Will 2023 Be The Year Of Recovery Or The End Of Cryptocurrencies?

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If something marked 2022, it was the crisis and the fall in the value of Bitcoin. Will 2023 be the year of cryptocurrency recovery or its final fall?


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Latinamerican Post | Santiago Gómez Hernández

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Leer en español: ¿Será este 2023 el año de la recuperación o el fin de las criptomonedas?

A few years ago, Bitcoin became the symbol of the power of cryptocurrencies. A virtual currency, without the control of a central bank and that, allowed free trade between people, was sold as the utopia of libertarians (although also for some criminals who appreciated the non-availability of property). Even El Salvador bought a large part of its national reserve in Bitcoins. However, in November 2021 cost more than 64 thousand dollars, and at the end of 2022, it only had a price of less than 17 thousand.

Also read: Did Nayib Bukele put the Salvadoran economy in check before the fall of Bitcoin?

Bitcoin was the first international digital currency that was backed by blockchain technology. The general public got so excited about this new technology that it sent its value of it skyrocketed. However, the coin was never backed by anything, and that suggested that the deal would always depend on the bubble that is created around it. The more people value the asset, the more it will cost, but it will never have a real backer that can answer that value. Neither support nor institution.

This did not happen sporadically. The market was losing confidence in these assets. It went from being a currency with which you could buy a Tesla, to a source of uncertainty for its investors. It is not for nothing that today it is considered a high-risk investment, but not as a stable asset that you could buy as a way of saving or accumulating wealth. Cases of hacking and theft of virtual wallets or scams (without being able to trace) ended up filling buyers with doubts.

However, the most significant blow it suffered may be the one that occurred with the collapse of the FTX company. This corporation was dedicated to the purchase and sale of cryptocurrencies, especially Bitcoin. The waste of investors' money ended up giving the final blow to a company that collected the savings of (possibly) hundreds of thousands of micro-investors. This is why it has opened the door to possible legislation that limits and regulates crypto, although this is still speculation.

Today, the big Bitcoin investors defend its usefulness and think about holding and not selling. Finally, that is the normal behavior of investors. They know that selling today would mean losing millions, while holding the asset, waiting for a new rise and subsequent recovery may be the best strategy.

A Light Of Hope

However, despite the great complaints that cryptocurrencies have, especially Bitcoin, some trust a relative recovery. If it is true, it is healthy to stop believing that “crypto” is made to make their investors rich, they are not necessarily destined for complete failure.

Maybe, in the end, the future of crypto will stop being what it is today: a pyramid model in which old investors benefit from new ones. It may be that in the future (not necessarily 2023), crypto (not necessarily Bitcoin) will be another currency, similar to the dollar or the euro. May it help you to save in a country with hyperinflation (like Venezuela) in which your savings in bolivars are useless. Or to transfer money in the form of remittances without having to pay intermediaries or sanctions from countries, like for people in Iran or Russia, ordinary citizens who depend on money from abroad.

More Friendly To The Environment

It is that, even, the excessive amount of electricity necessary to "mine" Bitcoins had been a climate problem. At that time, many people even dismissed the use or proliferation of cryptocurrencies because to obtain Bitcoins, it was necessary to solve almost impossible mathematical formulas to sustain the Blockchain. For this, many investors bought dozens of super-powerful computers and dedicated themselves to deciphering these formulas. The one who did it first kept the prize. This represented high contamination. It is even speculated that the energy consumed by the cryptocurrency industry is comparable to that of a country like Argentina.

Precisely, a change that gives hope to the future of crypto comes from the hand of Etherium, another famous cryptocurrency that recently announced a change in the way it is "mined". It will no longer be necessary for several computers to compete to solve complex mathematical operations, but now only "Proof of stake" is awarded, which is similar to investing a small sum to verify a small part of the data and then a computer is awarded. They no longer need to compete. This ends in a reduction in energy expenditure.
However, it is not certain that these great solutions will arrive in 2023. What yes, is that the disasters of FTX, or that of Terra Luna, or the hundreds of scams, will make this year begins to remain cautious within the market, where it is possible that the prices of the cryptocurrency do not reach records seen before.