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As 2022 approached, crypto investors were nervous.Major token prices Bitcoin (BTC -1.37%) increased by 61%; Ethereum (Ethereum -2.2%) increased 409% year over year. However, after the last major rally in 2017, 2018 was on ice, and November 2021 saw the major coins begin a downtrend. Is the cryptocurrency market headed for another sharp correction?
After all, 2021's mostly positive market momentum was overwhelmed by a bearish trend in spring 2022. Rising inflation, Russia's invasion of Ukraine, and other macroeconomic challenges led to a decline in the stock market. Cryptocurrencies followed suit, falling much faster than before. S&P500 during this period.
The 2023 calendar answers some important questions that have gone unanswered so far and may set the long-term course for cryptocurrencies and their investors. Here's what you can expect:
Cryptocurrency market forecast for 2023
Cryptocurrency market forecast for 2023
It is impossible to say exactly what will happen to the crypto market after 2023. There are still more questions than answers. However, paying attention to some key themes in cryptocurrencies can help you make better investment decisions as the market continues to evolve.
You should pay especially close attention to some important details:
- US and foreign regulations.
- Bringing cryptocurrency payments to the mass market.
- Exchange traded funds based on Bitcoin and other digital currencies.
- Countries that have adopted Bitcoin (or other digital currencies) as legal tender.
As these issues evolve and are resolved, they will shape the long-term future of the crypto sector. The picture could start to take shape by the end of 2022 as governments and blockchain developers steadily advance their long-term crypto plans.
Still, the series of baby steps that began with Bitcoin's birth in 2009 could continue for many more years.
Why cryptocurrencies could be the future of money
Why cryptocurrencies could be the future of money
In a best-case scenario from 2023 onwards, regulators around the world could collaborate on a global framework for cryptocurrency regulation. However, this is unlikely today, as international views on cryptocurrencies range from El Salvador and the Central African Republic's “Bitcoin is the official currency” to China's “Cryptocurrency transactions are illegal.” It seems so. Global unity on this issue seems unlikely in the short term.
However, regulation of cryptocurrencies is progressing at the federal level. The Biden administration has assembled a talented team to lead the crypto regulatory process, led by Treasury Secretary Janet Yellen and Securities and Exchange Commission Chairman Gary Gensler. Yellen has been tracking the sector for years, albeit with occasional skepticism. Gensler taught a class on Bitcoin, blockchain, and other cryptocurrency topics at the Massachusetts Institute of Technology in 2018.
SEC (Securities and Exchange Commission)
The SEC (Securities and Exchange Commission) is an independent government agency responsible for ensuring the integrity of the U.S. capital markets.
The hope is that with highly knowledgeable people determining the direction of future regulation, we will develop a system that is workable for investors, consumers, crypto businesses, and traditional banks. Informed regulators will understand important and critical issues, such as the difference between a store of value system such as Bitcoin and an advanced ledger with smart contracts such as Ethereum. Although Congress has introduced several virtual currency regulation bills in the first half of 2022, the wheels of bureaucracy are moving slowly and this issue requires deep thought and careful analysis.
As government agencies develop legal frameworks and tax policies, cryptocurrencies could enter U.S. consumers' digital wallets on a large scale. However, although Bitcoin became legal tender in El Salvador in 2021 and the Central African Republic in 2022, the United States is unlikely to follow suit anytime soon.
However, many retailers may start accepting payments in cash-like digital currencies such as Bitcoin. litecoin (LTC 0.58%), or a clone of a Bitcoin clone, also known as dogecoin (doge -2.9%). Increased use of cryptocurrencies should prompt regulators and politicians to take faster action, and blockchain systems should also benefit from widespread use.
This process will permeate the cryptocurrency market in the coming years. Investors cannot tolerate uncertainty, so even an overly strict regulatory framework is likely to be an improvement over today's haphazard supervisory regime.
Why cryptocurrencies are not the future of money
Why cryptocurrencies are not the future of money
A bright future can be delayed in some ways.
- Policymakers may drag their feet and fail to arrive at a sensible regulatory framework in the coming years.
- They may decide that currencies like Bitcoin and Litecoin only serve illegal activities and bad actors, and that those activities do not belong on U.S. soil.
- Retailers may balk at the unpredictable value of digital currencies and insist on traditional cash or credit card transactions instead.
- A sudden increase in security breaches, technology platform malfunctions, and other threats to the security of blockchain-based payment systems could undermine public confidence in digital currencies. For example, algorithmic stablecoins received a bad reputation after the financial meltdown. TerraUSD (USDT -0.02%) in April 2022.
Related crypto topics
Any combination of these circumstances could delay the digital currency revolution by several years. And assuming it finally arrives, it could look very different from the Bitcoin-led revolution that exploded in 2021. In the very long term, it seems unlikely that any government or national group will completely block the idea of cryptocurrencies, but they could slow the movement and steer the final product in different directions. Masu.
These risks may sound hypothetical, but they are very real. After all, the cryptocurrency community must cooperate with regulators around the world. Failure to do so could create significant obstacles to the advancement of the digital currency sector.
That's why you should never bet your farm on Bitcoin, Ethereum, or cryptocurrencies in general. This market tends to move in mysterious and unpredictable ways, soaring one year and crashing the next. Savvy investors want to build long-term diversified portfolios that can withstand dramatic pullbacks in certain sectors.
Anders Byland has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
