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3 Cryptocurrency Risks to Brace for 2023
Cryptocurrency prices have been in a strong bearish trend in the past few days as their correlation with American stocks continued. Bitcoin plunged below $17,000 while the total market cap of all cryptocurrencies dropped to $830 billion. Here are the three main risks facing cryptos in 2023.
Federal Reserve risks
The first main risk that cryptocurrency prices face in 2023 is the Federal Reserve. To a large extent, the Fed was the main driver for most assets in 2022. As inflation surged, the Federal Reserve hiked interest rates by 450 basis points. The most recent rate hike was a 0.50% in December which pushed the headline rate to the highest level in decades.
Actions of the Fed in 2023 will have a role to play in crypto prices. A hawkish Fed, as the officials hinted in this meeting, will lead to more pain for digital currency prices. Still, there are reasons why the Fed will be dovish. For one, inflation has started easing in the past few months. In November, consumer prices dropped to 7.7%.
Another factor is that recession risks are at an elevated level considering that the yield curve has inverted to the lowest level in decades. In the past, an inverted yield curve has been one of the best predictors of a recession.
Stablecoin risks
Stablecoins are important cryptocurrencies that are useful in the blockchain market. They are widely used in both centralized and decentralized exchange platforms. In 2022, the first major news was the collapse of Terra USD.
With the role of stablecoins rising, another collapse will lead to more problems for cryptocurrency prices. I expect that regulators will propose several new regulations for stablecoins. An important rule could be on disclosure and full-regulated audits for assets backing the coins. As such, there will be a challenge for algorithmic stablecoins.
Exchange risks
The other important risk that could affect crypto prices in 2023 will be exchanges. In 2022, the collapse of FTX was the biggest story in the crypto industry. Recent data shows that investors are either dumping their tokens or moving them to self-custody.
Therefore, there is an inherent risk that some big exchanges like Binance or Crypto.com will explode. If this happens, we could see cryptocurrency prices slip or accelerate the transition to decentralized exchanges like Uniswap and GMX.
BNB price has noted significant gains over the past few days, surging past the psychological resistance of $300. The native cryptocurrency of the Binance Exchange has surpassed Solana to regain its position as the fourth-largest cryptocurrency by market cap. The digital currency has been rallying lately with a 7-day profit of more than 15%. Additionally, BNB has clocked a phenomenal gain of 38% in the month to date.
Binance Coin Outlook
BNB price has been on a strong bull run for the past week, breaking out of its consolidation. Even so, the asset has experienced a correction in its uptrend over the past 24 hours but remains above the crucial level of $300. BNB’s total market cap has decreased by 4% over the past day to $48 billion, while the total volume of the asset traded over the same period dipped by about 15%.
Over the past year, Binance Coin has had to cope with Fear, Uncertainty, and Doubt (FUD) on the back of the regulatory troubles of its underlying exchange. Earlier, the BNB price touched a low of $223.50, a few days after its former CEO, Changpeng Zhao, pleaded guilty to money laundering charges. However, the cryptocurrency has managed to rebound 46% in value since then.
The recent price rally has been associated with various positive developments in the Binance ecosystem, including the Introduction of the Isolated Margin Auto-Transfer Mode. This feature enables…
Solana price performance in recent times has been remarkable, surpassing Ripple and Binance Coin to become the fourth-largest cryptocurrency by market cap. The SOL price breached the critical level of $100 for the first time since April 2022 over the weekend to imbue optimism among investors. However, the altcoin has corrected by 7%, suggesting that the market is overheated. At the time of writing, the ‘Ethereum killer’ was trading slightly lower at $111.60.
SOL Outlook
Solana price has made a significant recovery over the past few weeks, climbing above the psychological level of $100. The altcoin has been one of the best-performing assets this year, extending its year-to-date gains to more than 1,025%, with more gains recorded in the past month alone. However, even with such growth, analysts have noted that Solana has a bleak chance of topping its ATH of $260.
The reason behind this is the increase in supply relative to its value. In November 2021, when the Solana price hit its all-time high of $260, its total market capitalization was around $78 billion. Despite the value of the crypto asset being less than half of what it was at the top, its market cap is currently hovering near $50 billion.
This has been brought about by the increase in the Solana supply by more than 100 million SOL over the past two years. According to some analysts, for the altcoin to retest $260, its…
Solana price has noted significant gains over the past few weeks, climbing to its highest level since April 2022. The ‘Ethereum Killer’ almost topped the crucial level of $100 on Friday, before pulling back slightly. The asset’s recent surge has catapulted Solana’s total market cap to $39.6 billion, ranking 5th after and above BNB and XRP, respectively. Solana has jumped by more than 22% in the past week and more than 80% in the month to date. At the time of writing, SOL price was trading 0.90% lower at $93.10.
Catalysts Behind SOL’s Rally
Solana price has been on a strong bull run over the past few days, rocketing to its highest level in 20 months as the network benefits from the substantial activity and strong interest in memecoins. The SOL token, the native digital asset of the high-performance blockchain platform Solana, has shown some serious strength over the past few weeks, outperforming all the altcoins in the market.
The recent surge in the Solana price has been linked to heightened on-chain activities on the Solana blockchain. Notably, the ongoing hype for the blockchain’s speedy transactions, cheap fees, and a lottery of meme coin issuances has buoyed SOL’s on-chain activity. Metrics have revealed that Solana has been the strongest draw among on-chain traders, with trading volumes and network fees outperforming Ethereum- the largest altcoin by market cap.
Cited figures provided by DeFi aggregator DeFiLlama…
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