Exploring the Unknown. Engineer by day, explorer by night.
Here is the summary of this mirror post provided by GPT-3:
Ethereum has strong long-term potential due to its security model and growing demand
Layer 2 solutions have seen significant growth and competition is driving innovation
Investor sentiment and external economic conditions can impact short-term price fluctuations, but not long-term.
Incidents like the FTX collapse serve as a reminder to exercise caution and perform due diligence in the cryptocurrency space
Disclaimer: As a permabull, I believe that Ethereum's value will only go up in the long term, so take my analysis with caution. However, I recognize that my predictions for the short term can be utterly wrong, one-year’s view is considered short-term in the context of an investment thesis.
In this article, I will outline my reasoning for my belief in Ethereum's potential and review what happened in 2022 and what I expect to see in the coming year of 2023. I will address the various factors that influence the price:
Supply and demand
Investor sentiment
Economic conditions and monetary policy
One key factor that influences the price of a cryptocurrency is the balance between supply and demand - I refer to this as “usage”. In the case of Ethereum, the security model does not rely on unsustainable token issuance post-merge. The average daily issuance (post-merge, incl. staking rewards) is 4,680Ξ / 107d = 43.7Ξ / d. At the current market price of 1200 USD/Ξ, this equals to a daily issuance of 52,000 USD/. For comparison with other projects, I let the numbers speak for themselves.
With the successful implementation of Proof and Stake (PoS) and EIP-1559 active, token issuance is today negative (meaning that MEV and priority fees are smaller than the burn) until withdrawals are enabled. Going forward, when withdrawals are enabled, issuance is expected to stay relatively flat at around 120M coins.
On the demand side, we can observe real on-chain burn. In the last months of 2022, we have seen peak deployed contracts on Ethereum (filtering out gas tokens). This happened even during bearish market sentiment. Builders do not fear bears, it seems.
According to Etherscan.io, we see steady growth of daily verified contracts over the year.
The average gas is trending down, from the market high at the end of 2021 and its NFT-mania (avg. 180 Gwei) to now steady at 15 Gwei. The gas peak in Mai (200 Gwei) was during the LUNA/3AC crash, and the peak end of November (35 Gwei) was during the FTX fraud uncover and is fairly small in comparison. My interpretation is that the LUNA/3AC had much higher on-chain implications, as the overall leverage was higher back then and many had to rush and cover their leveraged positions, stETH for example. 3AC/Celsius could also have been much more involved in the Ethereum space than FTX/Alameda.
Another metric many are looking into is the daily active addresses. I don’t see that much value in it, because the activity on a blockchain can be long- or short-sighted. E.g. you’re long-sighted if you opened up a Maker CDP in 2020 and have not touched it anymore since then. The ATH peak at the end of 2022 is due to XEN crypto, some call it Ponzi or scam, I do not participate and just mention it here for completeness.
I’m not much into NFT so I don’t provide a summary of what’s happening there. From an outside observer’s perspective, I can just conclude that NFTs are still a phenomenon and not dead.
Stablecoins were the most successful contract in 2021, but in 2022 they have seen some withdrawals. For the greater Ethereum network, stablecoins are still essential and I believe they will grow in 2023 again.
In 2022 the new king in town and most successful contract on Ethereum was its own staking contract (+7M ETH in 2022). This contract attracted more deposits than any other contract, including all the layer 2’s (+2M ETH). It is fair to say that 2022 was the year of Ethereum staking. The strong demand for this contract demonstrates the appeal of staking as a way to earn rewards (incl. liquid staking derivates), support the security of the Ethereum network, and trust in further development.
Ethereum staking withdrawals are scheduled to be enabled in 2023. This event may have an impact on the price of Ethereum, but it is difficult to predict with certainty. Some people may argue that allowing stakers to sell their tokens could lead to a decrease in the price, as stakers may sell their holdings to realize their profits. However, it is worth noting that the majority of stakers have already been able to sell their tokens through staking providers such as Lido, Coinbase, Binance, etc. albeit sometimes at a theoretical loss of staking gains (which can range from 3-4% depending on the provider). It does not make sense for these stakers to wait until withdrawals are enabled to sell their tokens, as the price of Ethereum fluctuates on a monthly and even daily basis as much. It is also possible that some stakers may sell their tokens to pay taxes, but this is likely to be a small portion of the total stakers and not happen all at once. Typically for such a network update, I expect higher volatility as parties are trying to manipulate prices by either FUD or hype.
