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Will the Cryptocurrency Market Recover in 2023?

Key Takeaways
  • Current State & Influences: Post-2022's FTX collapse, 2023 sees steady crypto gains led by Bitcoin. Market sentiment is swayed by the Fear and Greed Index and global events
  • Regulation & Market Cycles: Governments aim for crypto regulations to protect investors. Crypto market cycles include accumulation, bull runs, distribution, and bear runs
  • Catalysts & Recovery: Institutional adoption and tech advancements, like Bitcoin ETFs, fuel recovery. Full market recovery is anticipated between 2024 and 2025, with diversification advised
17-Aug-2023 By: Simran Mishra
Will the Cryptocurrency Market Recover in 2023?

Crypto Market 2023: Recovery Factors and Investment Tips.

Will the crypto market recover in 2023? Should I start investing, or should I pace myself? At least, these seem to be the most asked questions in the second half of the year. 

We must admit that the crypto market is continuously volatile, especially after a slow 2022. However, a couple of cryptocurrencies, such as Bitcoin, have ended Q2 of 2023 with a plus value. Whether this situation has been influenced by a fear of missing out or a greedy thought, we will tackle this in the following chapters.

So, in today's article, we will discuss whether the crypto market will recover, what influential factors will contribute, and the potential challenges the crypto market will face. Stay tuned, read further, and adjust your strategies accordingly.

Current State of the Crypto Market 

The global market cap of cumulative cryptocurrencies is $1.2 Trillion, with a 0.87% decrease compared to last year in the same period. Moreover, Bitcoin's market cap is represented by 47.28% with a total value of $567 Billion, and Stablecoin is at $125 Billion, with a 10.39% market share.

Please allow us to explain the current state of the crypto market better, not only numbers but also facts so that you can draw your conclusions. 

After the 2022 FTX collapse, the crypto market suffered, whereby crypto fans invested in the most well-known coins, turning the market upside down. Overall, 2023 seemed to be the year with slow but steady gains due to macroeconomics and cooling inflation. 

Moreover, we have seen many changes in market sentiment as well. As for now, it is in a neutral position after being in a "greedy" state, but we will get to this later. We wanted to highlight that the crypto market is still susceptible to high volatility, even though it seems a fresh start after the 2022 storm.

Influential Factors of the Crypto Market Sentiment 

If you don't know by now, many factors contribute to the overall crypto adoption, supply, and demand, such as geopolitical factors, macroeconomics, crypto regulations, market sentiment, etc. 

However, we will focus on the sentiment of the overall crypto market, as this could be one of the easiest things to analyze to make your move and amongst the most influential factors.

As market sentiment refers to people's emotional behavior, the Fear and Greed Index is a good indicator for many crypto investors to understand what's happening in the market and whether buying the dip is a good move.

Regardless of the exact numerical result, there are two stances you need to remember:

1. Fear could be a good indication that many investors are worried, and it could be a good opportunity for acquiring and diversifying your portfolio. A notable example is the in June 2022, when Bitcoin dropped below $20,000 for the first time since 2020.

2. The Greedy position is usually a good indicator that the crypto market will be due for a correction. Usually, it means that in the following days, the market will drop drastically, somewhere around 10%.

In December 2020, it was the first time it recorded an all-time high on the Greed Index, a score of 95, followed by other occasions between December and the following February when Bitcoin exploded to nearly $60,000.

As of this month, the index is marked by a neutral position, with a score of 52. Of course, we do not recommend only following the market sentiment. Before investing, please check other metrics, such as volatility, market momentum, volume, etc.

Cryptocurrency's Regulation Impact on Global Crypto Market

Balancing innovation and investor protection seems to be one of the most challenging aspects of the crypto market recovery. Alongside the further development of blockchain technology, crypto, and the tokenization influence that continues to evolve and change, there is a thirst for a regulatory framework to clear the air. 

In the past years, we have witnessed many other changes proposed by countries like China, Japan, the U.S., and European Union to create an overall order that will benefit the investors, enabling them to grow and function long-term.

