Crypto Outlook for 2023

2022 has been a rough year for the crypto world. Confidence in this asset class has been damaged by the fall in FTX. Crypto market capitalization has fallen by more than $2 trillion as bearish sentiment has taken hold.

through Alan Boulhimez, Investment Strategy Director

However, this phenomenon has influenced many projects to be more accessible. There are many reasons to be optimistic in 2023.

The first reason is that retail investors bought bitcoin in record volumes after prices fell amid the FTX debacle. ETC Group research shows that the smallest investors – those with less than 1 bitcoin in their accounts – added a record $1.55 billion in bitcoins in November 2022.

Top topics in 2023

  • Recession: Softening likely
  • NFTs on the Polygon and Ethereum blockchains could skyrocket
  • “FUD” for “mining” bitcoin

Recession: Is a Soft Landing Possible?

The macroeconomic situation looks troubled. Economists wonder if the next recession will be mild, moderate or deep?

A “soft taper” would mean that inflation, which is at a 40-year high, would begin to fall without the economy falling into negative growth (ie, a recession). Such a situation would allow central banks to reduce their interest rate hike programs. The latter has exerted strong downward pressure on stocks, bonds and crypto in the past year.

Crypto as an asset class and cryptoassets remain capable of drastically outperforming stock indices such as the DAX40, S&P 500 and Nasdaq. This is especially true during bear markets and recessions.

Analysts consider that the continued high results of the “ISM” survey may encourage the Federal Reserve to continue raising interest rates. In the week ending Friday, January 6, the S&P 500 posted a total gain of 1.5%. During the same period, bitcoin rose 3.15% and ethereum 8.5%. Cardano, one of the top ten blockchains by market capitalization, rose 27.2%.

As we move into the second half of the year, bond markets are betting that interest rates will begin to fall, with the cost of capital falling at the same time, providing start-ups and risky assets with a more favorable environment. good growth.

At that time, the bitcoin mining premium will be halved (the “halving”) in 2024. Historically, when the supply of bitcoins coming to market is halved once every four years, demand – and prices – tend to rise exponentially. exponential.

NFTs on the Polygon and Ethereum blockchains will skyrocket

While the headlines may suggest that NFT markets have crashed, the fact is that cartoon monkey artwork and profile pictures are just the first iteration of what NFTs can be used for.

Brands looking to build closer and deeper connections with their young consumers are turning to Web3 concepts in a big way, such as blockchain, NFT, and the metaverse, and we see this trend exploding in 2023.

The success of the polygon (an improvement ofEthereum) allowing the integration of dozens of major companies is proof of this.

In August 2022, Nike (NYSE:NKE), which has a market cap of $196 billion, saw $185 million in NFT sales after acquiring virtual trainer marketplace RTFKT. These are significant sales figures for an established business looking to grow organically.

By doing so, Nike has become the most profitable brand in the world thanks to NFTs, forward Adidas, Reddit, Gucci, hermes, Burberry, instagram, TIK Tok, Robin Hood AND JP Morganall of which have started using Polygon and Ethereum NFTs.

On December 8, 2022, Starbucks (NASDAQ:SBUX), which has a market capitalization of $121 billion, launched its NFT loyalty program with Polygon. This provides interactive experiences and additional benefits to customers.

ETC Group research shows that Polygon users grew by 400% in the last five months of 2022, from 200,000 to over one million.

Investors should get excited about potential use cases for NFTs beyond art: for example, for customer loyalty programs, devices to encourage membership in maker communities, and the ability to tokenize real-world assets.

When we talk about abstraction, we mean that we expect to see more projects and products coming out where the end user doesn’t necessarily know that cryptocurrencies and blockchains are running in the background.

Starbucks, for example, calls its NFTs “stamps,” while Reddit calls its NFTs “digital collections.” This may be due to the public’s misperception of NFTs as a technology.

More importantly, NFTs are moving beyond a work of art to something much more consumer-friendly. The world’s biggest brands are now using them to find better ways to connect with their audiences online.

Beware of the fear of Bitcoin mining

In cryptocurrency land, FUD stands for “Fear, Uncertainty and Doubt”. It is a tactic of malicious actors to focus on the fortunes of publicly traded Bitcoin mining companies to suggest doubts about the sustainability of the Bitcoin blockchain itself.

This happens in every bear market.

Looking back at the bitcoin market of 2018/2019, one can see the end-of-the-world headlines announcing the imminent end of bitcoin, given the problems faced by bitcoin mining companies.

At the beginning of 2018, bitcoin was trading at around $10,500. It fell to a range of $5,500 to $6,500 and remained there from June to November 2018, before falling to $3,200. Many bitcoin mining companies capitulated and went out of business as their margins collapsed and they could not cover the cost of producing bitcoins.

The Bitcoin network doesn’t care who is mining it. It will continue to produce blocks every 10 minutes, like a clock.

Bitcoin will survive. Investors should be prepared to weather the storm of headlines and the spread of fear, however, in order to make the most of bitcoin’s price – the lowest it’s been in years.

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