What to expect from the crypto market in 2023

2022-12-26, 00:50

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[TL; DR]

The crypto crash that started in 2022 is likely to end in 2023.
The price of BTC is likely to shoot to $30,000 in the second quarter of 2023.
[Bitcoin](https://www.gate.io/trade/BTC_USDT) halving that will take place in 2024 will help BTC to rally. 
The Ethereum Shanghai upgrade is one of the key events to occur in 2023.

Introduction 
Many crypto investors look ahead to a better 2023, considering that a crypto bear market has stretched for the greater part of 2022. Inflation and spiking of interest rates in the United States resulted in a depressed crypto market.  The [BTC price](https://www.gate.io/trade/BTC_USDT) and [ETH price](https://www.gate.io/trade/ETH_USDT) fell by large margins during the year. For example, the price of BTC fell by over 64% and that of ETH by around 90%. Most altcoins have been performing in a way similar to ETH.

There were various negative developments in the crypto sector. Several cryptocurrencies such as TerraUSD and FTT collapsed while some major crypto projects like Celsius liquidated during the year. The collapse of FTX exchange was a big blow to the entire crypto market due to the contagion effect. In fact, the confidence of many investors decreased while uncertainty has grown in the market.

2023 can be a good year for cryptocurrency 
Despite the various negative events such as the collapse of FTX and TerraUSD as well as liquidation of several projects many crypto holders remain positive that the crypto bear market will eventually recover. Some statistics point to a brighter 2023 for the cryptocurrency sector. For example, even after the collapse of FTX there have been high purchasing considerations in the market. 
 The key developments likely to occur in 2023
We expect to see many developments in 2023 which include the increased use of artificial intelligence (AI), regulatory clarity in some instances and a depressed crypto mining sector. 
Major Tech Firms will expand investment in artificial intelligence
Large companies are investing more in machine learning than ever before as it helps to generate greater profit and decrease costs. Some firms use artificial intelligence technology to develop new products and streamline their services. For example, in the media sector artificial intelligence is used to aggregate data from different information sources. 
In the crypto sector, artificial intelligence is essential when collecting sentiments among investors. For instance, it is used to detect special words in media platforms which determine the level of greed and fear in the market.

artificial intelligence- Srimax
Google is an example of a tech company that uses artificial intelligence on a large scale. It uses it to streamline translation, search and mapping services which help the users to get the data they want within a short period. In a similar way, many blockchain based firms are using artificial intelligence in their business models. 
 Firms using Quantum computing
Quantum computing is a technology that uses subatomic particles to establish modern ways of processing and storing data. This is likely to produce computers that operate with super speed and which are more efficient than the traditional processors. However, these computers may render the existing encryption systems obsolete.
Notably, many investors will use these computers when analyzing crypto market trends and executing trades. 
Increase in market capitalization 
A group of South Korean experts, in their report “2023 Cryptoasset Market Prospect’ '' pointed out that the total crypto market cap will rise above $1.5 trillion in 2023. They believe that there is likely to be stabilization of inflation which will attract investors to put their funds in BTC and other digital assets. 
Although the [Bitcoin](https://www.gate.io/trade/BTC_USDT) market capitalization is down by about 65% from its all-time-high in 2021, many investors remain hopeful that it will recover during 2023. 
In a similar report Hashdex, a global crypto-focused asset manager, reports that in 2022 [Bitcoin](https://www.gate.io/trade/BTC_USDT) strengthened its fundamentals which can enable it to perform well in 2023. As a result, it is well-positioned as a long term investment asset. As such, it will be discussed within governmental agendas and crypto mining arenas which will increase its adoption.
Establishment of regulatory frameworks
Hashdex also reports that there is likely to be regulatory clarity, especially in the United States, due to some major mishaps that took place in 2022 such as the collapse of FTX. Some governments may put in place public policies that protect their citizens from bad actors that are in the crypto sector. For example, the regulations may focus on enhancing market transparency, differentiation of trading and custody service providers. 
 Growth of DeFI
In 2022, there were different failures of centralized finance (CeFi) institutions, whereas many decentralized finance (DeFi) ones functioned well due to transparency, predictable smart contracts and being auditable. 
As a result, DeFi protocols that have sound financial standing and strong tokenomics are likely to search for more investment opportunities in the blockchain sector. For example, they can adopt diversified staking products or venture in the NFT and metaverse sector. 
Change of United States Policy
The United States may change its tight monetary policy in 2023 which may stimulate the demand for cryptocurrencies.The Korbit researchers said that the United States may back away from the economic policies it has been using in 2022. As an example, in 2019, it discontinued the tight monetary policy which was adopted in 2018 leading to the gradual recovery of the crypto bear market. 
 [Bitcoin](https://www.gate.io/trade/BTC_USDT) halving
An important event on the crypto calendar is the [Bitcoin](https://www.gate.io/trade/BTC_USDT) halving event which occurs after 210 000 blocks are added to the blockchain. [Bitcoin](https://www.gate.io/trade/BTC_USDT) halving reduces the mining rewards by half. What is significant about the halving event is that the [BTC price](https://www.gate.io/trade/BTC_USDT) increases before and after it. Since the next [Bitcoin](https://www.gate.io/trade/BTC_USDT) halving is in 2024, the market expects that [Bitcoin](https://www.gate.io/trade/BTC_USDT) will go back up. 
 Ethereum Shanghai Upgrade
Another important event in 2023 is the launch of the Ethereum Shanghai upgrade in March. After its completion, the investors who have staked their ETH will be able to unstake and withdraw it. The success of this upgrade will likely increase confidence in the crypto sector and may result in ETH rallying in 2023. It will also help in reducing the transaction fees as well as increasing the processing speed.

