We’ve made it to the fifth article in DailyCoin’s “12 Days of Cryptomas” holiday feature, and this is sure to be a topic on everyone’s Christmas list. As most of our readers will know, “on the fifth day of Christmas, my true love gave to me five golden rings.” What could be better than that? Five digital golden rings.
Bitcoin’s status as digital gold is irrefutable. Being scarcer than its metallic counterpart and providing a better hedge against inflation, Bitcoin fits the bill to be the crypto industry’s “Five Golden Rings.”
With the end of the year upon us, let us overview Bitcoin and see how the asset has performed in what has been a long year for investors.
2022 – Not So Glittery for Bitcoin?
Peaking at an all-time high of $68,789 in November 2021, investors were feeling positive, and held high hopes for Bitcoin as enthusiasts prayed for the best gift from Santa.
Bitcoin hitting $100,000 was perhaps the most common price prediction for the most valued crypto. Analysts at Standard Chartered (OTC:SCBFF), CEO of Voyager Digital Steve Ehrlich, Goldman Sachs (NYSE:GS) Analyst Zach Pandl, Founder and CEO of Messari Ryan Selkis, and Bill Barhydt, the CEO of crypto exchange Abra, were among the notable figures leaning into the claim.
While there were even higher price predictions for Bitcoin, $100k seemed to be the unspoken consensus for its value in 2022. However, winter blizzards struck, sending the price of Bitcoin back to sub-$16k, its lowest price in more than two years.
The Tumultuous Timeline
Although Bitcoin has sled through several crypto winters, the last being in 2018, this year proved different. Here’s how 2022’s bear market set itself apart from the other icy periods Bitcoin has survived.
Macro-Economic Factors
Since Bitcoin launched in 2009, the stock market has been one of the greatest and most prolonged bull markets in history. However, with the sector entering its first real bear cycle since 2009, it was normal that Bitcoin would follow suit. This was especially the case due to Bitcoin’s high positive correlation with the stock market.
In 2022, the Federal Reserve also raised interest rates for more than half of the year as inflation rose to the highest point in four decades. Talks of recession have also played a role in taking the shine out of Bitcoin in 2022.
The Collapse of TerraUSD and LUNA
In May, the algorithmic stablecoin TerraUSD (UST) lost its dollar peg, leading to the collapse of the $60 billion Terra ecosystem. The aftermath sent Bitcoin tobogganing as it recorded one of the biggest single-day losses in its history. Bitcoin would recover, however, consolidating at $30k in 12 days.
Sudden Bankruptcies
There was more frostbite to come as the aftermath of the above two points started a flurry of frozen customer accounts and sudden bankruptcies among the biggest crypto firms, including Celsius Network, Three Arrows Capital, BlockFi, Voyager Digital, and FTX. The last would eventually bite the hardest.
A Golden Performance All the Same
Although this has been a difficult year for crypto’s leading asset, there have been bright spots amongst the dark clouds. One particular positive is that Bitcoin has outshone all other assets in terms of adoption by retail and institutional investors.
Positive Rise In Bitcoin Adoption
In August 2022, Bitcoin wallets topped 84.02 million from 76.32 million wallets registered. There has also been a significant rise in the number of investors holding Bitcoin.
Addresses with ≥ 0.1 BTC. Source: On-Chain College
On December 7th, the number of wallet addresses with a balance of at least 0.1 BTC rose steeply to a new all-time high, now at over 4.1 million addresses. The number of addresses holding 1-10 BTC also hit an all-time high of 800,000 addresses on November 28th.
Bitcoin crab addresses. Source: On-Chain College
Future ETFs Remain a Spark
Future ETFs have been golden performers in the crypto winter. The tremendous amount of inflow of attention received from retail investors helped several funds reach record trading volumes and operate smoothly through the disaster of the broader market.
On November 8, ProShares Short Bitcoin Strategy ETF (BITI) trading volume spiked 366% higher than any day since its launch, while ProShares Bitcoin Strategy ETF (BITO) surpassed its previous record by 64%.
Bitcoin Is More Secure Than Ever
The Bitcoin network has also never been more secure, with its hashrate tapping multiple all-time highs in 2022. The Bitcoin hashrate breached 321 Exahashes per second for the first time in 2022 and topped the value three times after November 12th.
Outlook for 2023
With the bear cycle winding down, investors expect a big bull run for Bitcoin before long. There is almost a consensus that the next year will be bountiful for Bitcoin, so here’s our outlook for Bitcoin in 2023.
A Positive Bull Run for Bitcoin?
With Bitcoin not entirely out of the woods, the bear market could drag into early 2023. However, there is a general consensus that 2023 will be a bullish year, potentially setting a new all-time high.
Once again, many investors have pegged the first milestone at $100k. This holds ground because the 2017 bull cycle saw a positive Bitcoin rally from $1,000 to as high as $19,000. A 19x gain at Bitcoin’s current price of $17k would drive it as high as $322k.
The 2017 price chart for Bitcoin (BTC). Source: CoinMarketCap
Billionaire venture capitalist and serial blockchain investor Tim Draper believes in that line, predicting that Bitcoin will rally to hit $250,000 in 2023.
Increase in Global Adoption
Although Bitcoin leads the adoption of all cryptocurrencies, with the current adoption trend, 2023 is predicted to be a milestone for the asset. Ric Edelman, the founder of the Digital Assets Council of Financial Professionals, predicts that more than 500 million people worldwide will own Bitcoin.
More Use Cases for Bitcoin
In 2022, Bitcoin’s Lightning Network consistently matured toward mass adoption through specialization and sophistication. This is confirmed by the multiple ATH capacity the Lightning Network recorded in 2022.
While the price of Bitcoin is mostly discussed at the moment, use cases may take center stage in 2023. The speed, low-cost money transfer, and secure and boardless nature have made more companies find ways to use the asset. Going past the bear cycle could see Bitcoin’s use cases rapidly increase.
The First Spot ETF
Many believe that in 2023, regulators in the United States will approve the first Bitcoin Spot ETF.
A spot ETF has long been pursued as it will allow investors direct exposure to Bitcoin. This will mean they can invest in BTC without going through intermediaries while providing leverage to its price.
On the Flipside
- In a note entitled “the financial-market surprises of 2023,” Standard Chartered explained that Bitcoin could plummet by 70% before bottoming out at $5,000.
- According to Standard Chartered, if this happens, then the crypto industry will suffer further bankruptcies and collapses.
We Have Ourselves a BitMas
Bitcoin is for life, not just for Christmas. The asset has found its way into the traditional finance industry, with the biggest banks and even some central banks adopting it as a means of payment.
By placing control in the hands of users – and not governments – Bitcoin promises to revolutionize global finance. Samson Mow explains, “Bitcoin will overcome any issue simply due to its design and the irrefutable need for sound money in human civilization.”
Why You Should Care
Bitcoin has earned its status as digital gold. It has a limited supply, a store of value, and can be used as a medium of exchange. Its status is further solidified by the significant growth it experienced through the tumultuous market of 2022. In addition, Bitcoin’s decentralized nature is another important reason why the asset continues to thrive against all odds.
Read more of our holiday feature series:
12 Days of Cryptomas
Find the previous iteration in the series here:
Four Positive Events in the Crypto Space This Year