The backdrop of inflation, war and escalating interest rates has not been promising for major cryptocurrencies in circulation this year, Bitcoin and Ethereum.
However, in Hashdex’s view, these factors have created the ideal test for bitcoin. For Hashdex, although the year has been one of strengthening of BTC fundamentals, ETH It should benefit from the development of new second-tier solutions. The information comes from the Crypto Investment Outlook, a report published for clients and the market.
Bitcoin
Bitcoin, the cryptocurrency with the highest market value currently listed, followed the decline during this year’s crypto winter in “a clear demonstration that it does not currently behave as a hedge against inflation,” according to Hashdex analyst Lucas Santana.
“Instead, similar to other risk assets, Bitcoin benefits from the monetary expansion of fiat currencies and suffers from the difficulties experienced in a hawkish environment,” he adds.
Even so, the analyst believes that the year has reinforced the fundamentals of the asset, with significant milestones for the adoption of the Lightning Network, as well as the launch of Lightning payments through CashApp, which allowed some 40 million users to switch to cryptocurrency as a medium of exchange.
“Last year also brought new all-time highs for Bitcoin’s hash rate and mining difficulty, with the network currently more secure than ever, despite reduced miners’ revenues,” Santana notes.
In addition, institutional adoption is expanding. “Fidelity started allowing retirement plans to invest in bitcoin in April; BlackRock launched the first spot Bitcoin private fund for institutional clients in August; and Google partnered with Coinbase to enable crypto payments in cloud services,” he adds.
Hashdex states that it is confident that Bitcoin’s increased regulatory clarity relative to other crypto activities will further increase its adoption by institutional investors.
Ethereum
Ethereum also suffered from the free fall of cryptocurrency prices. However, the Hashdex analyst believes that this year has been one of the most important in the history of the asset.
“After seven years of development, the transition to Proof-of-Stake went smoothly in one of the most anticipated events in the crypto ecosystem, The Merge. This transition represents a considerable achievement, finding the key to a new security mechanism that has drastically reduced the energy consumption of the grid,” he says.
According to Santana, the first signs of the change began to be perceived shortly after The Merge and the future of Ethereum for next year is promising.
In addition, the Shanghai hard fork is one of the most anticipated Ethereum updates in 2023. “Precisely because it allows stakers to migrate their ether holdings between validators or make profits from staking rewards,” which could make the network much more decentralized, he says.
The market has yet to see how demand for ETH can be driven by the development of new second-tier solutions and 2023 is expected to be the year of the launch of initial fragmentation functions, “increasing the overall capacity of its base layer and further democratizing access to network validation”, Adds.
