The bears still dominate the crypto market, making it hard to see bullish price movements, but the value of cryptocurrencies might explode again. The entry of institutional investors has raised the dependence on the stock markets, which might change in 2023.
Most leading cryptocurrencies reached all-time highs in November 2021, but their prices dropped dramatically in 2022. The bearish market started to dominate by the turn of the year, ensuring that prices were already falling significantly.
Many cryptocurrencies suffered massive losses in the first half of 2022, especially in January and May. In mid-June 2022, many crypto assets reached a yearly low, which preceded price stabilization in the third quarter.
The Reasons for the Prices of Cryptocurrencies to Fall so Sharply
The start of the bearish market was the main factor leading to the losses over the last few months. Bitcoin (BTC) and other cryptocurrencies experience a 4-year cycle where an upward trend market alternates with a downward one. The Bitcoin halving determines that cycle, which occurs about every four years.
The latest Bitcoin halving in 2020 caused the last bullish market to start. In 2021, it was in full swing, which led prices to experience significant increases. However, the bearish market suddenly established itself, which always signals sudden and steep declines.
Other factors causing sharp drops in prices in the short and medium term were the outbreak of the COVID-19 pandemic and the war in Ukraine.
Why Cryptocurrency Prices Might Rise Again in 2023
The bears still dominate the crypto market, which makes it difficult to see any upward movement in prices. However, there are good reasons to think that the value of cryptocurrency might explode again in 2023.
In 2018, the price of Bitcoin dropped from almost USD 20,000 to USD 3,500 in a few months. However, it made its first significant gains after the halving event in 2020, which had already started in 2019.
The price of Bitcoin at USD 3,500 in early 2019 could make significant gains again. It rose to over USD 10,000, tripling in a few months, followed by altcoins.
Over the last few years, the increasing dependence of the price of Bitcoin on the value of US tech stocks has been evident. In general, BTC has become more reliant on classical financial markets.
The entry of more institutional investors into the market has raised that dependence. Therefore, the price fell whenever the prices on the stock markets did, which cryptocurrencies should counteract.
The global economy has struggled with inflation over the last few months. In the US and Europe, it has risen dramatically for several months, affecting savings and the value of fiat currencies.
Central banks have raised crucial interest rates, increasing the risk of an upcoming recession.
Bitcoin and other cryptocurrencies might popularize further with a deepening recession in 2023. Investors are now seeking alternative assets to avoid losing the value of their crypto asset holdings. Therefore, the value of cryptocurrencies against classic assets might change, leading to an explosion in their prices.
By Alexander Salazar