From a long-term perspective, enabling staking withdrawals is to be seen as an important milestone in development. It completes the staking protocol; there was put much trust (or degeneracy) necessary to put Ether into the staking contract without knowing when to withdraw. Hence, it will finally allow investors, who may not be as familiar with the cryptocurrency space, to enter staking. Those investors see an immediate withdrawal option as a requirement to put money into staking. Liquid staking derivates are just not guaranteeing sufficient liquidity in a bank-run-like situation.
In the past few years, many other blockchain platforms, such as Neo, Tron, Tezos, Iota, Vechain, Cardano, Near, Eos, Hedera, Luna, Fantom, Solana, Avalanche, Polkadot, Algorand, and many more, have attempted to compete with Ethereum. However, I see it as very difficult for these platforms to catch up to the development activity and infrastructure already in place on Ethereum. Ethereum provides a first-mover advantage, and the other platforms are first to compete with each other.
In 2022 with large hacks on bridges it became clear to me that a multichain world with bridges connecting different networks can be risky, even for large protocols and that they are the honeypots. 5 of the 7 largest hacks were cross-chain bridges, and most of them happened recently in 2022. In my point of view, it seems unlikely that a prosperous interconnected multichain world will emerge, as the friction and risk involved will be just too high.
Another trend that I have observed is the increased development activity and adoption of layer 2 solutions. Exactly one year ago, at the start of 2022, the hashtag #L222 was trending - 2022 should be the year of layer 2.
Looking at the total value locked (TVL) in current layer 2 platforms, it is clear that there has been significant growth in this area. The TVL of these platforms has more than doubled in ETH terms, from 1.3M ETH to more than 3.4M ETH. Keep in mind that all of these L2 are still “in beta” and have some centralized aspects, some more than others.
For 2022, I see that Arbitrum has emerged as the clear leader in terms of TVL (even without its own Arbitrum tokens) and protocol activity. It’s also the place where most of my activity happens.
The Arbitrum Nitro update, which was activated at the end of August 2022, has proven to be a significant milestone for Arbitrum. As a user, I have found that it has greatly improved the platform by making it more affordable and fast. Overall, the update represents a major step forward for Arbitrum and has greatly enhanced my user experience.
Other metrics like the number of transactions, active daily accounts, etc. are difficult to compare as they can be easily faked (or gamed) on cheap networks.
However, it is worth noting that there are other layer 2 solutions that are still in development. I like to mention zkEVM like zkSync and Scroll, and StarkWare’s validiums (starkNet) with a slightly different approach and a large developer base. Many L2 are just announced or are in early alpha, so they are not even on l2beat (such as Consensys zkEVM, Mantle, Taiko, Fuel, and Altlayer to name a few). I expect that VC activity and funding of layer 2 will increase in 2023.
It will be interesting to see how all these protocols progress and emerge.
Investor sentiment is often a significant factor in short-term price fluctuations for cryptocurrencies. It is difficult to predict, how sentiment will change, as it can be influenced or manipulated by a variety of factors. In general, sentiment tends to follow the price of the asset.
The flippening (the event in which Ethereum surpasses Bitcoin as the largest cryptocurrency by market capitalization) was a hot topic in 2017, and then around 2021 - 2022 again. Currently, there is not much talk, although I see the chances higher than ever: Bitcoin price is down, and there is not much hype or activity on it. It would be a significant shift in the cryptocurrency market. Why is there not more flippening talk?
Institutions and “whales” are the same. They are people or a group of people with a lot of money. There are several trackers, often also referred to as “smart money” but 2022 showed that this attribution is not true (more in the next paragraph). It’s important to filter exchange addresses and contracts from them. Santiment did this for us and we can track their held supply:
The amount of ETH held by “whales” stayed more or less flat till Mai 2022, then reduced significantly after the Luna/3AC incident, and only after the merge in autumn 2022 the value goes steady up again and will likely reach ATH in 2023.
There have been a number of significant events in the cryptocurrency industry in 2022, including the Luna collapse, the 3AC breakdown, the Celsius bankruptcy, and the FTX fraud. There are too many to name them and somehow all are connected to each other. Many large players went insolvent, and retail and institutions lost money trusting those parties. They were naive and had not seen the risks. I truly feel sorry for the retail customers, in the worst case losing their life savings. That is the sad part, and I hope that SBF will be punished with imprisonment.
If those crises haven't happened this year, they would have occurred in the future and possibly with an even much larger impact. We’ve already observed that according to on-chain data, the events in May 2022 had much higher implications than the ones in November, although all the consequences might not yet have been revealed. Finally, I can also see that fire can have some purifying power. We should get rid of bad actors, the sooner, the better.
