2023 Crypto Investment Outlook: Is ETH the Top Choice?


As economic uncertainty continues to be the focus of financial markets in 2023, venture capitalists and early-stage investors are looking for safe investments with the potential for healthy returns. Bitcoin pioneer investor Tim Draper recently predicted that the price of Bitcoin (BTC 0.15%) will reach $250,000 by mid-2023 due to rising interest rates and continued sell-offs in tech stocks. However, the true outcome is likely to be somewhere between these two numbers. With this in mind, is Ethereum (ETH) the best cryptocurrency to buy in the new year?

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The Challenges of Central Exchanges

The collapse of Land this spring, coupled with the bankruptcies of high-profile crypto exchanges, lenders such as Celsius Network, FTX, and eventually BlockFi, created a significant challenge to the credibility of the cryptocurrency industry. Investors were shaken by events that intensified the already volatile Bitcoin selloff. Yet, the events highlighted the asset’s value, as Bitcoin is a truly decentralized and trustless financial asset, unlike centralized cryptocurrency exchanges such as FTX and BlockFi.

Unlike banks, these platforms are not FDIC-insured, and they are not subject to the same regulatory oversight as traditional brokerage firms. Additionally, customers trust the leadership of these centralized entities when buying or hosting cryptocurrency, but they are unable to fully understand the protocols and exchanges, resulting in little transparency for the public.

A Decentralized and Trustless Asset

Bitcoin was created in 2008 as a decentralized and trustless peer-to-peer financial system that did not depend on regulators or banks. This was an important part of the original appeal, and it remains a key component of its appeal today. The distributed ledger technology allows anyone to search for and verify transactions on the blockchain, and Bitcoin holders can keep it in their wallet or hardware ledgers without any worries about losing access.

There is no central authority that is impartial and can make a poor decision which could put the network at risk. Instead, the network is managed and protected by a small group of miners who are distributed around the world and validate transactions and control the network. Bitcoin experienced no downtime in 2022 and it remains a shining example of a secure network that has been free from disruptions or attacks.

Financial Giants Feel the Momentum

Adoption of Bitcoin is increasing at an incredible and steady pace; for instance, Alphabet recently announced that it would accept payments for its Google Cloud Service in Bitcoin beginning in 2023. Traditional financial institutions are also expanding their support of Bitcoin holders; Bank of New York Mellon, the oldest bank in America and the world’s largest custodian bank, will allow clients to transfer and hold their money using its Digital Asset Custody platform.

Additionally, according to a survey of institutional investors, 91% expressed interest in investing in the sector, while 41% are already holding cryptocurrencies. MasterCard is also working with Paxos to allow traditional banks to offer cryptocurrency trading. These developments demonstrate that Bitcoin is a unique financial asset with real-world usage.

Hyperinflation: A Hedge

Bitcoin is also a financial safety net for people all over the globe, especially those living in countries with severe inflation like Argentina and Turkey, where the inflation rate has surpassed 80%. These individuals are trying to reduce the impact of currency devaluation by using Bitcoin as a store of value or a medium for exchange.

Although Bitcoin was down 65% over the past year, which casts doubt on its status as an inflation hedge, its finite supply of 21 million coins means that tokens will not lose their value if more coins are issued by the central body. And with governments making it harder for citizens to purchase foreign currency, Bitcoin offers an alternative.

It is clear that Bitcoin is still a trustless, global financial asset that powers an incredible network of users, and the recent problems highlighted by FTX have merely underscored the importance of Bitcoin itself. It may not reach Tim Draper’s price target of $250,000 in 2023, but there is still plenty of upside to his prediction and the $17,000 he has estimated. Bitcoin is highly valued today and could be an attractive investment in the new year.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s Board of Directors. Michael Byrne owns positions in Bitcoin. The Motley Fool owns and recommends Alphabet, Baidu, Bitcoin, Mastercard and Tesla. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.

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