2022 was a brutal year to be in crypto or just about any risk on asset class. We are at the point now where some cryptocurrencies are down almost 90% from their all time highs. The question on everyone’s mind is where do we go from here as we head into a new year. Predicting the future of crypto and where the price goes is almost impossible as there are far too many unknown variables. The best we can do is look at the global macro picture and try extrapolate a prediction from there.
It seems that the price of crypto closely correlates the movement of the stock market. Most stock analysts tend to agree that 2023 will be either a flat year for the stock market or it heads lower. Currently, there are very few analysts who are predicting a bull market for stocks next year. The Federal Reserve Bank of the USA has openly said it is committed to bringing inflation down to the 2% range. To achieve this, it needs to raise rates aggressively as this is its primary tool to combatting rampant inflation. Generally, the rule is that when rates go up, stocks and other risky assets such as crypto go down.
With the current pace of rates, it seems that stocks and crypto will be flatlining or going down till the end of 2023. Obviously this is just a guess as other unknown things may appear which could be a tailwind for stocks and crypto such as an ending of the war in Ukraine and an easing of tensions between the US and China over Taiwan. A further negative event may arise in 2023 and that is if the global economy goes into a recession.
If the global economy goes into a recession then we shall enter a true ice age for crypto. In this environment, investors have little appetite for risky investments as the basic needs become far more important. Let’s hope the economy doesn’t go into a full blown recession but it’s prudent to prepare should it occur. If we do enter a crypto ice age, it may end around the first quarter of 2025 which will be after the next Bitcoin halving which has usually signaled the beginning of a bull phase in crypto. I think it wise to sit on the sidelines for now to see which way the future of crypto goes. I believe we shall eventually enter another bull run but it’s extremely hard to predict when.
Be patient fellow crypto investors, it may be a long time but I do believe we will one day have another bull run in Crypto.
