Bitcoin to Remain Flat in 2023 After Second-Worst YTD Since Launch

• Bitcoin (BTC) saw its second-worst year to date (YTD) in 2022 since launch — predicted to remain flat through 2023, according to Arcane Research (AR).
•The crypto winter of 2022 was fueled by tightening macro conditions and vastly exacerbated by crypto-specific leverage and awful risk management by core market participants.
•The Federal Reserve’s effective funds rate grew from 0% to 4.25%, leading to a massive repricing of risk assets that all benefitted from easy money and a low-interest rate regime in late 2022 and throughout 2021.

As the year 2022 is coming to an end, Bitcoin is expected to remain flat through 2023. According to Arcane Research (AR), this marks the second-worst year to date (YTD) for Bitcoin since its launch. By the end of 2022, Bitcoin had declined by 65%, only performing worse in 2018 when it saw a 73% decline on the YTD.

The decline in Bitcoin prices was caused by a combination of macroeconomic conditions and poor risk management by core market participants. AR noted that tightening macro conditions led to the “crypto winter of 2022”, which was exacerbated by crypto-specific leverage and risk management.

The Federal Reserve’s effective funds rate also grew from 0% to 4.25%, leading to a massive repricing of risk assets that all benefitted from easy money and low-interest rates. This re-pricing led to losses across most asset classes, with cryptocurrencies taking the biggest hit.

If this trend continues, the next Bitcoin market bottom may be the longest-lasting drawdown ever. AR predicts that Bitcoin will trade in a predominantly flat range in 2023, but will close the year at a higher price than the yearly open.

In addition, the Federal Reserve’s tightening of monetary policy will likely continue in 2023. This could lead to further re-pricing of risk assets, with cryptocurrencies continuing to take a hit.

Overall, Bitcoin is expected to remain flat through 2023, following its second-worst YTD since launch. The decline in prices is due to a combination of macroeconomic conditions and poor risk management by core market participants. If this trend continues, the next Bitcoin market bottom may be the longest-lasting drawdown ever. Despite this, AR predicts that Bitcoin will close 2023 at a higher price than the yearly open.

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