After the late 2021 crash of the cryptocurrency markets, when bitcoin lost more than half its value, investors and traders wondered whether 2023 would be a year of recovery or further decline. So far, the benchmark has risen more than 30% since Jan. 1, a change that could mean very good things for crypto enthusiasts. But will that mini trend hold or give way to another freefall? There are no surefire ways to predict how the most volatile asset class will behave in the short term or over many years.
However, those who want answers and are ready to get into the market can get a feel for the state of the sector from five indicators. Besides the overall rate of stock market adoption, it’s essential to examine brokerage firm acceptance of virtual currencies, national tax laws, the growth of retail transactions, and any sign of a potential price rebound since the massive 2022 fall. How can all those recent developments impact the cryptocurrency marketplace this year? Review the pertinent indicators and decide for yourself what’s in store for the second, third, and fourth quarters of 2023.
Stock Exchange Adoption
In Israel, regulators are struggling to decide how to classify assets like ethereum and bitcoin. There’s a concerted push by investors and brokerage firms to let people buy and sell digital assets within standard accounts. Recent pushback from Israel’s government is stalling the move as legislators try to categorize the digital currencies as securities, which could essentially decimate the burgeoning marketplace for the top coins. One country is an isolated case, but Israel’s situation is emblematic of what’s going on in dozens of developed nations.
Brokerage Acceptance
Less than a decade ago, many had to look far and wide to find brokers that dealt with cryptocurrency. Slowly, more online, and traditional firms began offering bitcoin, ethereum, and several other major coins as part of their asset menus. Nowadays, account holders who trade cryptos with a regulated broker number in the millions and reside in dozens of nations on several continents.
Gone are the days when casual crypto enthusiasts and more serious traders had to search for top-rated brokers who offered crypto-related services. The overall inclusion of digital and virtual forms of money among more standard assets, like stocks and commodities, has already deeply influenced the broader marketplace. Not only do new account holders expect to see virtual assets on their main menus, but they use the coins to transact retail purchases, fill savings accounts, and make speculative trades.
Tax Laws
Tax laws in the US, Europe, and parts of Asia are teetering on being crypto-friendly. For investors, that means they can freely buy and sell the assets even if they must report the transactions on annual income returns. Governments in developed countries use varying approaches for reporting. Some let citizens categorize their bitcoin and similar holdings as securities, like stocks and bonds, with similar reporting requirements. In 2023, new tax laws in the US and elsewhere could set the stage for long-term stability in the digital currency markets by finally settling the question of how to report assets on official documents.
Online and POS Transactions
The rapid transformation of the online marketplace has helped push non-fiat currencies into the mainstream. Even POS (point of sale) purchases in traditional retail venues have followed the same pattern. More merchants are willing to accept crypto as a valid form of money. Most of the large online retailers are adding the method to their shopping and payment carts, while convenience stores and brick-and-mortar sellers are doing the same. Everyday transactions represent a huge growth area for ethereum, cardano, and several other leading digital assets.
Market Rebound & Stabilization
The prices of top coins have already begun to rebound substantially since the beginning of the year. While they have not recovered from the late 2022 selloff and crash, some have posted significant gains since Jan. 1. Bitcoin has added nearly a third to its total value in that time. It’s worth noting that even amid a historic fall late last year, the volatile segment has achieved a degree of stabilization.
Looking at recent charts of the top coins, investors could make an argument that prices have at least stabilized or bottomed out. Whether a longish period of stability turns into a recovery or rebound is yet to be seen. However, other trends in the niche give market watchers reason to be optimistic. Tax legislation and government regulation are still the big question mark. From a consumer’s point of view, there’s been a powerful move toward general acceptance of virtual money.