The FTX collapse led some to believe that it would have a negative impact on the blockchain industry and its adoption by institutions. However, I disagree with this assessment. While there is certainly some regulatory risk involved in the cryptocurrency space, it is important to note that fraud is not caused by the use of cryptography or blockchain technology. In fact, these technologies can help to prevent fraud by providing an immutable and transparent ledger of transactions. I do not understand for how long FTX’s fraud left unnoticed. Some further implications might be some close of VC or “hedge(d)” funds, but that’s their very own business risk.
The irony of fate is that the failure can be attributed to central authorities, acting in a decentralized environment. All the decentralized solutions worked perfectly also under this stress test.
One way to reduce the centralized aspect in the cryptocurrency industry and limit the power of centralized exchanges is to move towards solutions that enable on-chain off/on-ramp, as already implemented in many wallets and services! If you haven’t, check them out! Also, user-friendly wallets with account abstraction increase the adaption of self-custodial wallets, I hope, even more in 2023.
Another step in the right direction is to trade less on centralized exchanges (which are by the way vulnerable to wash-trading and other hidden price manipulations, like the “Alameda-FTX deal”) and more on decentralized protocols. If we manage to get rid of on/off-ramp via CEX and shift the trading activity to on-chain solutions, then we’re in for a good future.
Over the full year 2022 we have seen steady reductions in the ETH supply on exchanges, starting at the beginning of the year with 21%, and currently at about 16% with a large shift after the FTX collapse. Over half of the CEX supply is held on Coinbase and Binance.
While the collapse of FTX has certainly had an impact on many retail customers, it maybe had a more significant impact on venture capital firms and "crypto funds", that were invested in the platform, in “FTX-imperium” or had funds on the trading platform. This event serves as a reminder for them, that, even in the exciting and promising cryptocurrency space, it is important to do thorough due diligence and exercise caution. If the backers of FTX had done their risk management job properly, the platform may not have grown to such a large scale so fast, as they would never have got funding. And backers of FTX were large names from TradFi like Blackrock, VanEck, and Sequoia.
It’s also a lesson to the broader cryptocurrency space, that it is important for all participants to be more selective in who they support and to be mindful of the potential risks involved in any investment. By being more cautious and vigilant, we can help to build a stronger and more sustainable industry.
The extent to which the larger economic conditions influence the cryptocurrency market is debatable. In the past year, the cryptocurrency market has generally followed the trend of the global equity/stock market, experiencing steady declines from an ATH. However, it is worth noting that the relationship between the cryptocurrency market and the larger economic conditions is not always straightforward. There have been numerous instances when the cryptocurrency market was in a bear phase, while the stock market was experiencing gains. Conversely, there have also been times when the cryptocurrency market was rallying while the stock market was relatively stagnant. Only in the last year or so was a high correlation between the global stock market (or tech) and cryptocurrency.
It is true that cheap money can fuel bubbles in markets, but it is not necessarily the case that expensive money will prevent Ethereum (or some other cryptocurrencies) from succeeding. I think it is much more important to focus on what is happening within the Ethereum space and ecosystem, rather than being swayed by external factors.
As @QCompounding pointed out quoting Peter Lynch (it’s an excellent read):
There is always something to worry about. There will always be uncertainty in the economy and on the stock market. Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling.
Don’t look at macro-economic factors. Nobody can predict interest rates, the future direction of the economy, or the movement of foreign currencies. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.
It is also worth considering that the total market capitalization of the cryptocurrency market is relatively small compared to other asset classes, which could make it less vulnerable to global economic conditions. Additionally, it is important to note that many retail investors in the cryptocurrency market are younger and in the case of Ethereum even more educated. They may not be as affected by economic downturns, as they are still in the workforce and may remain with stable incomes. I expect that many invest in crypto again.
As we look ahead to 2023, for me it's clear that Ethereum has a bright future as a long-term investment. With strong security, growing demand, and a thriving ecosystem with lots of activity on layer 2, it's well-positioned to weather any short-term price fluctuations and continue to grow.
That being said, it's important for investors to remain vigilant and exercise caution, as the cryptocurrency market can be volatile and risky. By carefully evaluating opportunities, conducting thorough due diligence, and being mindful of the potential risks involved, we can help to build a stronger and more sustainable industry that benefits all participants.
As we move into the new year, let's embrace the opportunities and challenges that lie ahead.
