2023 kicked off quite well for the cryptocurrency environment. While in 2022, the market navigated a period of plummeting values, January 2023 brought renewed hope when prices began climbing again. However, regulatory measures intervened, causing many crypto-friendly institutions to collapse due to their failure to adapt to the new legislation. Some exchanges have claimed that the standards are unfair and aimed to destabilize the overall market rather than protect it.
Despite these changes, Bitcoin remains a favorite among investors looking to diversify their portfolios. Digital gold maintains a level of market capitalization far above that of its competitors, and even the altcoins with a more substantial presence on the digital asset market still have very slim chances of competing.
However, as the market continues to shift and change, many investors are still on the fence about what they could do to boost their revenue. Here are some of the trends that are likely to impact the market the most.
Traditional finance
Initially, the traditional financial markets had little in common with cryptocurrencies. Still considered a volatile asset that’s difficult to pin down, Bitcoin has remained a controversial topic among economists. However, this has changed over the past few years, and many now consider digital tokens a valid part of a financial portfolio.
The current economic situation is, however, not the best. The debt level in the United States has skyrocketed, and many analysts predicted that the only legitimate course of action would be to default. That can spell trouble, as it would mean that the stock market would decline quite fast and descend into chaos. Many jobs will be lost, as unemployment could jump by about 5%. However, for digital currencies, it might have the opposite effect.
The initial purpose for which Bitcoin was created was to be used as a means to power daily transactions. It was also meant to have a role as a hedge against inflation. While the former hasn’t yet been realized, it is well-known to investors, who have been doing it for many years. While it’s difficult to accurately predict how the market will evolve under the circumstances of a debt default as there’s no precedence in the area, Bitcoin might record higher levels of engagement over the following period, which will elevate its price.
The supply
Unlike other types of financial assets, only a limited amount of Bitcoin will ever be mined. This has earned it the moniker digital gold since its scarcity is a large part of its value. The scarcer an asset is or becomes, the more valuable it becomes. After 21 million coins, all Bitcoin mining will stop, and the investors will be left with what had accumulated until then.
Any time a new transaction block is verified, the miners receive some of it as a reward. So far, around 19 million coins have been mined, meaning that approximately 2 million remain. Unfortunately, according to statistics, a large percentage of Bitcoin is also forever lost. About 30% of the coins in circulation won’t ever be retrieved. There are many reasons for this, including the fact that many keys and passwords were lost or forgotten. Some early adopters might have simply forgotten about their investments or have no desire to return to them ever again.
However, there’ll still be a few decades until the last Bitcoin is minted, especially since mining rewards are expected to undergo a new halving in 2024. With a little over a year until that happens, you can begin to see a slight increase in the meantime, as the anticipation causes more hype around BTC, which in turn results in higher engagement rates.
The demand
The price of Bitcoin affects the entire cryptocurrency market. While the correlation level between it and the largest altcoin, Ethereum, has been lower than usual recently, it is still pretty high at nearly 80%. However, Bitcoin itself depends on several things for its value. The supply is just one of them; the demand is another. Since April 2023, the number of Bitcoin transactions has remained elevated. Despite price fluctuations, traders continue to believe that BTC has excellent potential.
At the beginning of May, the number of daily transactions peaked at over 670,000. Compared to the same time during the previous month, the figures were elevated by almost 300,000. Another positive aspect is the number of active Bitcoin addresses. These are required if you want to purchase the coin. Currently, this number is steadily approaching one million. Previously, in April 2022, the figures peaked at 1.25 million. However, after the prices plummeted in July, finishing the year around 65% lower than they had started, many investors steered clear of the asset.
Here too, halving is believed to play a role, so in 2024, the demand could increase. Theoretically, this would happen as a result of the incoming supply squeeze.
Price elevation
After the price dropped so severely, many investors have eagerly awaited the moment Bitcoin will get back on its feet and go back to its previous values. 2020 and 2021 have been some of the best years in the coin’s history since its launch in 2009. During this time, it broke records almost constantly. With the current situation being quite difficult, many believe Bitcoin is bound to soar high sooner rather than later. The macroeconomic conditions seem to be working in BTC’s favor so far.
As inflation cooled, investors began predicting approximate dates for when Bitcoin might bounce back. The fact that some economists have deemed the banking system in the US to show signs of an impending meltdown has only helped fuel the estimations. It has also made investors less likely to place their capital in traditional finance endeavors and gravitate towards something like Bitcoin, which appears more trustworthy and robust.
So far, in 2023, Bitcoin has already surpassed the $30,000 milestone once, and many are convinced that it is bound to do so again. So far, it has had a rally of nearly 80%, which signaled for many that the bear market and crypto winter are on their way out.