Coinbase CEO Brian Armstrong recently stormed the twitter when he posted that, “Ripple, Stellar, and Altcoins are all a distraction. Bitcoin is way too far ahead. We should be focused on bitcoin and sidechains.” Brian hints towards a bright year ahead for Bitcoin while he was not much optimistic about the Altcoins.
Why will Bitcoin skyrocket in 2023?
Some recent reports have revealed that, more institutional investors are investing in Bitcoin as they come to view cryptocurrency as a legitimate asset class, with Bitcoin as the biggest (with a market cap of $300 billion) and most accessible.
According to the annual Fidelity Digital Assets survey conducted by financial giant Fidelity management, 58% of institutional investors surveyed bought cryptocurrency in the first half of 2022. Furthermore, 74% of those surveyed said they planned to invest in cryptocurrency at some point in the future. This was no small sample size either, as Fidelity surveyed 1,052 institutional money managers across North America, Europe, and Asia. These institutional investors have much more buying power than the average retail investor, and their increasing presence in the market could theoretically drive the price of Bitcoin higher.
Fed’s rate hike might be beneficial for Bitcoin
The Federal Reserve began aggressively hiking interest rates in 2022 in an effort to combat inflation, with results that have yet to be determined. One thing that the rate hikes did manage to do was crash many speculative, long-duration assets like Bitcoin and tech stocks. After raising interest rates from 0.25% to 0.5% in March to 3.75 to 4% with a series of sharp rate hikes, many market observers think that the Fed will have to eventually slow these rate hikes at some point in the near future. If the Fed takes its foot off the gas and allows rates to stabilize, that should make investors feel more comfortable with getting back into assets like Bitcoin.
While cryptocurrency prices have plummeted along with other risky assets, many commodities spiked higher in early 2022, including oil, but many of those moves proved short-lived. With rising rates expected to slow or stop, both oil and crypto seem to have found a floor.
Cryptocurrency has often been touted as a cure-all for what ails you, whether that’s inflation, low interest rates, lack of purchasing power, devaluation of the dollar and so on. Those positives were easy to believe in as long as crypto was rising, seemingly regardless of other assets. “Higher rates generally lower appetite for riskier investments and that is likely one of the causes for a significant pullback in digital asset prices over the last year,” says Spinelli.
Indeed, cryptocurrencies responded to reduced liquidity as did other risky assets, by falling when the Fed announced in November 2021 its intention to raise rates and then throughout 2022 as the Fed aggressively followed through. On top of that, high-profile blow-ups of individual cryptocurrencies and exchanges such as FTX have hammered traders’ confidence in these virtual assets.
“The future of crypto in 2023 is going to be driven by how much appetite for risk exists among the investor community,” says Raju. “Right now, the market does not seem to have that appetite.”
Future predictions for Bitcoin
Alistair Milne, founder of Altana Digital Currency Fund, is predicting Bitcoin’s price will surge to $45,000 depending on what happens with inflation. Writing on Twitter, he said he is “basically [all-in] again” and argued Bitcoin will prove its resilience once more.
Both men cite the upcoming halving in 2024 as a key factor in 2023’s performance. This is where the reward for Bitcoin farming will halve, a process that’s coded to happen every four years. Bitcoin halving counteracts inflation and keeps the amount of Bitcoin in circulation at a steady rate.
Milne suggests prices could hit massive highs of $300,000 by the end of next year and said “this was no time to be bearish”. Draper suggested on Twitter his prediction will “certainly [happen] before the halvening”. Bitcoin fans will certainly be keeping an eye on these two predictions for the next couple of years.
Professor of Finance at Sussex University, Carol Alexander has called a $30,000 Bitcoin price increase in the first half of 2023, eventually hitting $50,000 by the end of the year. Given her prediction last year that Bitcoin would bottom out at $10,000 wasn’t too far off the mark, many traders are taking Alexander’s word as gospel.
The other side of Bitcoin
Not everyone is bullish on Bitcoin. Mark Mobius, the billionaire founder of Mobius Capital Partners, called in early December that Bitcoin will fall further to bottom out at $10,000 in 2023. His reasoning is that the US Federal Reserve’s tightening monetary policy and rising interest rates will further scupper the Bitcoin market.
Mobius’ predicted in 2022 that Bitcoin would drop further to $20,000 when the price hit $28,000 back in May. As a result, many are taking the veteran investor’s latest warning as a sure sign the crypto winter isn’t over yet.
Analysts of the crypto market view the technology of Bitcoin as outdated, and also note that there are many superior cryptos in terms of speed, scalability, environmental awareness, and other important factors that influence the formation of the price. Despite Bitcoin’s shortcomings, analysts agree that during 2023 this crypto will still experience value growth, predicting its maximum value of $30,121 by the end of next year.
Mobius’ prediction has been echoed by VanEck Investments, whose head of digital assets research Matthew Sigel says Q1 will see Bitcoin hit $10-$12,000. He cites higher energy prices and Ripple’s SEC lawsuit as key factors in the continued drop.
While not an outright crypto prediction, legendary investor Dr Michael Burry has called we haven’t seen the last of inflation peak. “We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition. Fed will cut and government will stimulate. And we will have another inflation spike,” Burry wrote on Twitter.
Problems with Altcoin
Altcoin originally refers to all digital cryptocurrency launched following the success of Bitcoin; hence the name, which means “alternative to Bitcoin”. However, more recently, the term Altcoin has increasingly been used to classify another other than Bitcoin and Ethereum. Nowadays, there are thousands of Altcoins with new projects being launched daily.
Altcoins have a smaller investment market compared to Bitcoin. Bitcoin has generally hovered around 40% of the global cryptocurrency market since May of 2021.The altcoin market is characterized by fewer investors and less activity, resulting in thin liquidity. It is not always easy to distinguish between different altcoins and their respective use cases, making investment decisions even more complicated and confusing. There are several “dead” altcoins that ended up sinking investor dollars.