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Will Bitcoin and Ethereum prices stagnate, sink or recover in 2023?

Thanks to a hard month shake, the crypto market experienced one of the most drastic falls in its history in 2022. But questions arise about when the major cryptocurrencies will recover.

The capitalization of the world crypto market, which constitutes the total value of all crypto assets (including stablecoins and tokens), has fallen about 64%, from $2,2 trillion to about $797 billion year to date, according to CoinMarketCap. The two largest cryptocurrencies by market capitalization, bitcoin and ethereum have fallen 64% and 67%, respectively, during the same time period.

With a loss of more than half of their value, it could be argued that these cryptocurrencies cannot be recovered. But when you step back and look at the big picture, things aren't so bad for bitcoin and ether, despite what happened this year.

Let's take a look at how significant crypto and global events this year affected the two largest cryptocurrencies.(Opens in a new window)

When the Terra/LUNA ecosystem crashed in early May, over $1,8 billion was wiped out of the total crypto market capitalization in about six weeks, falling from around $820 trillion to around $XNUMX billion, data shows. data. Compared again to the largest cryptocurrencies, bitcoin and ether are down more than 50% in that period. Just focusing on that one event, the decline seems (and of course was) brutal.

Since that big drop, however, both bitcoin and ether have remained in the same range, even after FTX, one of the largest crypto exchanges, crashed last month and filed for Chapter 11 bankruptcy.

“Within cryptocurrencies, we expect digital asset selection to shift towards higher-quality names, such as bitcoin and ether, based on factors such as sustainable tokenomics, the maturity of the respective ecosystems, and relative market liquidity.”, according to Coinbase's Cryptocurrency Market Outlook 2023 report.

When combined with the biggest crypto crash earlier this year with the global macroeconomic reset, it begins to paint a picture of resilience for the two largest tokens in the digital asset space.

"Bitcoin's resilience amid major stresses suggests that its long-term success is not dependent on any centralized entity pumping or selling it", Coinbase researchers state in the report. The value proposition for bitcoin "has only strengthened this year" as sovereign currencies around the world have shown signs of stress and central banks continue to struggle with the credibility of their policies, they added.

“For as long as a Bitcoin 100-week moving average can be calculated, the crypto has never been in a deeper discount than at the end of November”said Mike McGlone, a senior macro strategist at Bloomberg Intelligence, in a "Cryptocurrency Outlook 2023" report. “The collapse of FTX and other cryptocurrency firms is a good reason, but it is from similar ashes that bull markets typically arise.”

This does not imply that all cryptocurrencies will maintain similar support, if at all. Take Solana, for example, which is down a whopping 94% year-to-date and hit single-digit prices for the first time in almost two years earlier this week.

Since the demise of FTX, Solana has been spiraling down for a number of reasons, including major NFT projects leaving its blockchain and one of its most prominent backers being now-disgraced former FTX CEO Sam Bankman-Fried. If we look only at the numbers, the future of Solana seems uncertain: it has gone from being the fifth largest cryptocurrency at the beginning of November to the 18th place as of today, according to data from CoinMarketCap.

Amid the chaos, however, Solana's co-founders see this drop as an opportunity for their team to keep building and ignore the madness of the market.

"It's just a moment of immense fear, but there is immense opportunity," said Raj Gokal, co-founder of Solana earlier this month. "There is a lot of signal and a lot of noise."

The basic approach for Solana-focused developers and users is to “view tough times as a great opportunity to just jump in, contrary, and build for that next market cycle,” Gokal said at the time.

The bear market may put additional pressure on cryptocurrency markets and break current support levels for bitcoin and ether, but some industry analysts see these breakouts as extreme discounts and opportunities.

“Bitcoin may drop to what would be a substantial discount around $10.000, but within the extended bull run it could hit the $40.000 resistance again,” McGlone stated earlier this month.

As for the second largest cryptocurrency, Ethereum may have a bullish scenario amid falling global markets and outperform both bitcoin and equities, McGlone added. “Many things can go wrong with new technology, but we see maturation with a long-lasting downward slope in incremental supply that – if the rules of economics apply – are positive for crypto #2.”

The most important concern for crypto miners is obvious: The market may not go up again next year. But believers and some market analysts believe it will.

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