United States interest hikes in 2018 to 2019- Cryptonews
As noted on the diagram, the United States halted interest rate hikes in 2019 leading to the recovery of the crypto bear market. This paints a health crypto market outlook for 2023, as the market hopes that the same will happen. 
 Growth in adoption of cryptocurrency
The findings by The Korbit researchers show that there is likely to be a greater adoption of cryptocurrencies in 2023. The mainstream investors will invest in [Bitcoin](https://www.gate.io/trade/BTC_USDT), ethereum and their derivatives. 
At the same time, they predict that many users will turn to stablecoins which may increase the synergy between the crypto sector and the traditional financial sector. As well, there is likely to be a surge in central bank digital currencies (CBDCs). For example, China, Turkey and Japan may develop their CBDCs in the near future. 
 Growth in resale market
The coming of non-fungible tokens and the metaverse has drawn many brands to use the blockchain technology. For example, brands such as Timberland and Athleta have tested product strategies including the use of the peer-to-peer technology. Some of these brands will partner with blockchain firms to promote their products and reach large audiences. 
 Market volatility in 2023
As in most cases, there are events or activities which can increase market volatility in 2023. Some countries or regions may introduce regulations in response to the collapse of crypto exchanges and other DeFi platforms. 
The market is still waiting for the verdict in the case between Ripple versus US Securities and Exchange Commission. If the verdict is against Ripple that may increase uncertainty in the crypto market. On the other hand, if Ripple wins the case that will create confidence in the crypto economy. 
 Crypto mining
Many [Bitcoin](https://www.gate.io/trade/BTC_USDT) mining firms are likely to encounter liquidity challenges and losses which may force some of them to file for bankruptcy. The main constraint here is the low [Bitcoin price](https://www.gate.io/trade/BTC_USDT), which may range between $10,000 and $15,000 within the first quarter of 2023.

ASIC Rigs for mining [Bitcoin](https://www.gate.io/trade/BTC_USDT)- Softwaretestinghelp
The contrast is that at a time when the price of [Bitcoin](https://www.gate.io/trade/BTC_USDT) is decreasing the cost of electricity is increasing. However, a crypto analyst VanEck thinks that the price of BTC will rise to $30,000 within the second quarter of 2023. 
 Will the crypto bear market end in 2023?
It is highly possible that the bear market will end in 2023 if the Fed Reserve halts hiking of interest rates. The price of [Bitcoin](https://www.gate.io/trade/BTC_USDT) is likely to increase as we approach the 2024 halving event. However, the overall market outlook indicates that 2023 will be better than 2022 in terms of returns on crypto investments. 
 Conclusion
In short, the crypto market outlook in 2023 seems positive and analysts predict that the price of BTC and ETH will rise significantly. Key developments in the crypto sector in 2023 include the Ethereum Shanghai upgrade, greater adoption of BTC and ETH as well as slowing down of interest rates. However, the crypto mining sector will suffer in the early days of 2023.

Author: **Mashell C.**, Gate.io Researcher
This article represents only the views of the researcher and does not constitute any investment suggestions.
Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.

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