Bitcoin remains the largest cryptocurrency in terms of marketcap. It’s no surprise that the upward and downward movement of its price affects the entire crypto market. After tanking at an all-time-high of $69,000 in 2021, it fell and ranged below the $28,000 mark in H2 of 2022.
Going into 2023, and bearing in mind the economic situation in the traditional financial world, Bitcoin Magazine came up with seven indices that should be considered by Bitcoin investors before taking any decision related to the asset.
Number of Bitcoin holders
Staying the obvious, Bitcoin Magazine revealed that the number of Bitcoin holders have increased over the years. There are more new unique addresses holding at least 0.01, 0.1, and 1 bitcoin which “shows that bitcoin adoption continues to grow”.
The measurement by Bitcoin Magazine also revealed that as these increased addresses are holding bitcoin in self-custody devices, the value of bitcoin held by long-term holders is up to 14 million bitcoin. Therefore, there is a higher likelihood that 72.49% of all bitcoin in circulation will not be up for sale any time soon.
The price of the asset for a while has not affected how holders interact with it as they are keen to buy and hold despite the fluctuations. Bitcoin Magazine believes that this is a positive sign towards increased adoption for the “digital gold”.
Bitcoin as store of wealth
According to Bitcoin Magazine, for any asset to become true money, it has to undergo these three stages of monetization – store of value, medium or exchange, and unit of account. Although bitcoin is in the stage of the phases, it surpases real estate, gold and equities looking at it from the “store of value” lens. Why?
“It is more liquid, easier to access, transport and secure, easier to audit and more finitely scarce than any other asset with its hard-cap limit of 21 million coins,” Bitcoin Magazine said. As progress is made to the second and third phases, the “digital gold” will gain more acceptance in the global financial market.
To buttress this standpoint more, Bitcoin Magazine highlighted that despite the wave made by bitcoin around the world, it does not represent up to 1% of global wealth that is shared by other assets mentioned above.
Thus, if it gains that acceptance, takes up to 1% of global wealth, it will be at a $5.9 trillion marketcap, and priced at more than $300,000 if all things are constant, the crypto magazine explained.
Transfer volume of bitcoin in 2022
Do you know that the value of transactions in USD cleared using bitcoin has increased over years? Bitcoin Magazine revealed Bitcoin settlement in 2022 was up by 102% when compared with data of 2021. One reason behind this is the strong censorship feature that bitcoin has.
This censorship resistance has made it impossible for any government or system to clamp down on the infrastructure behind bitcoin. According to the report, “despite the drop in price” of the most expensive cryptocurrency in the world, “the Bitcoin network transferred more value in USD terms than ever before”.
Best buying opportunity?
Looking at the price analysis of bitcoin over years, one will realize that bitcoin is at one of the lowest points in terms of pricing since its creation. “The bitcoin realized market cap is down 18.8% from all-time highs, which is the second-largest drawdown in its history,” Bitcoin Magazine said.
Projections from the report said that investors have one of the best opportunities to invest in bitcoin due to the price at which it stands which is rare and may never happen again.
However, investors should also bear in mind other economic factors that can affect at the macro level including the fact that “2023 likely brings about bitcoin’s first experience with a prolonged economic recession”.
Bitcoin and macroeconomics
In view of the advantages, opportunities and value of bitcoin for investors, there is a greater need to observe how macroeconomics will impact the cryptocurrency in 2023.
Creation of new monetary policies, Central Banks orchestrating new systems, the US and the EU developing a new roadmap, Chinese de-dollarization, and meadies taken by the Bank of Japan are some of the concerns investors should be aware of when investing in 2023, Bitcoin Magazine pointed out.
Bitcoin does not operate on its own, independent of external market forces, and this can be seen in the 2020/2021 market boom that was sparked by excess liquidity from COVID-19 relief, while the bear market effect in 2022 can be attributed to removal of liquidity from the economy.
In essence, while bitcoin is not totally dependent on cash flows in the economy, “it will certainly be impacted by this repricing of global yields”.
Positive mining bitcoin hashrate?
Mining hashrate of bitcoin is related to the difficulty in creating a new bitcoin currency using mining devices such as ASICs. In 2022, the hashrate increased, making it more difficult to mine bitcoin and the blockchain more secure.
According to the report, despite the increase in the difficulty to mine bitcoin, miners have shown more dedication by buying more advanced equipment to mine the cryptocurrency. The report puts the estimated increase in mining equipment at five.
While this proves to be good for the network, it’s not good for the miners as the reward for mining has gone down, the price of bitcoin has gone down, and the current energy crisis.
“We expect more of these companies to face challenging conditions because of the skyrocketing global energy prices and interest rates mentioned above,” Bitcoin Magazine said.
More scarcity, more self custody
The year 2022 broke the camel’s back like 2020 did during COVID. “2022 was the year of getting bitcoin off exchanges,” Bitcoin Magazine said. The reason and meaning of this is that due to the collapse of centralized exchanges in 2022, there was a massive move of Bitcoin from centralized platforms to self custody and the impact might be more scarcity of bitcoin.
Holders moved 572,118 bitcoins worth $9.6 billion from exchanges in 2022 which is the largest in the history of bitcoin and the second largest in terms of dollar value to the same scenario in 2020. “11.68% of bitcoin supply is now estimated to be on exchanges, down from 16.88% back in 2019,” the findings show.
The further impact of this is not known yet but it’s clear that bitcoin holders are not ready to allow their “gold” to go away.
Bitcoin looks promising especially as it hits a recession rock that will be combined with numerous macroeconomic activities by government institutions. It will be tough to project the future perfectly but let these factors guide your investment strategies.