Here is the summary of this mirror post provided by GPT-3:
Ethereum has strong long-term potential due to its security model and growing demand
Layer 2 solutions have seen significant growth and competition is driving innovation
Investor sentiment and external economic conditions can impact short-term price fluctuations, but not long-term.
Incidents like the FTX collapse serve as a reminder to exercise caution and perform due diligence in the cryptocurrency space
Disclaimer: As a permabull, I believe that Ethereum's value will only go up in the long term, so take my analysis with caution. However, I recognize that my predictions for the short term can be utterly wrong, one-year’s view is considered short-term in the context of an investment thesis.
In this article, I will outline my reasoning for my belief in Ethereum's potential and review what happened in 2022 and what I expect to see in the coming year of 2023. I will address the various factors that influence the price:
Supply and demand
Investor sentiment
Economic conditions and monetary policy
One key factor that influences the price of a cryptocurrency is the balance between supply and demand - I refer to this as “usage”. In the case of Ethereum, the security model does not rely on unsustainable token issuance post-merge. The average daily issuance (post-merge, incl. staking rewards) is 4,680Ξ / 107d = 43.7Ξ / d. At the current market price of 1200 USD/Ξ, this equals to a daily issuance of 52,000 USD/. For comparison with other projects, I let the numbers speak for themselves.
With the successful implementation of Proof and Stake (PoS) and EIP-1559 active, token issuance is today negative (meaning that MEV and priority fees are smaller than the burn) until withdrawals are enabled. Going forward, when withdrawals are enabled, issuance is expected to stay relatively flat at around 120M coins.
On the demand side, we can observe real on-chain burn. In the last months of 2022, we have seen peak deployed contracts on Ethereum (filtering out gas tokens). This happened even during bearish market sentiment. Builders do not fear bears, it seems.
According to Etherscan.io, we see steady growth of daily verified contracts over the year.
The average gas is trending down, from the market high at the end of 2021 and its NFT-mania (avg. 180 Gwei) to now steady at 15 Gwei. The gas peak in Mai (200 Gwei) was during the LUNA/3AC crash, and the peak end of November (35 Gwei) was during the FTX fraud uncover and is fairly small in comparison. My interpretation is that the LUNA/3AC had much higher on-chain implications, as the overall leverage was higher back then and many had to rush and cover their leveraged positions, stETH for example. 3AC/Celsius could also have been much more involved in the Ethereum space than FTX/Alameda.
Another metric many are looking into is the daily active addresses. I don’t see that much value in it, because the activity on a blockchain can be long- or short-sighted. E.g. you’re long-sighted if you opened up a Maker CDP in 2020 and have not touched it anymore since then. The ATH peak at the end of 2022 is due to XEN crypto, some call it Ponzi or scam, I do not participate and just mention it here for completeness.
I’m not much into NFT so I don’t provide a summary of what’s happening there. From an outside observer’s perspective, I can just conclude that NFTs are still a phenomenon and not dead.
Stablecoins were the most successful contract in 2021, but in 2022 they have seen some withdrawals. For the greater Ethereum network, stablecoins are still essential and I believe they will grow in 2023 again.
In 2022 the new king in town and most successful contract on Ethereum was its own staking contract (+7M ETH in 2022). This contract attracted more deposits than any other contract, including all the layer 2’s (+2M ETH). It is fair to say that 2022 was the year of Ethereum staking. The strong demand for this contract demonstrates the appeal of staking as a way to earn rewards (incl. liquid staking derivates), support the security of the Ethereum network, and trust in further development.
Ethereum staking withdrawals are scheduled to be enabled in 2023. This event may have an impact on the price of Ethereum, but it is difficult to predict with certainty. Some people may argue that allowing stakers to sell their tokens could lead to a decrease in the price, as stakers may sell their holdings to realize their profits. However, it is worth noting that the majority of stakers have already been able to sell their tokens through staking providers such as Lido, Coinbase, Binance, etc. albeit sometimes at a theoretical loss of staking gains (which can range from 3-4% depending on the provider). It does not make sense for these stakers to wait until withdrawals are enabled to sell their tokens, as the price of Ethereum fluctuates on a monthly and even daily basis as much. It is also possible that some stakers may sell their tokens to pay taxes, but this is likely to be a small portion of the total stakers and not happen all at once. Typically for such a network update, I expect higher volatility as parties are trying to manipulate prices by either FUD or hype.
