2022 was both incredibly optimistic and challenging for the Bitcoin ecosystem. In the US, both the SEC and CFTC declared Bitcoin as a commodity - a major win for the community. Despite growing adoption on all fronts, due to tumbling macro conditions and the contagious collapse of centralized exchanges, the price of Bitcoin did not fare so well.
As the global energy crisis persists, and the world bears a looming recession, Bitcoin miners have been facing tremendous pressure to keep their operations running. Despite Bitcoin’s current rally, the overall economic outlook is a cause for strain and innovation for miners in 2023.
The Bitcoin community is no stranger to adverse conditions. Since Bitcoin’s inception, each turn in the market has presented new opportunities for innovation and adoption. A fickle global sociopolitical and macroeconomic environment appears to be the setting for Bitcoin in 2023.
This article will cover what we can expect from Bitcoin in 2023, discussing volatility, Bitcoin mining, energy, and the Lightning Network. Also, it will include a reminder as to “why we Bitcoin” given that many forget that Bitcoin is a contemporary tool to defend freedoms and build independence.
Interest rate hikes
In its efforts to curb inflation, the US Fed started raising interest rates in 2022 and has indicated the intention to continue doing so in 2023. During interest rate hikes and the tightening of monetary policy, investments tend to move away from risk-on assets to the safety of cash or bonds.
Since Bitcoin’s price has historically correlated with the S&P 500 (equities), it falls under a high-risk asset class. Based on that assessment, we can reasonably expect the bear market to end when the Fed pivots — either halting interest rate increases or lowering them.
Bitcoin halving 2024
The next Bitcoin halving will be on March 18, 2024. If history repeats itself, or even rhymes, then we can expect to see the first signs of the bulls returning in the latter half of 2023. Fed pivot or not, 2023 is the runway to a big year for Bitcoin in 2024.
Miners in debt crisis
According to the Hashrate Index’s report, Bitcoin miners accumulated over $4 billion in debt in 2022. Off the back of the China ban, the Bitcoin mining community in the West took up massive loans during the 2021 bull market. This negatively impacted their bottom lines during the 2022 bear market.
That being said, bearish mining conditions typically translate into low Bitcoin ASIC hardware costs, representing a time-sensitive opportunity for new market entrants. If you are interested to start your own mining operations, now may be the best time before the market recovers.
Energy innovation with Bitcoin
Given difficulty reaching profitability, surviving miners likely need to cut excess costs to stay in business. In 2023, we can expect miners to partner with established energy providers, look to hybrid energy sources, and experiment with innovative mining equipment to stay ahead of the curve.
Energy is one of the most exciting topics for Bitcoin miners in 2023. Given that instant monetization of previously cost-prohibitive sustainable energy sources is now possible with Bitcoin mining, the sky is the limit for miners. Indeed, it is Warren Buffet who stated that, “energy deregulation will be the largest transfer of wealth in history”.
Affordable and efficient mining equipment
The Bitcoin Lightning Network
A solution to Bitcoin’s scaling challenge, the Bitcoin Lightning Network (LN) was proposed in 2015 by two researchers, Thaddeus Dryja and Joseph Poon, in a paper titled “The Bitcoin Lightning Network.”
Whereas the Bitcoin mainchain can only process seven transactions per second (TPS) at a fair cost, LN can process up to 1 000 000 TPS at a fraction of penny. This makes it ideal for processing micropayments and onboarding microhodlers, a fact that yields especially optimistic consequences for the “Global South”, with eyes on Africa, in particular.
Saylor, Dorsey, and stablecoins for LN
In December 2022, Bitcoin evangelist and Chairman of Microstrategy, Michael Saylor, announced plans to upgrade the Lightning Network. Through MicroStrategy, Saylor plans to build LN applications that make it easier to onboard consumers and enterprises in 2023.
Jack Dorsey has also announced a commitment of his time to innovating on LN since handing over his responsibilities at Twitter. Expect to see Jack unveiling the use of LN via one of his companies, Square, amongst his other initiatives in Bitcoin.
Perhaps one of the most significant developments may be if the idea of “stablecoins” on LN comes to fruition in 2023. Given the privacy, speed, and scaling benefits, US dollar denominated transactions on LN could be a game-changer for Bitcoin.
Bitcoin in 2023 and beyond
When zooming out from crypto noise and macroeconomic crisis, one finds that the fundamental argument for monumental change on the back of Bitcoin is ever stronger.
The hegemony of the US “petrodollar” is being upended before our eyes, and geopolitical balances are being tested as the nation states of the world backpedal from COVID and funnel as much attention as they can muster on the next fear factor.
Whether they know it consciously or not, the general populace is waking up to the redundant incompetence of the prevaling paradigm of modern day “democracy”, economics, and fiat monetary policy. Nation states as we know them today are as fragile as the Earth’s polar ice caps, whose capitulation is just as impending.
Bitcoin is a tool to build a new energy, money, and social infrastructure, a tool for freedom in the face of humanity’s chronically irresponsible economic and sociopolitical systems. In the inevitable event that humanity changes its course to prolong our longevity, Bitcoin remains poised to be a relevant tool at our disposal in 2023 and beyond.
Make sure to check back with Asic Magazine for all the latest feedback on Bitcoin in 2023.