3 shifts cryptocurrency will make in 2023

The cryptocurrency market has evolved rapidly since its initial ascent to popularity and profitability years ago. 2022 was a wild year in more ways than one, and 2023 is sure to have its share of surprises in store for crypto investors and financial experts.

But just how will the market for cryptocurrencies such as Bitcoin change throughout 2023? In truth, no one can know with 100% certainty what coins to buy, what you should hold, and how the market will shift overall. That said, we can make a few educated predictions based on past market movements and current sentiment. 

Let’s take a look at three shifts cryptocurrency will likely make in 2023. 

1. Will Ethereum supplant Bitcoin as king?

For as long as the crypto market has grown, Bitcoin has been the number one crypto token in terms of profitability and overall value, and its inflation rate has decreased since 2009. But that might change in 2023 as up-and-comer Ethereum stands a chance of taking the crown.

Indeed, it’s more than possible that Ethereum will surpass Bitcoin’s market value at some point in the next year, even if it’s only temporarily. That’s in part because both Bitcoin and Ethereum are highly correlated; in other words, when one falls, so too does the other, and vice versa.

However, Ethereum has become more popular in recent years thanks to its digital developments and innovations in the tech sector. Ethereum averaged approximately 700,000 transactions daily throughout 2019, reaching over one million transactions per day throughout 2020 and 2021.

Ether offers more utility than just being used as a payment token, though it can also do that. Indeed, Ethereum is primarily valued as a medium for decentralized application development. Ethereum is the undisputed master in this arena.

With investors and curious consumers looking into the crypto market more for its tech innovations and ability to facilitate things like smart contracts, Ethereum may surpass Bitcoin’s value not for its raw purchasing power but for the other things that it provides. In this way, Ethereum will cement itself as another cornerstone of the crypto market, something that only Bitcoin has managed previously.

2. Regulators will come for crypto

Few events shook the crypto market as drastically as the FTX bankruptcy filing. In a nutshell, the FTX bankruptcy case removed a lot of faith that investors had in crypto overall, resulting in a major market crash that is still making waves even today.

According to the US Commodities Futures Trading Commission, there is over $8 billion in missing customer funds from FTX. The man allegedly at the head of the conspiracy, Sam Bankman-Fried, has been charged with a series of financial crimes, totaling 12 charges overall, ranging from fraud to conspiracy to operate an unlicensed money transfer business to conspiracy to commit bank fraud and more.

All of this is still ongoing, but it likely heralds the beginning of a new regulation push for the broader crypto market. For years, the crypto market has been largely unregulated. This was previously cited as a strength of the market, as it was not theoretically beholden to the big banks and other regulatory agencies that control the fiat currency markets.

However, it’s clear to many that this deregulated system also has weaknesses — namely, that consumer funds can be taken and abused by bad actors and by untrustworthy exchanges or organizations. 

We’re already seeing the effects of the new regulation-focused push in the financial sector. For example, Binance USD lost its original peg to the US dollar in February 2023, after the Department of Financial Services in New York ordered BUSD tokens to stop being created.

Binance, in particular, has dealt with lots of big problems after the collapse of FTX, such as customer outflows, regulatory probes, and much more. In essence, it seems clear that major regulatory crackdowns are coming, not just for Binance, but for any type of cryptocurrency or exchange that has ties to FTX.

What sorts of regulations may appear?

At the time of this writing, it’s not clear how future regulations may appear or how they may affect the market at large.

That said, we do have some hints. The SEC, for example, has proposed a new rule that would require cryptocurrency exchanges, as well as other crypto custodians, to maintain federal and/or state regulations when holding customer assets.

The ramifications of this proposal are difficult to understate. For example, it would require crypto exchanges to have legal safeguards when holding consumer crypto assets, preventing those exchanges from operating with as much freedom as they enjoyed previously.

In the long run, however, this could be good for the market. It may restore consumer faith in cryptocurrency both as a topic and in the exchanges and platforms that keep the entire system running. That said, it’s also important to note that this could change the price of crypto, particularly for new investors, as well as affect which coins are most profitable in the long run.

3. “Meme” coins will lose value

So-called meme coins, such as Dogecoin (DOGE) and Shiba Inu (SHIB), had previously never been taken especially seriously. But that started to change when they saw monumental increases in their prices throughout 2021 and 2022.

The chief example is when Dogecoin skyrocketed in value following the appearance of Elon Musk on Saturday Night Live. Dogecoin gained over 20,000% in value after that appearance, causing many to purchase as much Doge as they could in hopes of striking it rich.

However, both Doge and Shiba Inu have fallen from their monumental price peaks, dropping over 90% into 2023. There are lots of reasons for this, including the fact that the coins are simply payment tokens without any underlying factors or value. While this argument can be made for crypto as a whole, it’s very clear that this is the case for meme coins.

As 2023 progresses, it’s likely that consumers, especially those joining the crypto market for the first time, will continue to drive the prices of meme coins down. While they have their place as social statements and experiments, meme crypto tokens are distractions at best, and money sinks at worst.

Will new meme coins appear?

It’s possible that new meme coins could arise in 2023. After the fall of the NFT market, many consumers and would-be investors may be looking for another vessel in which to funnel their cash. Meme coin schemes could be the perfect traps for these consumers.

But these days, people are much more educated about the crypto market than they were in previous years. It’s possible that another meme coin won’t have the same hype effect as either Doge or Shiba Inu, both of which largely rose to their profitability levels because of misinformation and irrational hype.

Keep a close watch on crypto markets

If anything is true about crypto, it’s that it’s nearly impossible to predict the next chapter. One way or another, the crypto market will not be the same at the beginning of 2024 as it is now. Keep these likely market shifts in mind. Understanding crypto’s inherent volatility can help to inform your crypto investments going forward and ensure that your portfolio remains stable and profitable for years to come.