Bitcoin Recovers in 2023 After Rocky 2022: Arcane Research
• Historically, 2022 is the second-worst year for Bitcoin since 2011 with a 65% YTD performance.
• Macroeconomic conditions and crypto-specific leverage have fueled the crypto winter.
• Arcane Research predicts Bitcoin to trade in a mostly flat range in 2023, but to finish the year with a higher price than it did at the start.
The past year has been a difficult one for Bitcoin. Historically, 2022 could end up being the second-worst year for Bitcoin since 2011, with a year-to-date performance of -65%. This is only surpassed by 2018, when the price lost -73% in one year. In comparison, physical gold has significantly outperformed digital gold, with a YTD performance of -1%.
The decline in Bitcoin’s price can be attributed to two main factors. Firstly, tightening macroeconomic conditions have had an impact on the digital gold asset. Secondly, crypto-specific leverage and poor risk management by core market participants have contributed to the crypto winter.
According to Arcane Research, Bitcoin followed U.S. equities very closely due to its high correlation. However, there were two distinct events in 2022 that caused the price to deviate from the U.S. equities – the 3AC and Celsius incident in June and the FTX event in November. These two outliers are responsible for the entire underperformance of BTC vs. the U.S. equities.
Looking ahead to 2023, Arcane Research predicts that contagion effects will probably continue in the early part of the year. However, the firm expects the majority of the year to be less frantic and uneventful compared to the last three years. As such, Bitcoin is likely to trade in a mostly flat range in 2023, but to finish the year with a higher price than it did at the start.