Also, there is a mutual interest for governments to attract new investors within the crypto sector, benefiting the crypto user. Many countries have taken measures that could significantly impact the next bull run, even though some investors consider that these regulations are underlying the decentralized nature of this vast industry.

Yet, as we all know about the SEC (Securities and Exchange Commission) crackdown, one positive impact is the prices in the crypto market, such as BTC, which saw a growth of 70.3% in 2023.

Crypto Market Cycles and Its Impact 

The crypto market cycle phenomenon consists of four stages: the accumulation, markup phase or bull run, distribution, and markdown phase or bear run. 

1. The Accumulation Phase

It is often marked by disbelief in the crypto industry, whereby there are low trading volumes and low-price volatility. This phase could benefit long-term investors who are buying and holding, rather than the short-term ones, as this could last from weeks to months or years.

2. The Markup Phase or Bull Run

During this time, the excitement starts rising, and from a market sentiment point of view, crypto users and investors are becoming optimistic about the outlook. This stage could be an excellent time for new users to join, as the upward price movement is much easier to recognize.

3. The Distribution Phase

As all things have a way of working, this is the stage where buyers become sellers, and the crypto market is reaching its balance. However, this also creates tension between both parties, as the buyers hope the bull run isn't over yet, and the sellers are locking their assets.

4. The Markdown Phase or Bear Run

This last phase is fueled by fear as the outcome is uncertain towards negative, significantly if the supply exceeds the demand from the distribution phase. The markdown is embedded with a decreased price chart as the market sentiment drowns in fear.

Catalysts for a Potential Crypto Market Recovery

As cryptocurrency's institutional acceptance has continued to rise, many analysts advise a couple of ways that could reignite the crypto market. We have the institutional adoption and mainstream recognition of cryptos, tech advancements among Bitcoin ETFs, a greater stablecoin adoption, and the upcoming Ethereum upgrade.

At the beginning of 2023, we witnessed the long and unending controversy on-the-spot Bitcoin ETFs, whereby this could significantly impact the United States, as it makes up approximately 99.5% of the global trading volume.

At this moment, North America accounts for 97.7% of all crypto ETF trading volume, and just as of this week, Europe's first spot Bitcoin ETF opened in Holland.

Another factor that could elevate the crypto market is the further adoption by institutional investors and major corporations which presumes a shift in perception of their long-term value.

Another influential aspect is the next Ethereum upgrade. This is expected to occur during the second half of 2023 and will focus on scaling Ethereum by making gas fees cheaper and using L2 rollups. 

When Will the Crypto Market Recover? 

Based on the activity in the past half year, along with the further development of the technology, the increased adoption of crypto, and the implication of institutions, there is still hope that the crypto market will see favorable growth. Yet, many crypto experts and analysts advise that a full recovery can be achieved between 2024 and 2025.

Moreover, in anticipation of the crypto market recovery, a couple of aspects could help sustain further all of the discussed levers.

1. Use Crypto Before the Bull Run

We often encounter newbies that wait too long until they jump in the water, even though it is a cautious step. It is essential to familiarize yourself with this ever-changing landscape and experiment gradually with different factors, such as bull and bear markets. Also, we recommend you check a market cap calculator for a better understanding, as this could help you further with your investment plan.

2. Diversify Your Asset Portfolio

Crypto airdrops are a great way to get new and exciting digital assets to diversify your portfolio and better understand how different cryptos perform. From a strategy point of view, you could analyze its impact and what contributed, alongside adopting a long-term strategy.

3. Build Your Network 

As we all know, the best marketing strategy is word of mouth, which works in high and influential crypto networks. So, growing your circle, discussing with crypto peers, and learning something new daily could be one of the many faces of good strategies.

Again, we must mention that these are not the sole practices, but it's a start, and as always, doing your research is a significant step to ensuring a practical approach.

Final Thoughts

We are still determining exactly when the crypto market will recover, but 2023 gave us a fresh start and showed us signs of a better outcome. Moreover, there is a slow global macroeconomic recovery, so this timeframe is suitable for observing the market and investing cautiously.