By almost every measure, 2022 has been a disaster for cryptocurrencies. It’s not just that the crypto market has lost nearly $2 trillion in total market cap. Bitcoin (Bitcoin -1.08%) When ethereum (ETH -1.89%) Both have decreased by more than 65% over the years. I also completely lost faith in the system itself.
Crypto lenders, stablecoins, and cryptocurrency exchanges collapsed throughout the year. And it turns out that many of the most high-profile names in the cryptocurrency industry are just scammers (or worse).
But heading into 2023, I’m still bullish on the long-term outlook for cryptocurrencies.
volatility
Longtime cryptocurrency investors know that volatility has always been a feature of cryptocurrency markets. This is nothing new. It is possible to point out that Bitcoin has had equally bad years in the last decade, even though he fell 65% in one year.
For example, Bitcoin dropped 58% in 2014 and 73% in 2018. In both cases the cryptocurrency went up and then really went up.
Despite both of these crashes, Bitcoin was the world’s best performing asset class for the decade from 2011 to 2021, delivering an annual return of 230%. Think about it for a second. Bitcoin has crashed twice in his decade and still beats every other asset class in the world.
This is one of the main reasons I remain bullish on Bitcoin. Bitcoin has a historical track record of recovering every time the major crypto markets have fallen. In other words, I have learned to stop worrying and love volatility.
New use cases for crypto
The crypto market continues to evolve and find new use cases. When Bitcoin came out in 2009, Satoshi Nakamoto envisioned peer-to-peer electronic cash systems as his primary use case. By the time Ethereum came along in 2015, the idea had evolved. With the emergence of non-fungible tokens (NFTs), Web3 games, the Metaverse and decentralized finance (DeFi), new smart he contracts ushered in an era of innovation.
Image Source: Getty Images.
I believe that new use cases will continue to emerge in the future. For example, one line of thinking suggests that we will see a “tokenization of the world” where all physical assets in the world will eventually turn into partial, shareable and tradable digital assets. Decentralized exchanges are already working on this technology and these digital assets can be traded just like crypto tokens.
At the very least, we can expect a fundamental improvement in cryptographic payment technology and the adoption of cryptocurrencies such as Bitcoin for online payments. With each new use case, the value of the entire crypto market will continue to grow.
Arrival of institutional investors
Until recently, the cryptocurrency market was almost exclusively the domain of small retail investors. So it was all too easy to be skeptical about the overall growth trajectory of cryptocurrencies. Prominent institutional investors often say that they see no purpose for cryptocurrencies other than money laundering and other criminal activities.
From this perspective, it was all too easy to be bearish every time the crypto market crashed.
But that is no longer the case. Wall Street is increasingly embracing blockchain and crypto, but large institutional investors are now joining the mix. For example, this summer BlackRock Co., Ltd. (black -0.10%)the world’s largest asset manager, coin base (coin -8.00%)the largest US-based cryptocurrency exchange.
As BlackRock acknowledged, institutional investors wanted cryptocurrencies and Coinbase wanted a natural partner. With the advent of so many new institutional funds, I believe we will see improved risk management and new investment products in the crypto world.
A much brighter 2023
For all these reasons, I think 2023 will be a much brighter year than 2022. Perhaps next year a new cryptocurrency law will be enacted, greatly increasing the transparency and certainty of the cryptocurrency market. FTX Market prank. This, too, should help reassure nervous investors.
Of course, cryptocurrencies remain risky and volatile, but if new institutional money flows into cryptocurrencies, combined with increased regulatory oversight and clarity to keep bad actors out, , which I think helps mitigate some of that risk. The innovative nature of the cryptocurrency and blockchain industry will eventually bring back the bulls that hibernated during the long crypto winter.