A Pivotal Year Ahead for Bitcoin: What Factors Will Shape BTC price in 2023?

The bitcoin (BTC) bulls had a year to forget. The only positive takeaway from the extended crypto winter was BTC avoiding a return to $10,000 in 2022.

BTC is down 64% to $16,658 in 2022. Significantly, BTC has tumbled 76% from its November 10, 2021, high.

The 2022 performance is in contrast to the bonanza year 2021. BTC struck a November ATH of $68,958 before the onset of the crypto winter.

Regulatory scrutiny marred the end of 2021, leading to a late 33.0% slump in just 6-weeks. US regulators, the White House, and even the IFM called for a comprehensive global regulatory framework to tackle systemic risk and protect consumers from illicit activity.

Comparisons between gold and BTC ended, with Gold Spot (XAU) down by just 0.77% year to date.

2022 Marred by Fraud and Bankruptcies

Throughout 2022, a chain of events brought down BTC and the broader crypto market, with each event increasing the prospects of a wave of regulatory reforms.

In May, Terra Labs collapsed, eventually sending BTC to sub-$20,000. FTX filed for bankruptcy in November, dragging BTC to a 2022 low of $15,558.

A loss of investor confidence left BTC at sub-$17,000 through to the end of the year, with regulatory risk and contagion fear pegging BTC back from a traditional rebound.

If the collapse of Terra Labs and FTX was not bad enough, US lawmakers also showed greater interest in Bitcoin, the Proof-of-Work protocol, and the environmental impact. Calls to ban Bitcoin became more frequent, with some US states taking more stringent steps to curb the growth of Bitcoin mining.

Beyond the crypto market, Fed monetary policy, recession fears, the war in Ukraine, and China’s COVID-19 policy also gyrated the crypto market throughout 2022.

While the beyond-the-crypto-market factors also impacted the NASDAQ Index, the collapse of Terra Labs and FTX delivered two crypto dislocations from the NASDAQ Index.

Despite the tumultuous year, BTC retained its number-one ranking by Market Cap. According to CoinMarketCap, the market cap stands at $318.76 billion, down from January 1 $890.95 billion.

What Will the Market Hold for 2023?

An ever-increasing list of crypto headwinds makes 2023 a pivotal year for BTC and the broader crypto market.

The fallout from the collapse of FTX will likely continue through Q1 2023, with regulatory chatter and enforcement by regulation likely to further test investor resolve.

A stable first quarter could restore investor confidence and deliver a bullish H2 2023. However, crypto-related events and external market forces will dictate the path of BTC and the broader crypto market throughout the year. These include,

• The Federal Reserve and interest rate decisions.
• Regulatory reforms.
• Outcome of the SEC v Ripple case.
• Russia and the war in Ukraine.
• Increased scrutiny over Proof-of-Work Protocols.
• Crypto exchange liquidity crunches.

For the stars to align for the crypto bulls, an SEC settlement with Ripple, an end to the War in Ukraine, easing inflationary pressures, an end to Fed interest rate hikes, and a regulatory framework that supports innovation while catching out bad players would support a BTC recovery.

As always, the best, base, and worst-case scenarios will be on the mind of investors as we approach 2023. Regulatory reforms and the ever-increasing threat of an economic recession will be the main drivers alongside the outcome of the SEC v Ripple case.

2023 Forecasts

With increasing regulatory, monetary policy, economic, and geopolitical uncertainty, BTC could take one of several paths through 2023.

In a base-case scenario, easing inflationary pressures should allow the Fed to take its foot off the gas. A soft landing and an SEC settlement in its case against Ripple should support a BTC return to $30,000. The base-case scenario is without fireworks and includes progress toward a robust regulatory environment.

In the best-case scenario, the Fed hints at ending its plans to return inflation to target to avoid a recession. Ripple wins its case against the SEC, and regulators deliver a crypto regulatory framework that supports innovation and growth. Institutional money would likely flood in.

Institutional money inflows should restore investor confidence and give the bulls a run at the 2021 ATH.

However, in the worst-case scenario, the Fed pushes ahead with interest rate hikes, leading to a hard landing. Significantly, the SEC will win its case against Ripple and lawmakers mandate the SEC to regulate the digital asset space by enforcement.

The shift in the regulatory landscape could lead to investors withdrawing from the crypto space. This could result in more crypto exchanges collapsing. In such an eventuality, BTC would likely slump to sub-$5,000, last visited in March 2020.

WalletInvestor.com has a bearish BTC prediction, projecting BTC to fall to sub-$10,000. The projection favors the worst-case scenario chain of events.

CryptoPredictions.com projects a low December 2023 price of $14,278 and a high Price of $20,998, which sits between our worst-case and base-case scenarios.

Other projections are more bullish, with $75,000 doing the rounds despite the unprecedented level of uncertainty.

The Halving Countdown Clock

For investors looking beyond 2023, the next halving event will become an area of focus in late 2023.