cryptocurrencies cryptocurrency bitcoin ethereum banking crisis bitcoin's dominance banking crisis startedThe 10 Best Things About Cryptocurrencies

The first quarter of 2023 is over. It was the first truly positive quarter for crypto investors since 2021. In this article, I will go through the outlook for 2023 from the perspective of well-known cryptocurrencies.

Bitcoin Has Pulled The Market Up

The first quarter was arguably Bitcoin’s. The world’s most famous bit of money has been the engine of the entire market since the first days of the year. This is also reflected in Bitcoin’s market share, which has risen significantly at the beginning of 2023.

The graphic below shows Bitcoin’s dominance since 2017. This is the CRYPTOCAP signal found in the Trading View service. Different sites calculate the market share slightly differently, but in the big picture, the trend is clear.

Bitcoin’s dominance has never exceeded 50 percent since the figure dropped to around 40 percent during the spring 2021 altcoin craze.

The largest increase in market share was achieved in mid-March when the market was shaken by the banking crisis that started in the United States. The price of Bitcoin rose at the same time as traditional banks (and many other assets) fell. This re-elevated the narrative of the digital haven to social media.

I believe that it is a short-term phenomenon. Bitcoin is the same investment now as it was a year ago, two years ago, or five years ago. Of course, some investors have even exchanged their stablecoins for bitcoins.

However, the fact remains that Bitcoin is still a high-risk asset for the majority of investors. This has been proven in the 2020 and 2022 crashes. In time, Bitcoin will hopefully grow into digital gold, but the confirmation of this narrative is a process that will take (tens of) years.

I guess that Bitcoin’s dominance will decline in the coming months and altcoins will strengthen, led by Ethereum.

Ethereum Is Facing An Important Update

Q1 has been a disappointment for Ethereum investors, even though the price of Ether has risen by a nice 50 percent. By comparison, Bitcoin is up 70 percent. Many would have expected a stronger rise due to Ethereum’s excellent fundamentals.

First, it’s worth mentioning Ethereum’s The Merge update, which happened just over six months ago. With The Merge, Ethereum switched to Proof of Stake consensus and stopped energy-consuming mining. At the same time, Ether has become a truly deflationary asset.

As the graphic below shows, the Ethereum reserve has decreased by 75,500 ETH since The Merge. With the old mechanism, about two billion dollars worth of ETH tokens would have entered the market.

The second point is related to Ethereum’s stake. It has been locked up until now, that is, it has not been possible to withdraw the staked coins at will. The situation changes with an update called Shapella. Its date has been confirmed as April 12.

Many Ethereum critics scare investors with a price crash, but I can’t believe at least in a long downhill. The unlocking will attract a lot of new speakers who have been waiting for the previous months for the Shapella update.

Ethereum is now a deflationary asset that offers a solid four percent annual return. It is also a “pure cryptocurrency” for institutional investors, i.e. ESG compatible.

I think Ethereum’s fundamentals are excellent right now, and I expect it to outperform Bitcoin by the end of 2023. The Shapella update can cause short-term volatility and also a price drop. In the long run, though, it’s a very bullish event.

Read This Article: Cryptocurrencies And Investing In Them + Best Cryptocurrencies April 2023

Tether Is The Overwhelming Number One Among Stablecoins

Third on the Cryptocurrencies ranking list is Tether’s stable currency. The first quarter of 2023 was excellent for Tether, as its market cap has grown from $66 billion to around $80 billion. More than half of this increase has come in the previous three weeks.

The reason for Tether’s rise is, of course, the banking crisis in the United States, which started with Silicon Valley Bank. The competitor USD Coin had more than three billion dollars in assets in SVB. When SVB collapsed at the beginning of March, the dollar peg of USDC, which was considered a hundred percent safe, disappeared and the stablecoin was trading at around $0.89 at its worst.

USD Coin got its money back thanks to the bailout, but investor confidence took a hard hit. USDC has lost $10 billion in market value in a month.

USD Coin has always been considered safe due to its US and regulated status. However, the “regulatory war” raging in the United States against the Cryptocurrencies sector has spooked investors. Suddenly, Tether’s status as an offshore stablecoin is much more attractive.

BNB Token And Binance

BNB was known as Binance Coin, but the currency was rebranded to BNB in ​​the spring of 2022. The BNB serves as the native token of the BNB Chain (staking & payment for transactions), and by holding it, you get discounts on the trading costs of the Binance exchange.

In the ranking of cryptocurrencies, BNB has placed itself firmly between Ethereum and other challengers. BNB’s market capitalization is almost double that of the next largest coin (XRP), but Ethereum, on the other hand, is almost 5x bigger than BNB.

Although Binance has tried to create a smell gap between it and the BNB token and between the BNB Chain, the future of BNB certainly depends on the success of Binance as well. Many investors are now worried about regulatory pressure.

The CFTC, which oversees the US commodity market, sued Binance and its founder Changpeng Zhao at the end of March. This is how the popular news service Coindesk tweeted about it.

It would not be surprising if the SEC, which oversees the securities market, also threw its spoon into the soup and attacked Binance. The most likely scenario for these challenges is the payment of fines, but situations can also escalate into lengthy lawsuits.

BNB is a somewhat problematic case from the investor’s point of view. Due to the regulatory risk, its price has risen by only 25% this year, which is less than Bitcoin and Ethereum. In addition to that, BNB’s market value is so high that it undoubtedly limits the upside potential.

