- Bitcoin price had its second-worst annual performance in 2022.
- BTC will recover in 2023 if the Fed eases and clear regulations comes in.
Bitcoin price collapsed in 2022 as the industry battled multiple fights like the collapse of Terra and FTX and an extremely hawkish Federal Reserve. BTC plunged by more than 65% in 2022, one of its worst years on record. BTC to USD was trading at $16,535 while BTC to GBP was trading at 13,675.
Will BTC rise in 2023?
Bitcoin, other cryptocurrencies, and tech stocks faced many battles in 2022. First, the war in Ukraine pushed inflation to the highest level in more than 4 decades. As a result, most global central banks, except in China and Japan, embraced an extremely hawkish tone. The Fed hiked by 450 basis points while the Bank of England (BoE) made their biggest rate hikes in years.
Historically, stocks and high-risk assets tend to underperform in periods of high-interest rates. This also explains why the bond market sold-off, with the yield of the 10-year American government bonds soaring to over 4%.
Second, BTC prices reacted to the collapse of platforms like Terra, Voyager Digital, FTX, BlockFi, and Celsius Network. The most recent collapse of FTX was more severe because the company was the second-biggest crypto exchange in the world with a valuation of more than $32 billion. It also drew the biggest regulatory scrutiny in the industry.
Bitcoin price also crashed because of valuation metrics. At its peak, BTC was valued at more than $2 trillion. This valuation was significantly expensive for a financial asset without any major use. This also explains why growth stocks like Tesla and Carvana plunged.
Bitcoin price will rise if this happens
Bitcoin price has faced these challenges in the past. Its price crashed by more than 73% in 2018, making it its worst year on record. The crash of 2022 was worse because of the multiple factors that were in play during the year.
So, will Bitcoin rise in 2023? I believe that it could rise if two main things happen. First, the Fed will need to abandon its extremely hawkish tone during the year. There are signs that this will happen since inflation has started easing in the past few months. It declined to 7.3% in November after peaking at 9.1% in July.
Second, BTC price will recover if we see clear crypto regulations. We believe that regulations, such as those implemented after the Global Financial Crisis (GFC) will play an important role in safeguarding the industry.