Since we are at the start of the new year we can see a lot of predictions for 2023 for all kind of entities. Content creators, well known figures in the field, companies and thought leaders are all asked about their vision for the upcoming year. Yesterday I published the “Top 3 Must Follow Crypto Accounts in 2023” myself as well.

What are the prospects for 2023 in the cryptocurrency market? It’s a question that investors are eager to know but there’s no certain answer. It’s difficult to predict the future of crypto market. Crypto-asset manager Bitwise has also attempted to predict the future and shared their predictions with their clients.

This week I came across an article in which the vision of Bitwise was explained. I took the liberty to translate and interpret their predictions since I think those are very interesting insights moving into 2023.

This is the link to the original article (in Dutch):

3 grote crypto voorspellingen voor 2023

Ethereum Will Be Deflationary

Bitwise’s first prediction is related to the Ethereum (ETH) network. According to the asset manager, Ethereum will be deflationary this year, meaning that there will be fewer ETH tokens in circulation at the end of the year than at the beginning. Bitwise believes that this number will decrease by about 1%.

The transition from proof-of-work to proof-of-stake in combination with the burning process has resulted in far fewer new ETH tokens being created. Under certain conditions, this even means that ETH tokens are removed from circulation. Bitwise therefore expects this to also happen on a yearly basis.

The correlation between bitcoin and stocks will disappear

It is likely that many have noticed that movements in the crypto market have been closely linked to the stock market in recent months. The correlation between stocks and cryptocurrencies has been, and is, very high.

According to Bitwise, this correlation will disappear in 2023. Currently, the correlation between bitcoin (BTC) and the S&P 500 index is nearly at the highest point ever, but it is gradually decreasing. Bitwise believes that this trend will continue throughout the year, resulting in bitcoin and the rest of the crypto market moving independently of the stock market.

USDC will become the largest stablecoin

Stablecoins are an important part of the crypto industry. They are cryptocurrencies that bridge the gap between fiat currency like the dollar and cryptocurrencies. It is extremely convenient for most investors and traders that stablecoins exist and a number of stablecoins, such as Tether, have a market capitalization of many tens of billions.

According to Bitwise, a change of guard is on the horizon. For years, Tether (USDT) has been the largest stablecoin in the world, but the asset manager predicts that USDC, issued by Circle, will take over the top spot in 2023.

My Reflection

First of all I think these are interesting views.

It will be fascinating to see the effects of Ethereum becoming deflationary. Not only for the price appreciation of the coin itself, but also regarding its performance in comparison to Bitcoin now that both have a different underlaying model.

Next, can Bitcoin and the crypto market in general really detach from the rest of the markets? Especially now a recession seems to be imminent in big parts of the world.

Finally, what will be the implications for the exchanges when USDT will be surpassed by USDC as leading stable coin? Will there be a switch to USDC pairs on these trading platforms? Or will USDT retain its important position over there.

Wrapping up

It’s always valuable to consider and think about the views of these type of companies which are full time active within the industry and are able to spend a lot of time on analysing trends. For me particularly the second and third prediction sound pretty interesting to follow and see how those will unfold.