Though the digital asset market faced a significant downturn in 2022, the fundamentals behind crypto assets and blockchain technology didn’t change. As we continue into 2023, blockchain technology and crypto assets continue to have a ton of real world use cases. Apart from their potential utility, there are a variety of global factors which create a continued bullish case for crypto in 2023 and beyond.
While mainstream media and cryptocurrency detractors tend to claim that cryptocurrency and Bitcoin are heading down the wrong track, we can instead analyze data to see just why it may be better to remain bullish on crypto. In this piece, we’ll discuss on-chain data before outlining a few bullish factors for crypto in 2023.
On-Chain Data and Analysis is Key
On-chain analytics or blockchain analysis is perhaps one of the most important permissions granted by a transparent blockchain ledger such as Bitcoin or Ethereum. Anyone, at any time, can look at all the transactions that are currently occurring, or have occurred, who holds how much of each asset, how long they’ve held it, and more. This data can then be examined in order to determine the health of a network by looking at things like daily active wallet addresses, how many wallets are in profit or loss, how long users have been holding assets, and so on. Analysis can be customized to almost any specification you wish.
So while many can claim that they know what’s going on with a blockchain network, such as someone claiming that Bitcoin is going to drop to X, on-chain data can muzzle the noise by showing strength instead. While it isn’t the be all and end all bull case for crypto, blockchain analysis can certainly help quiet the bears. Let’s look at three bullish factors for crypto.
Three Bullish Factors for Crypto
Below we’ve outlined three bullish factors for crypto in 2023 and beyond. These are by no means guarantees that crypto will rise in 2023, but are simply fundamental factors to keep in mind when thinking about cryptocurrency’s potential.
1. Active Wallet Address Numbers and New Wallets
If Bitcoin and cryptocurrency were truly in trouble, one would expect when looking at on-chain analytics to see a few things. First, a drop in daily active users of the network. Second, a consistent decrease in new wallet addresses being created. Finally, you’d expect long-term holders to start selling as they begin to accept that they need to get back funds while they can.
However, when looking at both Bitcoin and Ethereum’s networks, none of this is present. Despite Bitcoin’s total collapse from its all time high, there are still almost 1 million daily users of the network, and there are still almost half a million new wallets created per week. In addition, long-term holders are instead buying more, rather than selling, indicating that they see the price of Bitcoin over the past months as a buying opportunity/bottom.
Bitcoin continuing to maintain network activity is certainly bullish if it continues on, as it means more and more adoption of both Bitcoin and crypto in general.
2. Fiat Systems Facing Unprecedented Inflation and Interest
Perhaps the most basic and bullish reason to be into cryptocurrencies is their deflationary nature. They all (for the most part) have a completely fixed supply of coins or tokens, and often some sort of emission schedule that reduces over time. This means that there will be no more issue after some point, and that the hard cap will never be exceeded. For example, there will only ever be 21 million BTC in circulation. This is hardcoded into the protocol and cannot be changed. Once the whole supply has been mined and is all circulating, there will be no more to come.
This is in stark contrast to fiat currency systems, where the government can print as much of the currency as they like. This can lead to hyperinflation in some places, and is currently creating high inflation and interest rates in both developed and undeveloped nations. For example, the US alone doubled the amount of dollars circulating from 2019 – 2022, and overall the amount circulating is 10 times the amount there was pre-2008. This means a reduction in purchasing power for everyone, and increasing interest rates create a downward spiral for countries that have USD debt, as they have to convert their national currency for USD, which devalues their currency and increases USD strength. This is a vicious cycle that is hard to get out of.
When still on the Bretton-Woods system using gold, this wouldn’t happen, which is why Bitcoin maximalists want it to replace gold as the reserve currency with which fiat must be backed. Currently, fiat isn’t actually backed by anything other than a government promise. While US banks may offer FDIC Insurance, the reality is that if every US citizen went on a bank run, the US government would have huge issues on hand and you’d be unlikely to be able to take out what’s yours. It doesn’t have to be Bitcoin, but there needs to be some sort of actual backing for currencies.
3. Decentralization of Society is Needed
If nothing else, the fundamental concept of decentralization that cryptocurrencies and blockchain put forward are still desirable for a majority of the population. It’s fairly easy to show examples of how centralization causes problems in various aspects of society.
For example, in July 2022 in Canada, one of the major communications companies, Rogers, had an outage that affected 12 million Canadian citizens on a direct level (meaning no service). Not only that, but Rogers was/is the network used by Interac (debit in Canada), which actually meant that no business in Canada was able to accept debit during this network outage. There was also no alternative option for businesses to switch over to either, highlighting the issue created when a service is centralized.
There are already blockchain projects that are working to solve this sort of issue by decentralizing access to things such as electricity, internet, and phone services. The issues that society would run into if something like Google was compromised would be astronomical, not to mention their monopoly on your personal data. Putting your personal data back in your hands while also reducing the attack vectors possible for bad actors is just one other reason crypto should be bullish.
Closing Thoughts: The Potential in Crypto Remains
There are certainly more potential bullish cases for crypto as we continue into 2023 than the ones mentioned in this piece. However, they are simply meant to be food for thought when you consider the potential benefits that blockchain and crypto could bring to many aspects of our daily lives.
Obviously, if you’re considering an investment, do your research, but even if you’re not, learning about crypto and blockchain would be like learning about the Internet’s potential in the 90s. It may seem far away, but it’s closer than you think.