Bitcoin and the entire cryptocurrency space had a bumpy ride throughout 2022. The world’s leading cryptocurrency began the year exchanging hands around $46,700 and ended the year 2022 trading at $16,547.50, which represents a 64.57% decline. Consequently, the coin’s market capitalization took a tumble from around $900 billion on January 1, 2022, to end the year at around $320 billion.
The same was the story with the entire cryptocurrency market capitalization. The cryptocurrency market capitalization started the year 2022 with a market capitalization of $2.2 trillion and ended the year trading at $795 billion.
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This means the cryptocurrency market lost 63.86% in the year 2020 as contractionary monetary policies made investors weary of risky assets like the cryptocurrency space.
Reliving 2022 price predictions: While Bitcoin’s drop-in price could be attributed to the extraordinary circumstances that the entire cryptocurrency market has been through this year, it is important to reevaluate the 2022 price predictions made by various market entities.
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S2F Model: One of the most popular predictions was that of analyst PlanB’s Bitcoin Stock-to-Flow (S2F) model, which predicted that BTC’s price would trade at nearly $110,000 as of December 2022. Unfortunately, the cryptocurrency finished the year trading at almost 85% off target, which raises questions about the validity of the price model.
Stock-to-flow models are generally used to price commodities in the traditional markets, as they account for two variables related to an asset: stock and flow. “Stock” refers to the total existing supply of the asset, and “flow” refers to the new supply of the asset created each year.
Antoni Trenchev, the Co-founder and Managing Partner of digital asset management platform Nexo, listed some of the factors that could influence Bitcoin to include market demand, regulatory changes and technological developments. He added that though the S2F is an important tool for predicting Bitcoin price, it is based assumptions.
Other models: Besides S2F, other models have been used to attempt to predict the price of Bitcoin in the near and distant future. Two popular ones are Elliott Wave Theory and Hyperwave Theory. While both also find their roots in traditional financial markets, their success in predicting the price of BTC has been relatively limited as well.
What you should know: Cryptocurrencies only began their journey as an asset just over a decade ago, and it is safe to say that they are still in the nascent stages of price discovery when compared with commodities like gold or silver and other leading technology stocks like Apple and Microsoft.
Thus, while there are various BTC price predictions. It is essential to remember the limited availability of cyclical data to factor into these models. Trenchev added that many different models and approaches can be used to try to predict the price of Bitcoin.
Some people use technical analysis, which involves studying historical price and volume data to identify patterns and trends. Others use fundamental analysis, which involves evaluating the underlying factors that can affect an asset’s demand and supply. No single model or approach is universally considered to be the most reliable for predicting the price of Bitcoin, and it is crucial to consider a range of factors when making any investment decisions.
One important aspect that could change the trends for the price of Bitcoin is utility. Since Bitcoin is not a smart contract-compatible network, the asset’s utility has been limited to a payment rail. That is slowly beginning to change, with Bitcoin now finding more utility than ever before, supported by the Lightning Network (LN). LN is a layer-2 payment protocol built on top of the Bitcoin network that enables fast, seamless peer-to-peer transactions. It helps improve the scalability of the network enormously.
Most recently, Michael Saylor’s MicroStrategy announced that it plans to release Lightning Network-powered software and solutions in 2023. Michael Saylor is a strong Bitcoin advocate and his company is one of the largest corporate entities holding Bitcoin on its balance sheet. Despite the market decline seen in 2022, MicroStrategy continues adding Bitcoin to its treasury.
Between November 1st and December 21st, 2022, the company acquired 2,395 BTC at an average price of $17,181 for a total of $42.8 million. For tax reasons, it sold 704 BTC at $16,776 per coin for a total of $11.8 million on December 22nd. As a repurchase, the company bought 810 BTC on Dec. 24 for $13.6 million in cash. According to data from BitcoinTreasuries, this puts the firm’s holdings at 132,500 BTC, worth around $2.2 billion.
Bitcoin price expections for 2023: Here is a look at some price predictions for Bitcoin in 2023.
Simon Schaber, the Chief Business Development Officer of Spool, explained:
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“Over the course of 2023, the price of Bitcoin should return to a reasonable 25000-30000 U.S. Dollar range, due to a combination of factors. Firstly, as central banks continue to tighten rates, investors will be looking for alternative investments with higher returns, and Bitcoin has been the best-performing asset of the past decade. Secondly, technology stocks have been underperforming recently, and investors may be looking for other options to diversify their portfolios into risk-on asset classes. These two factors combined will contribute to a reasonable but slow increase in the price of Bitcoin over the next year as we are fighting our way out of this recession.”
James Wo, the Founder and CEO of Digital Finance Group explained:
“External reasons like inflation showing moderation, interest rate slowing, energy crisis getting better, and receding recession fear for the US all leave the door open to BTC price. Moreover, a halving of bitcoin production will occur in 2024. 2023 could see the BTC price rising to $30,000.”
Important Note: Investors should not view this article as investment advice and should do their research and consult the services of a professional financial advisor.
