For the global cryptocurrency market, 2022 turned out to be such a turbulent year that the echoes of the storm associated with the November crash of the largest crypto exchange FTX still affect investor sentiment. Let us recall that the exchange faced an $8 billion liquidity shortfall and filed for bankruptcy, its founder, Sam Bankman-Fried, was accused of orchestrating a global financial fraud, as well as misusing customer funds and defrauding investors.
At that time, Bitcoin and Ethereum lost more than 60% in price, and state authorities were not able to make a decision on regulating the circulation of digital currency that year. Therefore, the exchange, where millions of dollars were accumulating, was left without the supervision of at least the securities commission
It was hard for the cryptocurrency market players in 2022, but there is a chance that they will breathe easier in 2023. True, we should not forget: cryptocurrency is as free as a bird. Predicting whether it will fly upward or downward, is sometimes beyond even the power of experienced analysts. Bitcoins are not backed by gold or real money, they are just computer codes with their own tasks and ways to solve them. They are suitable for fans of “adrenaline investments” with unpredictable results. And at the same time, financiers assure that the cryptocurrency has a great future and endless possibilities!
What trends await the cryptocurrency market in 2023?
- Return of trust
According to experts, the crypto market has been still going through the Crypto Winter period since 2022. This is a “bear market” when the price of the cryptocurrency drops significantly. Not all market participants have been able to recover from the collapse of FTX yet, but the forecasts of financiers are more positive than negative, so 2023 could be a year of gradual restoration of confidence in exchanges in general and cryptocurrencies in particular. - State regulation
After the events of 2022, the need to finally regulate the digital money market was talked about everywhere: in governments, courts, banks, and even consumer protection societies in various countries. The FTX exchange was not sufficiently controlled, it was incompetently managed – that’s the reason for the fiasco with the loss of significant amounts and reputation. So this year we should expect tough regulatory acts in relation to the crypt, as well as an increase in the number of inspections of any regulatory bodies by the states - Growth of investment in stablecoins
A stablecoin is a cryptocurrency whose value is pegged to fiat currency or other real assets. Simply stated, the stablecoin exchange rate is more stable than other cryptocurrencies. After the storms of 2022 and the unpredictable spikes in crypto volatility, investors will begin to seek solace in more understandable and safe stablecoins – for example, in USDC, whose reserves consist of real dollars and US bonds. By the way, USDC capitalization showed growth with every shock in 2022. - Caution of investors
Investments in cryptocurrencies will not go anywhere, but it will hardly be possible to talk about large-scale actions of market players. Not only did the FTX exchange face a liquidity problem, the market capitalization fell everywhere and significantly. Thus the crypto industry becomes a risky investment, but there will always be those who love tickling their nerves with long money.
Risks and Precautions
Everything that financiers fear can happen in an unstable and unpredictable crypto market. The main danger lies in the potential failures of crypto firms and exchanges.While they are looking for the most acceptable options for interacting with users (taking into account the sad experience of FTX), market players may lose interest in cryptocurrency and start withdrawing it into cash or non-cash money.
- Strengthening control over crypto companies
On the one hand, this is something that has long been required, on the other hand, a hasty decision can turn into problems. It is likely that governing bodies will adopt strict regulations for crypto companies and rapidly implement them, which could stifle the industry’s ability to grow in the long term. However, investors will feel more secure. - Fraud
This is a risk not only in 2023, but for the entire time over which the cryptocurrency market will operate in the world. The year will be different in that, against the backdrop of the FTX crypto exchange scandal, users will be even more wary of banks involved in the cryptocurrency transactions sector.
There are fears that a significant part of banks are unreliable and unsafe, and the money of crypto investors can leak through bank loopholes in an unknown direction. Therefore, banks will have to work hard to restore customer confidence. - Infection of the market
In addition to the FTX exchange, the Terra stablecoin collapsed last year, which caused a chain reaction of the entire crypto market and provoked the bankruptcy of the Three Arrows Capital cryptocurrency fund. It pulled the collapse of other funds and cryptocurrency trading companies, and while none of these high-profile cases has been completed, on the contrary, new facts are being discovered, new victims are appearing. There’s a chance that in 2023 this process of “infecting” the market with new problems will continue. - Unpredictability and impossibility of forecasts
Just like in previous years, it will still be impossible to accurately determine which cryptocurrency will shoot up and which will leave the market prematurely. Therefore, investors will have to strain and choose the best strategy for placing funds in the crypt on their own.
If there are no shocks on a global scale and the world economy is not in a fever after another tweet by Elon Musk or a message about the arrest of the head of a financial corporation, then the crypto market will change the direction of the trend in mid-2023, as it happens every second year. In which direction this will happen – we will find out in the summer.
These trends for 2023 show that, despite the challenges, the cryptocurrency industry is constantly growing and evolving, providing new opportunities for profit for both experienced investors and those who are just taking their first steps in the world of digital currencies.