From a long-term perspective, enabling staking withdrawals is to be seen as an important milestone in development. It completes the staking protocol; there was put much trust (or degeneracy) necessary to put Ether into the staking contract without knowing when to withdraw. Hence, it will finally allow investors, who may not be as familiar with the cryptocurrency space, to enter staking. Those investors see an immediate withdrawal option as a requirement to put money into staking. Liquid staking derivates are just not guaranteeing sufficient liquidity in a bank-run-like situation.
In the past few years, many other blockchain platforms, such as Neo, Tron, Tezos, Iota, Vechain, Cardano, Near, Eos, Hedera, Luna, Fantom, Solana, Avalanche, Polkadot, Algorand, and many more, have attempted to compete with Ethereum. However, I see it as very difficult for these platforms to catch up to the development activity and infrastructure already in place on Ethereum. Ethereum provides a first-mover advantage, and the other platforms are first to compete with each other.
In 2022 with large hacks on bridges it became clear to me that a multichain world with bridges connecting different networks can be risky, even for large protocols and that they are the honeypots. 5 of the 7 largest hacks were cross-chain bridges, and most of them happened recently in 2022. In my point of view, it seems unlikely that a prosperous interconnected multichain world will emerge, as the friction and risk involved will be just too high.
Another trend that I have observed is the increased development activity and adoption of layer 2 solutions. Exactly one year ago, at the start of 2022, the hashtag #L222 was trending - 2022 should be the year of layer 2.
Looking at the total value locked (TVL) in current layer 2 platforms, it is clear that there has been significant growth in this area. The TVL of these platforms has more than doubled in ETH terms, from 1.3M ETH to more than 3.4M ETH. Keep in mind that all of these L2 are still “in beta” and have some centralized aspects, some more than others.
For 2022, I see that Arbitrum has emerged as the clear leader in terms of TVL (even without its own Arbitrum tokens) and protocol activity. It’s also the place where most of my activity happens.
The Arbitrum Nitro update, which was activated at the end of August 2022, has proven to be a significant milestone for Arbitrum. As a user, I have found that it has greatly improved the platform by making it more affordable and fast. Overall, the update represents a major step forward for Arbitrum and has greatly enhanced my user experience.
Other metrics like the number of transactions, active daily accounts, etc. are difficult to compare as they can be easily faked (or gamed) on cheap networks.
However, it is worth noting that there are other layer 2 solutions that are still in development. I like to mention zkEVM like zkSync and Scroll, and StarkWare’s validiums (starkNet) with a slightly different approach and a large developer base. Many L2 are just announced or are in early alpha, so they are not even on l2beat (such as Consensys zkEVM, Mantle, Taiko, Fuel, and Altlayer to name a few). I expect that VC activity and funding of layer 2 will increase in 2023.
It will be interesting to see how all these protocols progress and emerge.
Investor sentiment is often a significant factor in short-term price fluctuations for cryptocurrencies. It is difficult to predict, how sentiment will change, as it can be influenced or manipulated by a variety of factors. In general, sentiment tends to follow the price of the asset.
The flippening (the event in which Ethereum surpasses Bitcoin as the largest cryptocurrency by market capitalization) was a hot topic in 2017, and then around 2021 - 2022 again. Currently, there is not much talk, although I see the chances higher than ever: Bitcoin price is down, and there is not much hype or activity on it. It would be a significant shift in the cryptocurrency market. Why is there not more flippening talk?
Institutions and “whales” are the same. They are people or a group of people with a lot of money. There are several trackers, often also referred to as “smart money” but 2022 showed that this attribution is not true (more in the next paragraph). It’s important to filter exchange addresses and contracts from them. Santiment did this for us and we can track their held supply:
The amount of ETH held by “whales” stayed more or less flat till Mai 2022, then reduced significantly after the Luna/3AC incident, and only after the merge in autumn 2022 the value goes steady up again and will likely reach ATH in 2023.
There have been a number of significant events in the cryptocurrency industry in 2022, including the Luna collapse, the 3AC breakdown, the Celsius bankruptcy, and the FTX fraud. There are too many to name them and somehow all are connected to each other. Many large players went insolvent, and retail and institutions lost money trusting those parties. They were naive and had not seen the risks. I truly feel sorry for the retail customers, in the worst case losing their life savings. That is the sad part, and I hope that SBF will be punished with imprisonment.
If those crises haven't happened this year, they would have occurred in the future and possibly with an even much larger impact. We’ve already observed that according to on-chain data, the events in May 2022 had much higher implications than the ones in November, although all the consequences might not yet have been revealed. Finally, I can also see that fire can have some purifying power. We should get rid of bad actors, the sooner, the better.
