3 Reasons 2023 Could Be a Big Year for Bitcoin
According to recent research, most prominent financial institutions (74%) are considering making Bitcoin investments soon.
Alphabet, Mastercard, and other central banks and IT giants are expanding their cryptocurrency operations.
In the long run, Bitcoin might benefit from the Federal Reserve slowing the pace of interest rate rises.
Here’s why Bitcoin’s performance in the year ahead could look a lot more like its bull run in 2021 than its decline in 2022.
Bitcoin (BTC 0.15%) investors weren’t anticipating a 67% fall year too far in 2022, after gains of 59% in 2020 and 60% in 2021.
Although, as Peter Lynch, a great investor, once said, “The secret to earning money in stocks is to not be terrified out of them.” Lynch was referring to the stock market at the time, but his words of wisdom are just as applicable to crypto investors today. Many investors have sold their crypto holdings, including Bitcoin, during the current crypto winter. Still, for every sale, there is a buyer, and their Bitcoin was acquired by long-term investors who are confident in Bitcoin’s long-term prospects.
Bitcoin’s decline may be mainly attributed to rising interest rates and the end of monetary easing. Yet, some recent occurrences suggest that Bitcoin’s future looks more like 2021 than 2022. Three positive developments are on the horizon for the leading cryptocurrency next year.
1: The Fed’s easing of rate hikes could propel Bitcoin
With uncertain outcomes, the Federal Reserve started aggressively raising interest rates in 2022 to battle inflation. The rate rises brought many long-term speculative assets, such as Bitcoin and tech stocks, to their knees. Many market experts believe that the Fed will soon be forced to pause these rate rises after boosting interest rates from 0.25% to 0.5% in March to 3.75 to 4% with a series of short rate hikes. A return to Bitcoin and other speculative assets may occur if the Federal Reserve eases off the gas and allows rates to level out.
Skate to where the puck is going
Those who invested in Bitcoin at the beginning of 2022 have suffered significant losses. Despite this, its value has held up better than predicted, given the upheaval that conventional financial markets plunged into since it is still primarily a speculative investment and is in its early stages. In hindsight, 2023 is destined to be a landmark year for Bitcoin. Increased investment from big institutional investors, rising usage by global technology and financial organizations, and a more hospitable monetary environment from the Fed all point to a far brighter outlook than in 2022. Though Bitcoin is a high-risk investment, I believe that even the most conservative investors would profit from holding some BTC.
2. And so are blue-chip companies.
The use of Bitcoin, meanwhile, is on the rise at some of the world’s largest internet and banking corporations. Opponents of Bitcoin have been trying to discredit the cryptocurrency as an investment for a long time because it has limited practical use.
It is rapidly changing, however. Mastercard (MA -1.2%) recently announced plans to work with crypto firm Paxos to assist traditional banks in offering crypto trading and investing on their platforms, and Alphabet (GOOG -2.21%) (GOOGL -2.03%) recently announced that it would allow customers to pay for Google Cloud using Bitcoin and several other cryptocurrencies.
3. The institutions are coming.
First and foremost, more and more institutional investors are putting money into Bitcoin as they see cryptocurrencies as a real asset class, with Bitcoin being the largest (with a market valuation of $300 billion) and most accessible.
Five-eighths of institutional investors questioned by financial services primary Fidelity management reported purchasing cryptocurrencies in the first half of 2022. In addition, 74% of respondents stated they were planning to buy bitcoin. No tiny number either; Fidelity polled 1,052 institutional money managers in the Americas, Europe, and Asia. The increased participation of these institutional investors in the market might lead to a higher Bitcoin price because of their greater purchasing power than individual investors.
The oldest bank in the United States and the biggest custodian bank in the world, Bank of New York Mellon (BK -0.67%), recently said it would begin providing custodial services for Bitcoin in response to customer demand. The world’s most powerful asset management, BlackRock (BLK -1.35%), recently announced a partnership with Coinbase (COIN -1.59%) to provide access to its Aladdin trading platform for customers who already owned Bitcoin on Coinbase.
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