The future of digital currencies 2023
With the increasing prevalence of digital currencies today and taking into account their degree of volatility, the question of the future of digital currencies for the year 2023 seems very logical.
Over the past decade, we have all been witness to the boom and boundless growth of cryptocurrencies, as Bitcoin and many of its peers have gone from being an interesting investment experience to being a mainstay of the portfolio.
The industry is still in its infancy and is constantly evolving. Therefore, it is very difficult to predict where things will go in the long term, but it is possible to predict what will be the case in the coming months as experts follow developments in the regulation and institutional adoption of crypto payments to try to get to know the market and its direction better.
While accurate predictions are impossible, we asked five experts what they predict the future of cryptocurrency to be like in 2023 based on what they pay attention to in the cryptocurrency industry. The results were as follows:
The future of digital currencies with regulation
Conversations about cryptocurrency regulation should be expected to continue as lawmakers now in Washington, D.C. and around the world try to figure out how to create laws and guidelines to make cryptocurrencies safer for investors and less attractive to cybercriminals.
China reaffirmed its efforts to crack down on cryptocurrencies this year, primarily through digital mining regulations, while US senators considered new regulation to strengthen digital currency tax reporting procedures.
“Regulation is probably one of the biggest threats the cryptocurrency industry faces globally,” says Jeffrey Wang, president of the Americas at Amber Group, a Canadian-based cryptocurrency finance firm. “We very much welcome clear regulation.”
Like most things related to cryptocurrency, regulation comes with hurdles. “There are different agencies that may or may not have the judicial authority to oversee everything,” says Wang. “And that varies from state to state.”
Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen both expressed their agencies’ interests in regulation, while SEC Chairman Gary Gensler commented on his agency’s and CFTC’s role in monitoring the industry. Furthermore, the Internal Revenue Service has a clear interest in making sure that investors know how to report virtual currency when filing their taxes.
Wang says that clear regulation means removing “a huge hurdle for digital currency” since companies and investors are operating without clear guidelines at the moment.
What could the new regulation mean for investors and traders?
Recent proposed legislation may make it easier for the IRS to find cases of tax evasion when it comes to cryptocurrency. Although, beforehand, investors must keep records of all their capital gains or losses on their digital assets. The new rules may also make it easier for investors to properly report their digital transactions.
“This will significantly reduce the tax filing burden for crypto,” said Shehan Chandrasekera, Head of Tax Strategy at CoinTracker.io, a digital tax software company.
Regulatory announcements can also affect the price of a digital currency in already volatile markets. Market volatility is why investment experts recommend holding any cryptocurrency investment to less than 5% of the total portfolio while avoiding anything you can’t afford to lose.
In the end, many experts believe that regulation would be a good thing for the industry. “Reasonable regulation is a win-win for everyone,” says Ben Weiss, CEO and co-founder of CoinFlip, a cryptocurrency buying platform and digital ATM network. “It gives people more confidence in cryptocurrencies, but I think it’s something we have to take our time and we have to get it right.”
Possible endorsement of a cryptocurrency ETF
SEC Chairman Gensler also recently hinted that investors may soon be able to access cryptocurrency ETFs, which would represent a new, more traditional way to invest in cryptocurrencies. Cryptocurrency ETFs will allow investors to buy cryptocurrency directly from traditional investment brokerages they may already have accounts with, such as Fidelity or Vanguard.
“We’re doing it in the stock market, we’re doing it in the bond markets, and people might want it in the cryptocurrency market as well,” Gensler said at the Aspen Security Forum earlier this month. It has also been said that there are already deposits of cryptocurrency ETFs with his agency.
The US Securities and Exchange Commission has considered this offering several times over the past few years, but none have been given the green light as in other regions, such as Canada and the European Union.
“I was expecting it to be approved before the end of 2021. And I’m still hoping for it,” says Abner. “Obviously there are a lot of people waiting for it with the other regulations that have been introduced. That will probably slow things down, but I think there is still a possibility that approval will happen, either at the end of this year, or at least in early 2022.”
What can cryptocurrency ETFs mean for their investors?
Cryptocurrency ETFs are not yet available in most countries of the world including the USA, but the approval could mean more Americans and non-Americans buying into the cryptocurrency market which will affect it. Instead of learning to navigate a cryptocurrency exchange to trade your digital assets, you can add a currency to your investment portfolio directly from the same broker with whom you already have a retirement or other traditional investment account.
