Should we expect major investments from 2023 for the cryptocurrency market: analysts’ view
In 2022, more than $30 billion was invested in cryptocurrency startups. This is one of the largest investments in the history of the industry by major investors, and the investment has not been hindered by a prolonged bearish trend and the bankruptcy of many cryptocurrency companies. But will investors be able to surpass the aforementioned figure already this year? Alas, some analysts doubt that prospect. Here’s a closer look at their views.
Note that expectations for 2023 for the cryptocurrency market are rather mixed. For example, Eric Voorhees, the head of ShapeShift, says that Bitcoin could grow as much as $40,000 by the summer, especially if there isn’t another batch of collapses in the industry.
At the same time, former Meta spokesman David Marcus believes that bankruptcies and collapses in 2022 will end up taking several years to restore confidence in the blockchain industry.
Buying cryptocurrencies
Is it profitable to invest in cryptocurrencies?
Experts at analytics platform Galaxy Research released a report the day before with a forecast of key trends for 2023. Head of research Alex Thorne noted in the publication that 2022 was a period of great investment in the industry. The $30 billion investment target is surpassed only by data for 2021 – $31 billion was invested in crypto during that period.
Here’s the relevant graph. It shows that the amount of venture capital invested in cryptocurrency startups exceeded the $30 billion mark in 2022. On top of that, the number of deals for related investments was 2,900.
Volume of investments and number of transactions by year
Unfortunately, the third and fourth quarters of 2022 saw a significant decline in investor activity: in particular, the fourth quarter saw the least number of deals and the least amount of capital invested over the past two years. Analysts predict that this trend could continue into 2023 if macroeconomic conditions do not improve.
Investment volume and number of deals by quarter
Thorne remains sceptical in his forecasts – in his view, start-ups will find it quite difficult to raise funds this year. Here’s a relevant rejoinder from the experts.
In 2023, startups will need to focus on fundamentals, reducing operating costs and increasing revenues.
As a reminder, the need to cut costs in 2023 will also be relevant for large Bitcoin miners. Still, right now the combination of BTC's low cost and high mining complexity makes mining the first cryptocurrency not the most profitable thing to do, so industry giants will have to look for a way out. Read more about their possible moves in this article.
Bitcoin price strongly correlates with volume of investment
The benevolence of US regulators is also worth considering, as America still dominates the crypto startup ecosystem. According to Cointelegraph sources, more than 40 per cent of all crypto venture capital deals last year involved US-based startups. Here’s a relevant cue.
The continued importance of the US to the market and the country’s leading position provide ample reason for US policymakers to clarify and unify rules and regulations for the emerging industry.
The year 2023 will also break another anti-record with as many scandals and crises as last year. Billionaire Mark Cuban voiced this point of view in a recent interview. Recall that he has long promoted crypto to the masses and is in favor of popularizing Bitcoin. However, Mark also sees one of the main drawbacks of the industry – fake trading volumes on centralised exchanges.
This is a practice known in the world of finance as voshtrading. Centralised exchanges can make huge numbers of trades, simulating high activity from traders. In this way the exchange can gain more credibility from the outside, appear in the relevant rankings of various platforms and attract new clients. However, analysts have sounded the alarm in the past: it turns out that wax trading is practiced by most trading platforms. And that’s bad, because fake trading is also banned under US law, meaning regulators could impose additional sanctions on the industry.
Billionaire Mark Cuban
The next biggest thing that will affect the industry will be “detecting and eliminating fake trades on centralised exchanges, Kuban believes. Here’s his cue.
The volume of transactions with virtually worthless tokens is in the tens of millions of dollars. I don’t see how they can be that liquid.
Voshtrading is not limited to centralised exchanges. On 5 January, Quantum Economics CEO and former eToro analyst Maty Greenspan said that 42 per cent of the total volume of NFT transactions did not reflect real trader activity. He also added that voshtrading was being used to hide potential revenue from the tax authorities.
Note that Cuban himself has a mixed reputation in the coin industry. His adventures with the TITAN token, in which he provided liquidity on the QuikSwap platform in the summer of 2021, have been particularly amusing. The annual return on this activity was 206 per cent, and Mark was not embarrassed by this and actively talked about his chosen activity.
But when the project folded, which was hardly a surprise given its rate of return, Mark took it upon himself to criticize the entire decentralized finance industry and call the regulators for help. This makes it difficult to treat Cuban as an expert in the cryptocurrency niche. Additionally, within the industry, most players already know which exchanges are the top, so the story of fake trading volumes to attract attention seems like a relic of the past.
Billionaire Mark Cuban
We believe it is impossible to predict investor behaviour in the cryptocurrency industry as it is not always rational. As the Google Trends platform shows, the popularity of asking about Bitcoin is now at a two-year low. Accordingly, cheap BTC is of little interest to the vast majority of people. But when it starts to set records, that's when mass purchases will begin. Therefore, the only way to find out what people will do in 2023 is in practice.
Related posts
