypto criminals never truly exemplified the industry’s core values.
At thriving companies, the highest-ranking executives strive for innovative approaches to market products that many consumers distrust. Some businesses leverage the increasing interest in artificial intelligence by employing crypto schemes with intricate AI connections. Others argue that the industry’s original nomenclature has become irredeemably tainted and calls for a total rebranding. Following the FTX incident, the desire intensified.
The cleansing pursuit is a familiar ritual in an industry with a brief history marked by repeated peaks and crashes. Initial Bitcoin proponents had to convince regulators and the public that cryptocurrencies were more than a convenient instrument for drug traffickers. Years of regulatory scrutiny preceded the 2017 crypto market surge. During this period, many enticing-sounding startups were exposed as frauds.
The most recent round of soul-searching has not yet reversed the industry’s fortunes. Since the demise of FTX, regulators have announced fines and other enforcement actions against several prominent cryptocurrency companies. The unexpected failures of two dependable banking partners, Silvergate Capital, and Signature Bank, have dealt crypto startups a fresh blow.
The prospects of the crypto industry in 2023
Crypto’s rise in Q1 heralded by Bitcoin is a tremendous reaction to the recent collapses and the crackdown on exchanges like Binance and Coinbase. This turnaround has shown that the future of the asset is not dependent on a singular exchange, which is encouraging for the industry as a whole.
The crypto market has endured a roller coaster in the past few years, with prices rising and falling quickly. Despite the volatility, however, it is undeniable that the crypto industry in 2023 has shown tremendous recovery potential. Industry professionals remain optimistic that this trend will continue into the second quarter of 2023.
Market researchers and analysts have studied the performance of the crypto market since its inception and have concluded that the market is showing steady growth. This bodes well for investors already familiar with the crypto markets and those only just getting started.
Consequently, the continued growth points towards increased confidence in blockchain technology as more businesses adopt it. The need for professionals to work in the sector will increase. This will create more job opportunities, which could foster further growth in the crypto industry in 2023.
April bullish prospects
April has traditionally been a bullish month for risk assets. This year is expected to be no exception, with Bitcoin and stocks expected to thrive. As the industry gears toward the year’s second quarter, the price correlation between Bitcoin and gold is another metric to watch closely. The 30-day relationship between the two assets peaked at over 0.3 this month, its highest over 12 months. The ongoing bullish technical set-up for gold certainly bodes well for further price gains if Bitcoin and gold retain their price correlation.
Furthermore, recent financial data indicates that inflation is cooling down. This has raised hopes that policymakers will be able to dial back their aggressive monetary tightening. This could further support the upward momentum for the crypto industry in 2023, giving investors more reason to be bullish. In conclusion, 2023 is shaping up into a good year for the crypto market. And if we continue to see a rising trend in the total number of crypto holders in Q2 2023, it could easily translate into more gains ahead.