Is Cryptocurrency a Good Investment in 2023?
Is Cryptocurrency a Good Investment in 2023?
Opinions expressed by Entrepreneur contributors are their own.
How much will bitcoin or any altcoin cost in 2023? Great question. Even professional traders cannot predict the price of crypto due to many influencing factors. But as an investor, I want to think about something else. Are they right that they have already buried crypto, or is it not the end of last year’s market crash?
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Bugatti for bitcoin – failed.
In February 2021, Bitcoin capitalization exceeded $1 trillion for the first time. The first cryptocurrency grew by 900% in one year and traded at $54,000 per coin.
Despite the record price, there was no release from investors. For example, the Square payment service owned by Jack Dorsey bought more than three thousand bitcoins.
Amidst the rising price of Bitcoin, in March 2021, the founder of the Kraken cryptocurrency exchange, Jesse Powell, made a sensational prediction: by the end of 2022, one Bitcoin could buy a Lamborghini and by 2023, a Bugatti.
The prediction failed: today you can buy a Kia Rio or a Mitsubishi Mirage for just bitcoins. And this is after the growth of ETFs, NFTs, DeFi and stablecoins. So what went wrong?
Related: Everything You Need to Know About NFTs and Cryptocurrency
High interest rates – done
In the year In 2022, the development of blockchain technology is high. For example, we’ve seen the Ethereum protocol update: now, instead of a proof-of-work algorithm, it uses blockchain proof. After the change, the network consumes 99.95% less energy.
However, this event was overshadowed by others – the losses of Terra Project, Voyager Digital and Celsius Network crypto banks, Three Arrows Capital hedge fund, BlockFi and FTX exchange.
Also, US inflation is projected to reach 7 percent by 2022, just as it was in the early 1980s. The Federal Reserve raises rates seven times a year to curb inflation. The base rate is between 4.25% and 4.5%, the highest mark in 15 years.
The Fed’s policy has affected the value of risky assets such as stocks and crypto. When interest rates rise, the dollar strengthens, but risky assets fall. Due to this and the bankruptcy of crypto projects, the cryptocurrency market collapsed. The media once again started talking about the beginning of crypto winter – a decrease in the value of all coins and a long bearish trend.
But I do not agree that due to the fall (last year, according to the Coinmarketcap charts, the market capitalization decreased by more than half – from 2 trillion dollars to 800 billion dollars), this part can be put to rest.
When it comes to crypto, price volatility is the last thing you need to pay attention to. I look at less obvious things to understand the market outlook.
The influence of venture capital
By the end of 2022, the activity of venture capitalists has decreased significantly. This information may shock newbies, but let’s read the news carefully.
How has the timing of entry into projects changed investor enthusiasm? Seed and early-stage crypto startups get big checks in 2022. Investors are buying young startups, which means the game is not over and funds will flow into the sector.
In addition, the cryptocurrency market is only growing. You may fail in school but get into college on the first try. So the fall of 2022 is not a sentence, but only growing pains.
Related: Decentralized Venture Capital Will Change Startup Investing Forever
Web 3 development
Web3 is a new blockchain-based decentralized incarnation of the Internet. Both are financial applications and NFTs. But the most dynamic part of Web3 is blockchain games.
The crypto summer did not affect the development of gaming programs based on distributed ledger technology: The number of transactions in gaming blockchains will increase by 94% by 2022.
It is such a powerful trend that only a complete blackout on the planet can bring it down. So the entire blockchain sector will be more speculative and more practice-oriented.
Return of NFTs
Post-Covid-19, even people who are far from business have learned that the worst-hit sectors have recovered vigorously after the crisis. This is exactly what should happen with the NFT segment.
By 2022, it will be reduced by 97 percent. But the decline is not a trend – unlike the arrival of big players in this market. NFTs were launched as part of the loyalty program of the giant Starbucks. The list of majors that launched NFTs at the end of the year was filled with Reddit, Meta, Nike, Disney and Coca Cola.
All these companies have invested in developing their own projects based on Web3, and by 2023 They will continue to develop. My guess is, other companies will pick up the trend, so it’s only a matter of time before the NFT market revives.
Related: 5 Ways to Protect and Grow Your Wealth During the Cryptocurrency Dip
The tendency to collect
In the year In December 2013, on the Bitcointalk forum, a user, GameKyuubi wrote a typo in the title – “I HODLING.” He criticized traders who use bitcoin to get rich to keep the crypto even when market signals suggest the need to get rid of the asset, comparing their position to his own.
The term HODL became a meme, and the change in Hodler’s number became a data for analytics platforms to assess the growth of the industry.
Glassnode’s new statistics show a significant increase in addresses stored in the Bitcoin blockchain. These hodler wallets have received at least two transfers in the past seven years. However, funds were never withdrawn from these addresses.
The number of such wallets has reached almost 800,000 – an increase of 18% during the year. The figures show that the number of dedicated users of the service is growing.
Hodlers don’t make money from Bitcoin. They believe in its potential as a universal payment method. And user growth is a big factor in Bitcoin’s global acceptance. I’m sure that while some are faithfully hoarding crypto and people developing blockchain and projects based on it, seasonal and annual jumps are just ripples in the pond. The most interesting things happen in the depths.