The FTX collapse led some to believe that it would have a negative impact on the blockchain industry and its adoption by institutions. However, I disagree with this assessment. While there is certainly some regulatory risk involved in the cryptocurrency space, it is important to note that fraud is not caused by the use of cryptography or blockchain technology. In fact, these technologies can help to prevent fraud by providing an immutable and transparent ledger of transactions. I do not understand for how long FTX’s fraud left unnoticed. Some further implications might be some close of VC or “hedge(d)” funds, but that’s their very own business risk.
The irony of fate is that the failure can be attributed to central authorities, acting in a decentralized environment. All the decentralized solutions worked perfectly also under this stress test.
One way to reduce the centralized aspect in the cryptocurrency industry and limit the power of centralized exchanges is to move towards solutions that enable on-chain off/on-ramp, as already implemented in many wallets and services! If you haven’t, check them out! Also, user-friendly wallets with account abstraction increase the adaption of self-custodial wallets, I hope, even more in 2023.
Another step in the right direction is to trade less on centralized exchanges (which are by the way vulnerable to wash-trading and other hidden price manipulations, like the “Alameda-FTX deal”) and more on decentralized protocols. If we manage to get rid of on/off-ramp via CEX and shift the trading activity to on-chain solutions, then we’re in for a good future.
Over the full year 2022 we have seen steady reductions in the ETH supply on exchanges, starting at the beginning of the year with 21%, and currently at about 16% with a large shift after the FTX collapse. Over half of the CEX supply is held on Coinbase and Binance.
While the collapse of FTX has certainly had an impact on many retail customers, it maybe had a more significant impact on venture capital firms and "crypto funds", that were invested in the platform, in “FTX-imperium” or had funds on the trading platform. This event serves as a reminder for them, that, even in the exciting and promising cryptocurrency space, it is important to do thorough due diligence and exercise caution. If the backers of FTX had done their risk management job properly, the platform may not have grown to such a large scale so fast, as they would never have got funding. And backers of FTX were large names from TradFi like Blackrock, VanEck, and Sequoia.
It’s also a lesson to the broader cryptocurrency space, that it is important for all participants to be more selective in who they support and to be mindful of the potential risks involved in any investment. By being more cautious and vigilant, we can help to build a stronger and more sustainable industry.
The extent to which the larger economic conditions influence the cryptocurrency market is debatable. In the past year, the cryptocurrency market has generally followed the trend of the global equity/stock market, experiencing steady declines from an ATH. However, it is worth noting that the relationship between the cryptocurrency market and the larger economic conditions is not always straightforward. There have been numerous instances when the cryptocurrency market was in a bear phase, while the stock market was experiencing gains. Conversely, there have also been times when the cryptocurrency market was rallying while the stock market was relatively stagnant. Only in the last year or so was a high correlation between the global stock market (or tech) and cryptocurrency.
It is true that cheap money can fuel bubbles in markets, but it is not necessarily the case that expensive money will prevent Ethereum (or some other cryptocurrencies) from succeeding. I think it is much more important to focus on what is happening within the Ethereum space and ecosystem, rather than being swayed by external factors.
As @QCompounding pointed out quoting Peter Lynch (it’s an excellent read):
There is always something to worry about. There will always be uncertainty in the economy and on the stock market. Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling.
Don’t look at macro-economic factors. Nobody can predict interest rates, the future direction of the economy, or the movement of foreign currencies. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.
It is also worth considering that the total market capitalization of the cryptocurrency market is relatively small compared to other asset classes, which could make it less vulnerable to global economic conditions. Additionally, it is important to note that many retail investors in the cryptocurrency market are younger and in the case of Ethereum even more educated. They may not be as affected by economic downturns, as they are still in the workforce and may remain with stable incomes. I expect that many invest in crypto again.
As we look ahead to 2023, for me it's clear that Ethereum has a bright future as a long-term investment. With strong security, growing demand, and a thriving ecosystem with lots of activity on layer 2, it's well-positioned to weather any short-term price fluctuations and continue to grow.
That being said, it's important for investors to remain vigilant and exercise caution, as the cryptocurrency market can be volatile and risky. By carefully evaluating opportunities, conducting thorough due diligence, and being mindful of the potential risks involved, we can help to build a stronger and more sustainable industry that benefits all participants.
As we move into the new year, let's embrace the opportunities and challenges that lie ahead.
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