It’s fair to say that 2022 has been a disastrous year for the cryptocurrency market. The economic downturn experienced all over the globe, which has been exacerbated by international conflicts like the Ukraine war and a high incidence of extreme weather events, has impacted nearly all industries – but crypto might have felt it more keenly than most.
At the time of writing, Bitcoin is down 64% from the start of the year, while its nearest competitor Ethereum has fallen 66%. Since these two currencies generally set the tone for the rest of the market, their drop in value has been emblematic of the sector’s struggles in 2022. So, will they experience an upturn in the coming 12 months? And will that have a knock-on impact on their altcoin counterparts? Here are our predictions for 2023.
Ethereum and Bitcoin to decouple
As the original cryptocurrency, the behavior of Bitcoin has largely set an example for the rest of the industry to follow – and until now, Ethereum has obliged. However, 2023 could be the year in which their fortunes diverge for the first time. That’s because Ethereum is yet to experience a bump in value after the eventual completion of its much-touted merge in September, in which it transitioned from a proof-of-work to a proof-of-stake concept, slashing emissions and accelerating processing times in the process. If the market turns, Ethereum could be one of the biggest beneficiaries.
Greater activity outside of investment
Bitcoin was originally designed to serve as an alternative store of value and method of exchange, much like fiat currencies (but without the centralized governance). However, the crypto market in general has come on in leaps and bounds in recent years, with the explosion of new technologies such as non-fungible tokens (NFTs), decentralized apps (dApps) and smart contracts revolutionizing the industry. With so many new methods of how you can earn with crypto, you can expect more players to become involved in the sector very soon.
Some good news for the cryptocurrency industry in an otherwise bleak year was the decision by Faustin-Archange Touadéra, president of the Central African Republic, to adopt Bitcoin as legal tender. The CAR became the second nation to do so after El Salvador the year prior and, with many developing economies looking for new ways to boost performance and escape the current crisis, more could soon follow suit. There have already been rumblings that Cameroon, Congo and the Democratic Republic of Congo will embrace crypto in the near future, but that could be the merest tip of the iceberg.
More stablecoin competition
While the aforementioned governments might be on the fringes of the global economy, bigger players are also set to become involved in the world of stablecoins. Indeed, many major countries have been discussing the introduction of central bank digital currencies (CBDCs) for some years now, with China perhaps further progressed along this route than any of its competitors. However, it would not be a surprise to see other nations such as Turkey, Japan or even the USA accelerate CBDC plans in 2023.
Whatever the coming 12 months hold for the cryptocurrency industry, they surely must be an improvement on the dozen which preceded them.