Over the past few years, cryptocurrencies have gradually become more popular among investors. While in the beginning, they were primarily the domain of those with previous knowledge of them, things have gradually changed, and cryptocurrencies have begun attracting an ever-growing number of investors. There are many reasons for this change, such as crypto’s reputation as an inflation-resistant asset and its connection to technology that many researchers believe is set to change the world. Everybody wants to be directly involved with the future, so it only makes sense that cryptocurrencies have gradually become more noticeable to the average investor who has decided to diversify their portfolio by including digital assets.
However, 2022 has been a challenging year for the cyber money and tokens market. Traders have seen their capital rates plummet as prices fell, in some cases dropping as low as 60% compared to earlier values. The ETH price took several hits, making many investors feel unsure of their portfolios’ integrity. However, since the beginning of 2023, the situation has improved quite dramatically, with cryptocurrencies now recording steady growth. The prices are not yet back to their original levels, a good thing considering that sudden change would be unsustainable in the long run.
However, will this trend hold? With spring just around the corner, can investors be confident that crypto prices will defrost and continue growing over the following months?
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Market themes
While cryptocurrencies are still quite volatile compared to other assets, there are trends within the digital asset market as well, which set the scene for the ways in which the market changes. The most significant difference within the crypto environment is that it is increasingly used in the broader economy and has become accepted into mainstream markets. Corporations and organizations have seen the promise of crypto and are beginning to invest in it at an increasing pace. This has decisively changed the crypto environment, contributing to different price fluctuation patterns, owing to the fact that institutional investors typically have much larger amounts of capital to invest compared to the average trader.
Many businesses have also begun accepting crypto payments from customers, making digital money transactions more appealing to the general public. The initial purpose of blockchain-based currencies was to support daily transactions in the same way as fiat currencies. This hasn’t been the case since the beginning, as digital money had to go through a few intermediary steps to reach the level where it is now. Nowadays, some large businesses have already included cryptocurrencies in their payment options, alongside cash and credit. While still mainly used to power ecommerce transactions, the opportunity to pay in brick-and-mortar stores using your crypto is also becoming more common. When investors see that there are real-world use cases for cryptocurrency, they’re more likely to be invested in their investments.
Regulations
Regulations are also beginning to be more critical in the cryptocurrency ecosystem. Since digital money has become more mainstream, lawmakers have started to notice the need for regulatory practices similar to those implemented for any other financial product or service. While this can help offer some investors some additional protection against unfavorable events such as hacker attacks, many investors aren’t convinced and believe that the change would be an infringement on cryptocurrencies’ core characteristics, which attracted the attention and engagement of investors in the first place.
Some of the aspects the regulations would likely include are:
- Protection of investors’ money in case an exchange crashes, as was the case in 2022.
- Strengthen data reports and practices within crypto businesses.
- Prevent schemes in which organizations inflate the value of assets for profit.
- Ensure promotions remain clear, and there’s no reason to believe there’s anything deliberately misleading in the marketing strategy.
Economy
While the crypto market was largely separate from traditional stocks and bonds during its first years, this has gradually changed over recent years. Now, the values of crypto records depend on the stock market as well. Some investors are displeased with this change, believing that crypto becoming more popular has also made it more vulnerable. This change means that cryptocurrencies are now more sensitive to regulatory and geopolitical pressures. As such, if you’re looking for ways in which the market will change over the next few months, you must also keep an eye out for changes within the other markets.
In 2022, inflation rates rose globally, peaking at levels as high as 15% in some areas. Prices for consumer goods and services have been the highest they’ve ever been in decades in some parts of the world. The prices of oil, gas, real estate and living costs have also skyrocketed, the markets were affected, and crypto suffered. Throughout 2023, inflation is likely to fall, according to analysts. However, the speed at which this will happen is still a topic of significant contention.
However, while a decrease is expected, many economists believe that the resulting values will remain relatively high. For instance, the Bank of England thinks that inflation will remain above its target of 2% by the end of 2023, with the rates believed to stagnate somewhere around 4%.
The future of crypto
Since the change appears to be primarily positive, you can expect to see an improvement in the price of cryptocurrencies as well. However, how fast or slow that will happen remains to be determined. Currently, there’s no way to estimate the trends the market will embark on with absolute certainty. If you notice anyone claiming to know how the market will develop and urging different types of market action, it’s better to keep your distance. It can very well be a trap or a scheme to get someone rich quickly.
The best thing to do regarding crypto is to keep your eyes wide open and be ready to act quickly. You must be equipped to face any challenges and be prepared to make swift decisions as the markets change. And also, don’t forget to maintain objectivity as much as possible. It’s tough being an investor, yet the rewards are worth it.
