Many people start the new year with good intentions. Crypto investors are also optimistic. After a disastrous 2022, things can only get better. But not so fast: Bitcoin and Co. are developing further, Altcoin adoption is flourishing and the regulatory level remains exciting. However, the persistently poor macroeconomic situation offers little hope. In addition, internal factors have also been weighing on the crypto market for some time. Will the Bitcoin price fall even lower – or is the worst over?
Internal Threat: Digital Currency Group (DCG)
The collapse barely out of nowhere. In early November, crypto exchange FTX collapsed, dragging numerous other crypto companies to the brink of collapse. Also affected: the Digital Currency Group, the flagship of the crypto industry. Not only does it manage billions of dollars in cryptoassets. It also includes Genesis, the top crypto broker, and Grayscale, the largest crypto wealth manager, among others. Both companies have been confronted with bankruptcy rumors for weeks.
Although FUD and bankruptcy speculation is spreading quickly in the crypto space – thanks in part to Twitter – the allegations weigh heavily on the DCG. The company is said to have sold off massive amounts of tokens from its portfolio. Also, Bitvavo, the most popular Dutch exchange, claims that DCG is not paying them $280 million worth of deposits due to “liquidity issues”. In a letter from late November, the company disclosed that it had more than two billion US dollars in debt.
Should the DCG actually face bankruptcy, this could mean far-reaching effects on Bitcoin and the entire crypto sector. In addition to price losses, there is also a risk of lasting damage to the image of the scene.
External situation still tense
Additional pressure comes from outside. Inflation remains at high levels. At the same time, the war in Ukraine is still raging, while protests in China against Beijing’s strict Covid strategy are causing supply shortages.
In addition, increasing energy costs are a burden for parts of the world’s population. In the US, average prices have risen by around 20 percent since the beginning of last year, hitting many mining companies hard. Most recently, Core Scientific, one of the largest Bitcoin miners in the world, announced bankruptcy. Argo Blockchain, an exchange-listed BTC miner, is also facing financial difficulties.
Together with the massive loss in value of the BTC course, the situation results in a toxic mixture.
If the macroeconomic factors do not ease, the mining industry faces a real crisis. A price movement to the south could be the result.
Bitcoin Forecast: Crypto Winter to 2025?
Taken together, both internal and external factors reflect a precarious position. David Marcus, CEO and founder of Bitcoin company Lightspark, is also preparing for a crypto winter that “could last until 2025”. Included looks he admittedly with suspicion for the next few years. But Marcus encourages long-term investors:
It will still take a few years for the market to recover from the abuses of unscrupulous players and until there is responsible regulation. Consumer confidence will also take a few years to rebuild. But ultimately, I believe this reset will be a long-term benefit for the honest players in the industry.
Whether Bitcoin will drop even lower in 2023 remains to be seen. While a variety of negative factors are weighing on the crypto ecosystem, Bitcoiner confidence seems unbroken. Anyway: Anyone who is convinced of the number 1 cryptocurrency currently has the opportunity to buy “cheaply”. For comparison: the last all-time high is just under $70,000 per BTC. Halving will also play a crucial role in the coming year, as you can read in the latest issue of BTC-ECHO Magazine.
