Bitcoin started 2023 in high spirits, with prices slowly recovering after the difficulties of 2022. Yet, the growth was short-lived. Despite amassing gains of approximately 80% in a relatively short amount of time, August brought in trouble for the market and saw most of the amount earned over the past few months completely melting away.
Given the situation, many investors have started to become concerned about how things will evolve over the future. Although they still buy Bitcoin online, they’ve also started developing strategies that can help them guarantee bigger gains. While some believe a bullish run that takes prices higher is imminent, others take a bleaker view of the situation, saying that prices will most likely get worse before they get better.
Although Bitcoin climbed quite a lot since the beginning of the year, it also recorded many periods of stagnation, which led users to conclude that recovery wouldn’t be as linear as initially expected. Many investors hoped that Bitcoin would eventually gain the momentum and achieve a stronger foothold that would allow it to continue rallying. Yet, that hasn’t come to pass, and the prices dropped instead.
Going into September, the market sentiment appears to be getting worse, especially considering the postponement of a decision regarding multiple spot BTC on exchange-trade applications. The bears can rejoice during this time since they have regulatory pressures on their side, keeping the prices in check. The US Department of Justice considers that some exchanges may have been involved in illicit activities, including money laundering and facilitating trades to and from countries with economic sanctions imposed on them.
Since inflation rates in the United States managed to go down to 3.2%, the Federal Reserve started draining liquidity from marketplaces. According to the US dollar index, the dollar is now at approximately the same level as it was six months ago when compared to the Swiss franc or the Euro.
Although many investors have continued hoping that prices will get back on track sooner rather than later, it seems now that the bulls won’t win in 2023 either. Most analysts believe that the next logical step in Bitcoin’s journey will be a drop to an even lower level, perhaps somewhere around $22k. The main reason for this move appears to be that BTC derivatives have already started showing signs of bearish activity.
The hype for BTC ETFs appears to be dwindling as well. By the 18th of August, the 19% rally that occurred in the aftermath of the initial filing had been fully retracted. Bitcoin moved back to $26,000. In the aftermath, there was a failed attempt to regain the $28k support level due to the fact that investors elevated the odds that an ETF approval is imminent after the news concerning the trust request of Grayscale.
Nonetheless, on September 1st, the Standard and Poor’s 500 index closed at 4,515. That’s roughly 6.3% below compared to the all-time high in January 2022. That shows that the general feeling permeating the Bitcoin environment is that investors aren’t as optimistic as they were expected to be around this time. This is particularly important considering that the 2024 halving is only seven months away. Even gold, which has been struggling since around May to go over $2,000, recorded a 6.5% difference on the S&P 500 compared to the all-time highest level.
Therefore, it seems that the future doesn’t have a lot of growth in store for Bitcoin. The fact that regulatory pressures remain high and might even intensify over the next few months isn’t any help. However, according to research, the gains from a swift spot ETF approval would be powerful enough to outweigh the negative impact on the exchanges. Yet, other analysts maintain that there’s no objective way to determine if this is true.
Moreover, the total assets of the Federal Reserves dropped to $8.12 trillion from the March peak of $8.73. The liquidity drainage impacts BTC’s potential protection against inflation. Although BTC has been holding on tightly since March, a closer look at the derivatives seems to indicate that bulls are starting to lose their conviction.
El Salvador made history as the first country in the world to integrate Bitcoin as legal tender, essentially giving it the same status as any fiat currency. Although the move has been controversial, with many saying that it is too early in BTC’s history for such a move, plans went ahead. Now, the nation’s Ministry of Education and the nonprofit organization Mi Primer Bitcoin have announced plans to introduce Bitcoin into the public school curriculum by 2024.
Following program completion, the students will receive a completion diploma. The primary source material will be based on Bitcoin, and many believe that El Salvador can set an example in digital financial education. It can also help the general public have a clearer idea of what it means to buy, sell and trade Bitcoin, as well as how to ensure that the transactions will be conducted with safety in mind.
If the program works well in its incipient phase, it could be moved to every school in the country over the following year. This could be the first step to bringing Bitcoin education all over the world. On September 4th, Bitcoin Cuba announced that they’ve already begun gathering sign-ups for their first edition of Mi Primer Bitcoin.
The bottom line
Although many expected 2023 to be the year when Bitcoin returns to its previous values, perhaps even reaching its 2021 all-time high levels. However, it seems now that the coin has been too weakened to make any considerable, long-standing changes. It will still be a while until Bitcoin recovers, and it seems now that a lot more effort will be necessary than initially predicted.
However, dedicated investors are still convinced of the coin’s ability to drive value and create the perfect conditions for a growing portfolio. The best solution for investors is to remain mindful of these challenges and find the best strategies to help them be successful. Long-term holding is preferable during this time, as it means users will incur fewer losses and won’t have to worry about losing their capital.