Let’s start with the fact that the attitude of the public, and even investors themselves, to the world of cryptocurrencies is highly ambivalent. Some people perceive virtual currencies primarily as tools for criminals and a source of various financial scams.
Others see them as the currencies of the future, and still others – as speculative instruments with high risk, but at the same time giving a chance to achieve a large profit in a short time.
Since only the last of these approaches is not the most controversial, in this text we will treat cryptocurrencies as typical financial instruments and try to assess their investment attractiveness.
The Situation On The Cryptocurrency Market In 2023
At the time of writing this article (mid-April 2023), the situation in the cryptocurrency market is bad, or even very bad. Bitcoin (BTC), the oldest and most important digital currency, has lost as much as 75% of its value over a year and currently costs around USD 17,000.
Such large price drops are not a surprise, because in previous years cryptocurrencies recorded strong increases, and the crypto market sells after a bull market is extremely severe.
Moreover, recent declines have been favored by the unfavorable geopolitical and macroeconomic environment, which has also dragged down equity markets and emerging market currencies.
Fall Of The FTX Exchange
Despite the difficult circumstances, bitcoin stayed above the important $20,000 level for quite some time, the peak of the previous 2017 bull market.
However, the beginning of April 2023 brought another collapse of the exchange rate and its rapid decline by as much as approx. 30%, i.e. clearly below the mentioned support.
The reason for this was the sudden and unexpected collapse of the FTX exchange, which strongly undermined trust in virtual assets and caused fears of further bankruptcies in the industry.
It is worth noting that the FTX exchange was one of the largest and most important cryptocurrency exchanges in the world.
She sponsored, among others Mercedes’ Formula 1 team, advertised during the Super Bowl, and, together with Visa, intended to introduce payment cards tied to their customers’ accounts.
Its owner himself in a few years made a fortune, the value of which just before the collapse of the stock exchange exceeded 20 billion dollars.
Therefore, we are talking about a well-known and important entity in the cryptocurrency market.
Investors Fear Further Problems
Currently, crypto investors are afraid not only of the problems of subsequent cryptocurrency exchanges but also of the loss of liquidity by stablecoins (especially Tether, whose capitalization reaches tens of billions of dollars) or the imposition of restrictive regulations on the market.
The latter could heal the situation in the industry, but at the same time limit or even deprive cryptocurrencies of a certain independence from the financial system, which many still consider their important asset.
Promising Cryptocurrencies For 2023
We paid a lot of attention to the general situation in the cryptocurrency market and Bitcoin, which is the most important digital currency.
The above-mentioned issues are a clear signal that today it is impossible to indicate promising crypto assets that can bring satisfactory profits in the next few or several months.
What’s more, the current condition of the market is really bad, so it may be difficult to make any money from investing in cryptocurrencies at this time.
It is also worth adding that after a period of strong declines and with persistent negative market sentiment, new, interesting projects related to blockchain technology or other innovations have no chance to gain investors’ interest.
History shows that in such conditions attention is focused on well-known cryptocurrencies that have quite a long history and are at the forefront of the market in terms of capitalization.
Their valuations are considered attractive and investors assume that sooner or later they will return to growth – in the case of less-known projects, the probability of this is lower.
In addition, when sentiment improves after a period of slump in the cryptocurrency market, it is a well-known project that first gains in value.
For the above reasons, in 2023 and 2024, it is worth paying attention primarily to Bitcoin, which has by far the largest share in the cryptocurrency market and attracts the attention of all crypto investors.
Until the price of Bitcoin starts to increase systematically, there is no reason to expect that the rates of other cryptocurrencies will also gradually increase.
Of course, it also works the other way around – drops in the BTC rate drag down the entire cryptocurrency. Given the relatively low valuation of bitcoin recently (clearly below $20,000), in the long term it may (but does not have to) turn out to be a reasonable investment.
Ethereum, Litecoin, And Other Famous Altcoins
Also noteworthy are such cryptocurrencies as Ethereum, litecoin, dogecoin, and other well-known altcoins with high liquidity.
It is not said that they will bring profit shortly, but if the sentiment on the cryptocurrency market improves, they may be one of the first to start making up for losses.
Although individuals of they differ from each other when the market is flooded with a wave of fear or enthusiasm, it does not matter much – the prices of the aforementioned projects increase or decrease by tens of percent in a short time.
Forecasts For Cryptocurrencies In 2023 And 2024
In assessing whether it is worth investing in cryptocurrencies, the forecasts of experts and market experts can help. The problem is that they are now as extreme as they have probably never been in the past.
Some people predict that we are slowly approaching the end of the sale and probably in 2023 or 2024, cryptocurrencies will return to strong growth.
Others expect the situation to deteriorate, but at the same time to clear the market of unreliable entities, which would be positive for it in the long run.
There are also voices that due to numerous irregularities, as well as the deteriorating situation in the global economy, this time cryptocurrencies will not rise and further deep declines await them.
Regardless of which prediction is closest to you, you should keep in mind that cryptocurrencies have been showing a correlation with other markets for quite some time, especially with the stock market.
In other words, if the world’s most important stock indices lose value, due to, for example, fears of a recession or a deteriorating geopolitical situation, further declines in cryptocurrency prices may not be stopped even by positive information about them.
Read This Article: Cryptocurrency Wallet: How Does It Work And Which One To Choose?
Is It Worth Investing In Cryptocurrencies?
The cryptocurrency market is noteworthy, both because of its high-profit potential and emerging technologies.
Cryptocurrencies are issued by entities related to the blockchain industry, artificial intelligence, and other future solutions.
There is no shortage of projects in areas such as decentralized finance (DEFI) or the Internet of Things (IoT), which will probably gain importance in the coming years.
This sounds promising, but at the moment, for the previously mentioned reasons, investing in cryptocurrencies is associated with a very high risk.
No one knows what the future will bring and whether this time, as it has done in the past, the market will recover again and see another bull market.
It is also worth mentioning that the governments of some countries are not friendly towards virtual assets and try to limit their functioning, at least on their territory.
In Poland, cryptocurrencies remain legal, so you can freely invest in them, but the possible introduction of restrictions by countries of great importance, such as China, India, or the USA, may hurt the entire market.
On the other hand, we have the example of the government of El Salvador, which in June 2021 made Bitcoin its legal tender. This shows that the attitude towards virtual assets varies.
All in all, it makes sense to take the approach that many both novice and advanced investors take, which is to invest in cryptocurrencies only as much as you can afford to lose.
It is best to treat them as a supplement to the investment portfolio, and not a replacement for traditional financial instruments, such as shares or bonds.
It should be remembered that for your safety, you should not keep cryptocurrencies on exchanges or store funds in stable coins for a long time.