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While 2022 may have been a bad year for stocks, it’s been absolutely atrocious for cryptocurrency.
Stocks are on a big losing streak this year, with the S&P 500 on course to close the year with a 17% loss. The picture is even grimmer for Bitcoin and other leading cryptocurrencies.
As of writing, BTC is down 64% on the year and ETH is down 66%. Going further out on the risk curve, most other major altcoins are down more than 90%.
Remember when inflation was transitory and the Federal Reserve was holding rates at zero? What a difference a year makes. In January 2022, Ethereum (ETH) was worth more than  $5,150 ($3,800 USD) and Bitcoin (BTC) was $65,113.20 ($48,000 USD)—and the Fed’s war on inflation is the main reason both leading coins are down so sharply.
But not only. The last 12 months have been strewn with crypto meltdowns, bankruptcies and chaos, so the losses should not be surprising to anyone. Now the question is whether all this market chaos will continue in 2023, and how long the crypto winter might last.
Cryptocurrency is no stranger to boom and bust cycles. A quick look at the price history of Bitcoin—the benchmark for the entire industry—illustrates the point:
Many analysts believe this pullback is different, thanks to the struggles of the wider economy.
“The ongoing crypto winter could last longer this time,” says David Kemmerer, CEO of CoinLedger. “That’s because of macroeconomic factors: 40-year highs in inflation, rising borrowing costs and political instability after Russia invaded Ukraine.”
Because of its brief history—Bitcoin has only been around since 2009, launched in the wake of the Great Recession—crypto market downturns have not coincided with a bear market in the wider financial space until very recently.
Financial markets enjoyed a long bull market from 2009 until the end of 2021, only briefly interrupted by the Covid-19 pandemic recession in early 2020. In fact, the stock market opened this year up more than a staggering seven times from the lows of March 2009, which was only two months after Bitcoin was launched.
But the dual headwinds of high inflation along with interest rate hikes from the Bank of Canada (BoC) and the U.S. Federal Reserve have given both stock and crypto markets a one-two punch. Risk assets like stocks and crypto suffer when interest rates rise.
That’s because higher interest rates suck liquidity out of the economy, and assets furthest out on the risk spectrum get hit hardest. The same phenomenon that’s hurting crypto is depressing the value of tech stocks. Meta (-67%), Netflix (-52%) and even Apple (-22%) have also felt the brunt of the downturn.
To answer the question of how long the crypto winter will last means you need to understand how long elevated inflation will keep the BoC and the U.S. Fed’s hawkish monetary policy stance in place. Easing inflation and falling rates are among the only things that can help crypto now.
“The last bear market was over two years long. We’re only a year into this one, and the macroeconomic climate is significantly worse,” says Nick Saporano, CEO of decentralized payments provider Divi Labs.
Bitcoin is ending the year at around $22,777.69 ($16,800 USD), down from about $26,440.44 ($19,500 USD) on the eve of the FTX crisis. If contagion continues to reverberate from FTX’s bankruptcy, BTC has more room to fall.
Even Cathie Wood, CEO of Ark Invest and a well-known Bitcoin advocate, acknowledges that large financial institutions may take a step back from crypto in the near term because of FTX.
Despite standing by her BTC prediction of $1 million USD by 2030 in a recent Bloomberg interview, Wood said, “The one thing that will be delayed is perhaps institutions stepping back and just saying, ‘OK, do we really understand this?’”
With crypto’s reputation badly dented by the crises and scandals of 2022 and wider markets hurting, another leg downward to $13,559.20 ($10,000 USD) may not be so far-fetched for BTC in 2023.
JPMorgan Chase & Co. analysts agree that the bottom is not in yet. The bank sees Bitcoin’s floor at around $17,630.80 ($13,000 USD), with “a cascade of margin calls” across the market following recent events.
Strategists also use Bitcoin’s production cost to forecast how far prices could fall. “At the moment, this production cost stands at $20,339.18 ($15,000 USD), but it is likely to revisit the $17,630.80 ($13,000 USD) low seen over the summer months,” the JPMorgan team stated in a note.
Where Bitcoin goes, Ethereum typically follows—or at least that has been the case so far.
After the Ethereum merge in September 2022, a major network overhaul for the second-largest crypto by market capitalization, some analysts are speculating that the price action of the pair could soon decouple.
“ETH is yet to benefit in terms of value from the recently launched proof-of-stake merge,” Kemmerer says. “Part of the reason is because of the crypto winter.”
Kemmerer believes the crypto could rise as high as $3,390.26 ($2,500 USD) in the next six months. While this is an aggressive bull case, the fact remains that the same developments driving Bitcoin’s price are impacting ETH. The macroeconomic climate must cooperate for upside gains to return.
If it doesn’t, Ethereum will likely fall further. Having dropped below $1,356.10 ($1,000 USD) in June, it would not be surprising to see a three-digit price for ETH again in the next six months, should more negative catalysts crop up.
As bad as it’s been for Bitcoin and Ethereum in 2022, the situation has been significantly worse for other speculative altcoins.
While the bear market is raging, altcoins are not where investors probably want to be, and that predicament won’t change anytime soon. Many altcoins are facing an uphill battle to establish legitimacy during the bull market, a task that has proved harder now with less liquidity in the market.
Until Bitcoin and Ethereum recover, altcoins will continue their downward trend. And much like bear cycles of days gone by, many will cease to exist entirely.
Stablecoins represent an even more interesting case for 2023.
Crypto exchange Binance delisted several stablecoins in September, including USD Coin (USDC), the fifth biggest cryptocurrency at a market cap of $58 billion ($43 billion USD). Circle, creator of USDC, announced shortly after that they would launch a euro-backed stablecoin on Solana (SOL) in the first half of 2023.
Some analysts are predicting that competition could promptly pick up even more. This is due to the growing number of  American state-sponsored stablecoin projects, known as central bank digital currencies (CBDCs).
Canada announced in November 2022 that it was launching a consultation on crypto, stablecoins and CBDCs. The Bank of Japan is piloting a rollout with major banks in early 2023. Turkey even announced it would launch a stablecoin next year, and many more countries are slated to do the same. One of them is far beyond the rest: China.
So far, China’s CBDC development has been limited to local areas, but next year could change that with wider adaption.
For current stablecoin issuers such as Tether (USDT), Circle and Binance, that means competition is heating up.
“Stablecoins are really in a tough spot because there’s little question that the advent of CBDCs is going to eat away at their market,” says Richard Gardner, CEO of fintech company Modulus Global.
The market for stablecoins is as difficult to forecast as the price forecasts of Bitcoin. Ethereum, or any other cryptocurrency.
One thing is certain: Risk in the crypto sector remains elevated.
Dan Ashmore, CFA, is a financial analyst from Ireland. He writes for CoinJournal and Invezz, and has contributed analysis to Bitcoin.com, The Independent, and numerous other publications. Dan has also published a paper assessing Bitcoin’s fair price and is currently writing a book analyzing the asset through a macroeconomic lens. Additionally, he works as a sports arbitrage trader, exploiting pricing inefficiencies in the betting markets. Follow or DM him on Twitter @DanniiAshmore
Aaron Broverman is the lead editor of Forbes Advisor Canada. He has over a decade of experience writing in the personal finance space for outlets such as Creditcards.com, creditcardGenius.ca, Yahoo Finance Canada, Nerd Wallet Canada and Greedyrates.ca. He lives in Waterloo, Ontario with his wife and son.

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