- Crypto has taken a beating in 2022, with prices collapsing and companies going bust in spectacular fashion
- Sentiment is the lowest it has been since 2018, with the doom mongers out in force again
- What does 2023 have in store for crypto?
Crypto has been through the ringer in 2022. The crypto winter has set in swift and hard, aided in no small way by the greed and recklessness of certain crypto companies that we need not mention. Prices have tumbled, projects have gone bankrupt, and the mainstream media has its knives out for the space once more (and, to be fair, who can blame them this time round?
Can we expect better things in 2023, or are we destined for more of the same? Let’s take a look.
Fundamentals
Fundamentally, crypto isn’t looking in a great place for 2023. All the talk of institutional adoption and Bitcoin being a way of negating inflation turned out to be nothing but wishful thinking – it did exactly what the stock market did and collapsed as inflation soared and the Federal Reserve rolled out its quantitative tightening program.
Unless Fed policy changes dramatically in the early part of 2023, we are not likely to see a shift in this sentiment. As a risk-on asset, crypto needs a very specific set of circumstances in which to thrive, and with money tighter than it was two years ago and a post-pandemic global recession predicted by many, including some very smart people, crypto is not looking like a very attractive buy for quick gains in 2023.
Throw in the fact that regulators are going to be taking a much closer look at the sector following the collapse of FTX, and the others than came before it, and buying crypto might be seen as a very risky play indeed next year.
Technicals
Things don’t look much better in a technical sense:
Crypto is clearly deep in the throes of a bear market, something that typically lasts between one and two years. This puts us in equivalent territory to 2019, and while crypto did enjoy a huge spike prior to a collapse, this was down to China’s surprising public support of blockchain which artificially drove the price up.
Clearly, we can’t rely on something like this to drive crypto’s recovery, and even if it did it would only be temporary – markets need time to heal and recover ready for another rally, which is what 2023 will be spent doing.
$12,000 looks like a ‘go-all-in’ region for Bitcoin should it get there, but otherwise we can expect plenty of chop below $20,000 which is something that only professional traders should get involved in. Everyone else should just buy and hold or wait and set alerts at key areas.
Or just go on holiday.
Neutral at Best
Overall then, unless there is a drastic change in sentiment, 2023 looks like it will be a mainly bearish-neutral year for crypto. It won’t be as bad as 2022 (which is just about impossible), but expect the fallout from the FTX affair and others to spill over and, by association, drag crypto through the mud again.
Crypto bear markets tend to be split into three sections – decline, stagnation, recovery. 2022 was the decline, 2023 will be the stagnation and the start of the recovery if we’re lucky, while 2024, and the Bitcoin halving, will hopefully be the recovery period.
Therefore, if we had one word of advice for 2023 then, it would be this – survive.
