As we enter 2023, the future of cryptocurrency is shrouded in uncertainty, yet rife with potential. With a convergence of events, challenges, and opportunities, this year is shaping up to be a pivotal one for the crypto space.
While there are countless variables to consider, there are three key factors that are likely to have a significant impact on the trajectory and adoption of crypto in the coming months.
The crypto market is facing a potential supply increase, which could be influenced by two significant events. One of these is the Shanghai upgrade that Ethereum will undergo in April 2023, marking a full transition into a proof-of-stake blockchain.
This upgrade is expected to significantly enhance the network’s performance, but it also raises concerns about a potential increase in the total circulating supply and subsequent downward pressure on ETH’s price.
However, there are reasons to believe that such concerns are unfounded. For one, a full 32 ETH withdrawal is impossible until 18 months after the Shanghai upgrade.
Withdrawals will initially enter a queue where staking rewards take priority over the principal stake, slowing the influx of ETH into the circulating supply.
Furthermore, most ETH stakers were underwater during the bull market of 2021, meaning that they are currently not in profit and may be further discouraged from selling.
Recovery from the Mt. Gox Hack
Another significant event that could affect the crypto market’s supply is the upcoming release of recovered coins from the Mt. Gox that happened in 2014.
For those unaware, Mt. Gox was once the world’s top Bitcoin exchange, with around 70 percent of trading volume globally.
However, an unexpected hack that happened in February 2014 resulted in the loss of over 850,000 Bitcoins, sending shockwaves throughout the crypto community and leading to the exchange’s eventual closure.
Now, nearly a decade later, the trustee in charge of the Mt. Gox bankruptcy proceedings has announced plans to distribute recovered coins to creditors, potentially impacting Bitcoin’s supply and market dynamics.
While the exact amount of Bitcoin to be released remains unclear, the market is closely monitoring the situation as it unfolds.
Potential Downward Pressure on Bitcoin Price
The release of these coins from Mt. Gox could potentially lead to downward pressure on BTC’s price, particularly if creditors sell their newly acquired assets on the market.
However, it’s worth noting that there are also several factors that could mitigate such effects. For one, many creditors have been waiting years for the distribution of recovered assets and may choose to hold onto their Bitcoin rather than sell immediately.
Additionally, the overall demand for BTC has significantly increased since the Mt. Gox hack, meaning that the market may be able to absorb the additional supply more easily than in the past.
Concerns About Possible Impact on the Market
Although there is some relief that one of the largest institutional holders of the recovered Bitcoins has stated their intention to hold onto their coins, there are still concerns about the potential impact of the Mt. Gox distribution on the market.
Once the claimants receive their Bitcoins, there may be lingering uncertainty and doubt about how the market will react, which could introduce some volatility into the market.
It’s worth noting that the release of these coins comes at a time when the overall sentiment towards Bitcoin has been improving, with increasing adoption and mainstream recognition.
However, the potential influx of a large number of Bitcoins into the market could still cause some disruption, particularly if the claimants choose to sell their coins immediately.
Some analysts believe that the distribution of these coins could have a positive impact on the market.
For example, if the claimants choose to hold onto their coins rather than sell immediately, it could increase the overall level of Bitcoin ownership and help to promote wider adoption.
Additionally, the distribution could help to restore faith in the market, by finally providing some closure to a long-standing issue that has been a source of concern for many in the community.