Here’s what 2023 holds for Bitcoin, according to BitMEX
Cryptocurrency exchange BitMEX outlined some possible scenarios that could play out in the coming months for the cryptocurrency industry.
It believes that the Federal Reserve will most likely halt its interest rate hikes by the end of the year, which will trigger a flow of funds into global capital markets and risk-off assets. Cryptocurrencies, such as bitcoin and ether, can be useful in such cases.
Scenario #1
According to BitMEX, the US Federal Reserve will most likely slow down rate hikes or stop them altogether by the second half of 2023 and even begin to reduce them towards the end of the year. Currently, the percentage is 4.75%, a figure last seen during the 2008 financial crash.
The company argued that such a policy change could promote a market recovery and increase interest in the cryptocurrency sector, as investors are likely to seek exposure to riskier assets in search of higher returns.
“When it comes, the pivot will help resume the flow of funds back into global capital markets and trigger a rally, including in cryptoassets.”
CEO Stephan Lutz believes central banks will have no other chance but to abandon their aggressive rate hike strategy soon, because otherwise the policy could result in “a further decline in real economic activity.”
Most market participants see the Fed raising interest rates by 0.25% later this week. Some experts, such as “Bond King” Jeffrey Gundlach, believe this will be the last such move, while Anthony Scaramucci thinking the pivot comes when inflation in the US cools to 4-5%.
Scenario #2
Despite classifying the chances as slim, BitMEX said there is an existing risk that the Federal Reserve will continue to raise interest rates beyond 2023 due to fears of potential stagflation.
It estimated that such a decision would curb investor appetite for various asset classes, including cryptocurrencies, and would lead to a slowdown in the industry:
“If stagflation occurs in 2023, it will dampen business and consumer sentiment, hurting retail and institutional investor appetite for a range of asset classes, including crypto.”
BitMEX said such a “surprise scenario” could lead to a shock drop in bitcoin’s price to as low as $5,000, while most investors could focus on “long-established safe havens” such as gold. Remember, the primary cryptocurrency has shown an impressive comeback after the devastating 2022, increasing its value to over $28,000 (an increase of almost 70% since January 1st).
The research stated that possible stagflation is unlikely to hit the economy due to several indicators: the slowing inflation in the US and China’s opening to international trade after the latest COVID-19 lockdown.
Scenario #3
BitMEX claimed that 2023 could see several developments that could repair crypto’s legacy and make it a less risky asset class.
“Helped by the efforts of market and industry participants, legitimate use cases for the industry are multiplying.”
By realizing the broad interest and use cases of digital assets, watchdogs can unite and establish an international regulatory framework that can provide investors with maximum protection while allowing the industry to thrive and innovate.
“In addition to this, interest in the world of decentralized finance will only grow as the industry emerges from the crisis with a list of strong players with legitimate business models. This will serve to offer a number of relatively investment options with lower risk than previous years,” BitMEX added.
The company expects many countries from the Western world to jump on the cryptocurrency bandwagon in one way or another. It also sees totalitarian nations that have previously banned the use of digital assets, such as China, continue to develop CBDCs.
This could give the Chinese a chance to be part of the digital revolution. Russia, Thailand, Hong Kong and many other nations have also shown intentions to roll out a digitized version of their official currency.
