3 Bitcoin Predictions for 2023 From a Crypto Executive Who Called the Market Top

Bitcoin is changing hands around a quarter of its late-2021 all-time high, with the total market capitalization of crypto down to $810 billion from nearly $3 trillion over the same period. The crypto market is under intense pressure from an absence of retail investors and the persistence of tight financial conditions, with the industry facing existential threats from regulation and waning interest.

Ryan Selkis, the founder and CEO of Messari, a crypto market intelligence group, warned investors about what was coming a year ago. “Doesn’t it just feel a little toppy? The $30 billion Shiba Inu market caps, the Times Square NFT billboards?” he wrote in his annual outlook report in December 2021.

A year—and a big bear market—later, Selkis’ crypto theses for 2023 asks “is this the dark before the dawn, or the beginning of a long Arctic winter?” 

Here are three key predictions for Bitcoin from Messari’s annual report:

Bitcoin on Balance Sheets

A major tailwind for crypto has been the adoption of Bitcoin as a treasury asset by companies, most notably software group

MicroStrategy

(ticker: MSTR) and

Tesla

(TSLA), among others. This trend may not accelerate into next year, according to Selkis, but could shift to a different type of buyer.

“In a rising rate environment, I’m not sure that many corporate treasurers are willing to load up on balance sheet Bitcoin,” Selkis wrote. Rather, the Messari chief sees it as more likely that the market will see shocks on the supply side as distressed crypto miners cover costs and investors sell assets to harvest losses for tax purposes.

“Short of a significant Fed pivot on interest rate policy, the next demand-side shock for Bitcoin will likely happen at the global government level, not big corporations,” Selkis said. El Salvador is one country to have jumped on the Bitcoin train—to generally poor results—but will it be the last?

On-Chain Signals Flash Buy

Last year, “the drivers of asset prices were blinking ‘sell’ but many of us just couldn’t help ourselves,” Selkis said. “Let’s flip the script this year, and ask, ‘how much lower can we go?’”

The market is an unpredictable beast, but crypto analysts and market participants often look to a range of technical indicators and “on-chain” signals—based on transactions recorded on the blockchain network—for buy and sell indicators.

Selkis is very clear that he believes in crypto and is bullish on multiple segments of the digital asset market, so perhaps it’s no surprise that he’s identified an indicator that makes Bitcoin look cheap. But it’s worth a look.

Messari highlights a metric called Market Value to Realized Value (MVRV). This measures current price times supply—or the market cap—against the cumulative value of Bitcoins that have moved in the last five years at the price at which they were last sold on the blockchain. “Market cap can stay the same when realized value spikes and vice versa. It’s a dynamic measure that accounts for flow,” Selkis explains.

“An MVRV that hits 3 has meant ‘sell right now’ and a MVRV below 1 has meant ‘start accumulating’ for crypto’s entire history for Bitcoin,” wrote Selkis, pointing to a market chart showing this indicator firmly below 1. “Where are we now? January 2015. December 2018. i.e., Sell-a-kidney-to-buy-more territory.”

Digital Gold and a $500,000 Price Target

Bitcoin has long-been compared to “digital gold” and hyped as a steady source of value that is resistant to inflation because of the limited supply of tokens. While the inflation hedge argument has come under pressure in 2022, with prices tumbling in tandem with stocks as inflation ripped to multi-decade highs, the analogy to a new form of gold continues to be compelling.

“Bitcoin is beginning to act more like a credible neutral reserve asset,” Selkis said. “From both a MVRV and risk return standpoint, Bitcoin seems a bit more attractive today.”

Messari aren’t the first group to try and arrive at a price target for Bitcoin by using comparisons to gold, whether that be through comparing relative value and volatility or considering what would happen if the two assets are on parity. Selkis eyes a particularly alluring price target—even if it isn’t Bitcoin at $1 million, predicted by perma-bull Cathie Wood.

“Bitcoin’s parity with gold would yield a 25x return, so there’s a lot to like in adding a 4% position in digital gold for every ounce of gold you buy,” Selkis said. “At today’s prices, Bitcoin-gold parity would bring us a $500,000 Bitcoin.”

Bitcoin at $500,000 is a far cry from the sub-$17,000 levels today. But surely any advance in prices—whether it be a short-term Santa Claus Rally or long-term pro-crypto thesis—relies, in some part, on hope.

Write to Jack Denton at [email protected]