However, investing in a cryptocurrency ETF will still carry the same risks as any digital investment. It is a portfolio of assets, but it will only be diversified by investing in different digital currencies, all of which are speculative and volatile. If you are not willing to lose the money you put into cryptocurrency by buying into an exchange or fund eventually, you should think carefully about whether you are willing to take the risk of having cryptocurrency in your investment portfolio at all.
The future of digital currencies and institutional adoption
In the year 2021, major companies in various industries have taken an interest in cryptocurrencies and blockchain and in some cases have even invested in it. For example, AMC recently announced that it will be able to accept Bitcoin payments by the end of this year. Fintech firms such as PayPal and Square are also betting on cryptocurrencies by allowing users to buy on their platforms. Tesla continues to move back and forth on its acceptance of Bitcoin payments, moreover it owns billions in digital assets and experts expect it to get more and more of it as well.
“We’ve seen a massive amount of institutional interest, and that will continue to drive the growth of the industry for a longer period of time now,” says Abner.
Some experts predict that larger global companies could spur adoption further in the latter half of this year. “What we’re looking for is the involvement of organizations in the cryptocurrency space, whether it’s Amazon or big banks,” Weiss says. A massive retailer like Amazon can “catalyze a chain reaction from others who accept it,” and that “will add a lot of credibility.”
In fact, Amazon has recently fueled rumors that it is taking steps towards this end by sharing an advertisement for a “cryptocurrency and blockchain product developer” job. Walmart is also hiring a cryptography and digitization expert to oversee its blockchain strategy.
What could more institutional adoption mean for investors?
While paying for things with cryptocurrencies doesn’t make sense for most people right now, more retailers accepting cryptocurrencies could change that landscape in the future. It will likely take much longer before spending Bitcoin on goods or services becomes a smart decision, but more institutional adoption could lead to more use cases for everyday users, and thus this will have an impact on cryptocurrency prices. Nothing is guaranteed, but if you buy a cryptocurrency as a long-term store of value, the more “real world” use of it, the higher the potential for higher demand and value.
Bitcoin future prospects
Bitcoin is a good indicator for the cryptocurrency market in general because it is the largest cryptocurrency by market cap and the rest of the market tends to follow its trends.
The Bitcoin price has fallen a lot in 2021, going from $60,000 in April to under $30,000 as recently as July. But it rose again in the last months of 2021, after that, to about $50,000. And at the beginning of 2022, the price of this currency once again experienced a significant decline, reaching a level of less than $35,000. But it began to recover and rise again. This volatility is one of the main reasons why experts recommend keeping cryptocurrency investments to less than 5% of your portfolio to begin with.
But how high can bitcoin go up? Bitcoin’s past may provide some clues, according to Kiana Daniel, author of Investing Cryptocurrency For Dummies. Danial says there have been a lot of huge spikes followed by dips in the price of Bitcoin since 2011. “What I expect from Bitcoin is volatility in the short term and growth in the long term.” But there are other experts who are more optimistic about Bitcoin’s growth in the short term.
Bill Noble, chief technical analyst at TokenMetrics, a cryptocurrency analytics platform, believes that the price of bitcoin will rise over the rest of the year. It resumes: “I think Bitcoin is more likely to reach $75,000 than $25,000.”
What could Bitcoin’s price volatility mean for investors?
Bitcoin’s volatility is one more reason for investors to play the long static game. If you buy looking on long-term growth potential, don’t worry about short-term volatility. The best thing you can do is not check your investment in cryptocurrency constantly, instead invest in it and then forget that you did it. And as experts keep telling us, every time there is a swing in currency prices – whether up or down – the emotional reaction can lead investors to act recklessly and make investment decisions that could lead to losses.
The future of digital currencies:
We can speculate about what the digital currency might be worth to investors in the coming months and years (and many will), but the reality is that it is still a new and speculative investment without a long history on which to base projections. No matter what experts think or say, no one really knows. This is why it is so important to invest only what you are willing to lose while trying to stick to high percentages of rewarding traditional investments to build wealth over the long term.
“If you were to wake up one morning to find that digital currency has been banned by developed countries and has become worthless, will you be okay?” says Frederick Stanield, certified financial planner with Lifewater Wealth Management in Atlanta, Georgia.
It is best to keep your investments small and never put your cryptocurrency investment above any other financial goals such as saving for retirement and paying off high interest debt.
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