However, BNB benefits from Binance’s wild growth because every new customer is a potential BNB holder. In addition to this, BNB is also used in the popular debit card. BNB Chain is also the third largest smart contract platform in terms of liquidity after Ethereum and Tron.

Will The Ripple Lawsuit Be Settled?

After BNB, in fifth place is USD Coin, which was already discussed above. In sixth place is Ripple’s XRP token, for which the first quarter was a success. The price of XRP has risen at the beginning of the year by a handsome 50 percent, i.e. the same as Ethereum.

However, the situation would look very different if the review had been done three weeks ago. Namely, the XRP rate was flat until mid-March. After this, the course rose by 50 percent in less than ten days. Why?

The reason for the rise would seem to be investors’ speculation on the Ripple vs. SEC lawsuit. Many who followed the industry still well remember how the SEC sued Ripple and its founders in December 2020. It was the last act of the then SEC boss Jay Clayton before Gary Gensler took over the agency.

The SEC accuses XRP of being an illegal security. If the charges go through, it would be a death sentence for the XRP token in the US. Most likely, the course would see a huge collapse. However, Ripple has a chest of hundreds of millions to defend itself, and the company has also done that.

The lawsuit against the SEC has lasted almost two and a half years. Its decision is expected at any moment. The latest price rise suggests that someone knows (or believes they know) that the outcome is favorable for Ripple.

There are high stakes in this trial anyway. Ripple’s victory would be a severe setback for the SEC and Gary Gensler’s ability to challenge other cryptocurrencies as illegal securities. Ripple’s loss, on the other hand, would give the SEC a lot of firepower to attack other projects.

Investing in the XRP token is a complete lottery until decisions are made in the court case.

Read This Article: Cryptocurrency Wallet: How Does It Work And Which One To Choose?

Ethereum Scaling Solutions With Strong

Finally, let’s pick three names from the top 100 list of cryptocurrencies, which are all Ethereum scaling solutions. The cryptocurrencies in question are Polygon (MATIC), Optimism (OP), and Arbitrum (ARB).

At the time, I predicted that Ethereum’s Layer 2 solutions would grow in popularity enormously this year. Q1-2023 has been interesting in this respect.

Polygon was one of the best investment targets at the beginning of the year. The price of the MATIC token was rising by one hundred percent already in mid-February until the rocketing stopped. Despite everything, MATIC is up 43 percent, and at the same time, the token has also firmly entered the crypto top 10 lists.

Optimism has also been an excellent investment target. The OP token has risen by 134 percent this year, i.e. more than doubled its rate. At its peak, OP was up more than 200 percent at the end of February.

Optimism and Polygon have not managed to increase their liquidity this year. The same cannot be said for Arbitrum, whose TVL reading has doubled to more than two billion dollars. Below is a picture of the current ranking of smart contract platforms.

Arbitrum also made headlines at the end of March, when the platform made its long-awaited airdrop. It launched Arbitrum’s ARB token. It finally got a market cap of $1.5 billion after a lot of swings, which is more than 2x that of the Optimism token.

Investors should remember one important difference between Arbitrum and Optimism tokens. They are governance tokens, just like DeFi app tokens. With ARB and OP tokens, you only get voting power in protocol management.

Transaction fees are paid in Ether (ETH) instead. Polygon is also a better investment target in this respect.

As has been noticed in the DeFi sector in recent years, the increase in popularity and liquidity of the protocol does not necessarily radiate at all to the price of its management token. It is easier for a novice investor to buy Ether, whose rate directly benefits from the increasing use of both Ethereum and Layer 2.

The Following Quarters Of 2023

Finally, let’s examine the situation of the Cryptocurrencies market at a general level. In my opinion, there is already quite a bit of evidence that the bear market that started in November 2021 has come to an end. The biggest single factor is the banking crisis that started in the United States.

Like stocks, the cryptocurrency market follows the liquidity of central banks. In any case, the Fed’s tight monetary policy was coming to an end at the end of 2023, but the banking crisis that started in March has thrown a wrench into the cart.

The Fed’s balance sheet has already started to swell wildly in just a couple of weeks, so the QT hated by investors has practically ended. Here are graphics for the year from the Fed’s website.

It is hard to believe that the Fed will forcibly push interest rates higher than this when every percentage point increase only worsens the banks’ problems. Interest rates are unlikely to fall quickly because inflation has not fallen, but the worst is surely over. We are now very close to the end of the monetary policy that weighed down the exchange rates.

At the same time, Bitcoin’s next halving is approaching in just over 12 months. Although in my opinion, halvings no longer control Bitcoin’s course like in its early years, the narrative of that will certainly help to create a new lift in cryptos.

I don’t think 2023 will be any fireworks. It will still take a long time before the large masses dare to buy dog ​​coins again. This will hardly happen before 2024. I foresee volatility myself and a small increase during the next quarters.

I also believe that the aforementioned upgrade of Ethereum will be a positive thing for Ethereum as well as for the entire altcoin market after a possible initial shock. Bitcoin will no longer be the top performer in the crypto market in the following quarters.

By admin

Hi, I blog post writer. I am found of writing articles including general niche, CBD, fashion, home, casino and much more. I think positive and write positive in my words. Furthermore, I am also working on SEO and Link building services.

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