Will 2023 be the year of Bitcoin [BTC] despite the USA huffing and puffing?
Q1 of 2023 was Bitcoins [BTC] time to shine. The royal coin has not had a favorable run in recent times. Notably, in 2022, Bitcoin’s price fell by 64.02% from December 2021 prices. Losses were compounded throughout the year, with Terra’s [LUNA] crash and FTX’s collapse leaving BTC in the middle of a horrible crypto winter.
In fact, Bitcoin hit a two-year low of $15,480 in November 2022, a decline that was exacerbated by macroeconomic factors. Similarly, the gains in March 2023 were largely caused in part by the government’s assurance that depositors would have access to all their funds after the collapse of Silicon Valley Bank, thus boosting investor confidence.
Joel Kruger, market strategist at LMAX Group, recognized Bitcoin’s 2023 growth as a positive sign, saying:
“The market has done a good job of pricing out most of the downside from the 2022 fallout and has been looking to take advantage of discounted prices and positive news around ongoing institutional adoption.”
However, the possibility of a setback remains due to macroeconomic factors such as interest rate hikes, Federal Reserve decisions and US reliance on the dollar remains widespread. Still, Kruger suggests investors should remain bullish on Bitcoin. Especially as,
“Short-term pullbacks are nothing more than compelling opportunities to build long-term exposure to Bitcoin. Investors are likely to favor a deflationary, fully decentralized asset with limited supply that is built to increase in value over time.”
As we head into Q2 of 2023, bullish sentiments can only prevail, especially with BTC trading at $28,293.31 at press time. It is also worth considering this – Bitcoin’s 3-day MVRV ratio, at the time of writing, highlighted the possibility of a sustained northward trend.
Source: TradingView
Crypto’s growth and macroeconomic factors
2022 was undoubtedly crypto’s scariest year, with Terra and FTX crashing in May and November 2022 respectively. This was the perfect time for the naysayers to emerge, proclaiming that the end of crypto was near. This fear sent the industry reeling, dragging it down to a position it has been struggling to extricate itself from at the time of writing.
However, the music changed in 2023 as there was an increased focus on ensuring these events do not take place again. But for that, the current crypto structure would have to undergo an upheaval. This resulted in demands for increased accountability. Famously, said US Securities and Exchange Commission Chairman Gary Gensler,
“This asset class is rife with fraud, fraud and abuse in certain applications.”
The SEC, in an effort to crack down on unregulated securities, filed suit against Ripple Labs]in 2020, alleging that the latter participated in the sale of unregistered securities. The outcome of this lawsuit will set the tone for the entire crypto space. Considering the US’s status as a superpower, it will affect crypto globally as well.
If the SEC wins this case, most cryptocurrencies will have to fall under a “security” of some kind, marking it under a regulatory agency’s umbrella.
But what about cryptos like Bitcoin, whose owner is unknown? It is a question that is currently unanswered.
Regulations across countries
The US is not the only country looking to regulate cryptocurrencies through the SEC, as other countries have also started looking to govern it through CBDCs. By 2023, 114 countries had begun exploring the use of CBDCs. 20 countries reached pilot or launch phases, including Australia, Thailand, India and Russia. Jamaica is the latest country to launch its CBDC, titled JAM-DEX.
The most worrying part of it all, however, is that the US continues to lag behind. The frameworks it has put in place, like the Biden ordinance, have been few and far between. Despite these small steps, no one has taken any concrete action yet. This is a worrying sign not only for US crypto investors, but also for most countries.
The United States, considering its status as a superpower, will lead the definition of what a cryptocurrency is. In fact, part of the reason global adoption has not accelerated as it should have been due to the world’s continued reliance on the USD as a reserve currency.
Consider this – If the US issues a dollar-based CBDC, it will significantly change the way countries trade with each other. International trade would be depolarised, leading to increased liquidity. The debate about cryptocurrencies would largely cease, as most investors would prefer a government-backed and stable investment option with low volatility.
What is the reason for the delay?
For one reason or another, US lawmakers are unable to agree on uniform regulation for the handling of cryptocurrencies. In a nutshell, this has led to delayed adoption.
For example, SEC Chairman Gary Gensler, a public advocate for crypto regulations, has suggested,
“For those who want to encourage innovations in crypto, I would note that throughout history, financial innovations do not long thrive outside of our public policy frameworks.”
As US lawmakers continue to disagree on crypto regulations, it begs the question – Will this back-and-forth affect America’s stance as a global financial hub? There is no doubt that recent state laws (such as the recent Arkansas bill) have provided some clarity regarding states’ views on crypto. However, the arrest of Sam Bankman-Fried, a major crypto player in Washington, has discouraged lawmakers from coming right out and voicing their opinions about the industry. This is to the great detriment of all those who are waiting for regulatory clarity from the country.
However, this faltering adoption is not a sign of discouragement. For example, this 23-year-old article referred to the Internet as a “passing fad” and a “poor substitute” for the real world. Now, fast forward to 2023 and people are buying houses on DEXs like RWAs.
Bitcoin’s rise is a testament to investor confidence that the royal coin will remain prevalent for the long term, and its 2023 gains are just the beginning. Regardless of what the macroeconomic events are, BTC is likely to stay true to its “king coin” status, even if it may falter at times.
