• Bitcoin had a difficult year in 2022, losing 65% of its value compared to 2018’s 73% drop.
• Arcane Research predicts that contagion effects will continue in early 2023, but the majority of the year will be less frantic than the past three years.
• The firm expects Bitcoin to finish 2023 with a higher price than it did at the start.
The past year has been a difficult one for Bitcoin, with the digital currency losing 65% of its value year-to-date (YTD). This is only slightly better than 2018’s performance, when BTC lost 73% in one year. In comparison, physical gold has outperformed Bitcoin significantly in this period of high inflation, making the “digital gold” narrative premature.
According to a year-end report by Arcane Research, the crypto winter was essentially fueled by tightening macroeconomic conditions and crypto-specific leverage, combined with poor risk management by core market participants. BTC was highly correlated with the US equity markets, with two distinct outliers in June and November resulting in the coin’s underperformance.
Looking ahead to 2023, Arcane Research predicts that contagion effects will “probably” continue in the early part of the year. However, the firm expects that the majority of 2023 will be less frantic and uneventful compared to the past three years. As such, the firm believes that BTC will trade in a “mostly flat range” during the year, with a higher price at the end of 2023 than at the start.
This prediction is further supported by the fact that the US economy is expected to continue to improve in the coming months, with vaccination numbers rising and the government offering more stimulus checks. This could help to increase the demand for Bitcoin, potentially pushing the price higher. In addition, institutional investors are expected to continue to enter the market, which could also provide a strong tailwind.
Overall, while the past year has been a difficult one for Bitcoin, it appears that the coming year could be more positive. With the US economy continuing to improve and institutional investors continuing to enter the market, the digital currency could end the year with a higher price than it started with.