Bitcoin (BTC) price prediction for January 2023


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itcoin (BTC) continues to prove the unpredictability of the cryptocurrency market, falling from £31,000 in January last year to £17,175 today.

As volatile as BTC prices are, they are driven by four main factors: supply, demand, competition, and sentiment. Here, we’ve looked at how each might play out in the near future — plus some additional pressure and expert opinion — to give you the next bitcoin price prediction.

The Financial Conduct Authority (FCA) has repeatedly warned that anyone investing in cryptocurrency should be prepared to lose everything.

Supply

The lower the asset, the more valuable it is. The total amount of bitcoin that will ever exist is limited to 21,000,000, which means that the supply is limited.

New bitcoins are minted when a new block of confirmed transactions is added to the blockchain by a bitcoin miner (read more here). As a reward, they are gifted with a newly minted amount of bitcoins.

Over 19,000,000 BTC have already been minted over the past 12 years and another 2,000,000 will be mined. However, even though the unmined supply of BTC is more than 10% of the total supply of BTC, this does not mean that the 21,000,000 limit will be reached in 14 months (10% of 12 years).

This is because the minting of new bitcoins is set at a constant rate that slows down over time. When Bitcoin started, the reward given to miners for adding a block of transactions to the blockchain was 50BTC. Four years later, this was reduced to 25, and the award continues to halve every four years.

The bounty is expected to be 3,125BTC by the end of 2024, which means it will be decades before all 21,000,000 bitcoins are minted. Thus, in the medium term, bitcoin will not be scarce.

However, the halving mechanism effectively puts a cap on supply, which could increase prices if demand increases in the future.

Judgment on Supply: Without particular pressure on supply, prices will remain relatively stable or fall.

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Demand

Increasing demand for a finite resource should increase its value. As we know, bitcoin is a finite resource that will become scarcer over time.

The greater the demand for Bitcoin, the greater the number of people who buy it. Daily bitcoin transactions peaked at 440,000 in May 2021.

More than 303,000 transactions took place yesterday, January 17, 2023, up from 271,416 last month. The figures reflect lower demand than in the spring of 2021, but are up from last summer, when daily transactions were around 200,000.

Google trends data shows that fewer people are searching for bitcoin today than a few years ago, with searches peaking in December 2017.

Another valuable indicator of demand is the number of active bitcoin addresses, since you need an active address to buy bitcoins.

According to BitinfoCharts, there were approximately 875,000 active addresses at the time of writing. The figure is broadly flat for the year so far, but is up slightly on last month and down from a peak of 1.25m in April last year.

Finally, the next bitcoin halving should happen in the spring of 2024, and demand could theoretically increase by then in anticipation of the supply squeeze it brings.

Judgment on demand: Demand looks broadly flat, if slightly higher. Therefore, prices may remain stable or rise.

Competition

The emergence of cheaper altcoins with faster transaction speeds has not dethroned bitcoin as the king of cryptocurrencies. It is still the largest cryptocurrency by market capitalization and has even been adopted as the state currency in El Salvador – something no other altcoin can boast.

Critics have argued that some altcoins have more potential than bitcoin because the latter is only a payments system. Ethereum, Cardano and Ripple programmable blockchains that can host smart contracts and decentralized applications (dApps).

Proponents may argue that bitcoin is not directly comparable to such altcoins.

Interestingly, the cryptocurrency crisis, which started in May 2022 and took a discount of more than 50% from the value of bitcoin, also affected its competition. Ethereum (ETH) and Cardano (ADA) both fell by similar amounts, meaning bitcoin’s losses were not its rivals’ gains.

Established as a less volatile alternative to traditional cryptocurrencies, stablecoins have been adversely affected by such global economic factors.

Another big change in recent months has been the Ethereum merger, with Ethereum moving from a Proof of Work consensus mechanism to a Proof of Stake consensus mechanism. While better for the environment, the change doesn’t appear to have significantly boosted bitcoin’s main rival in value.

Competition verdict: Without particular pressure on competition, prices may remain stable.

Feeling

Bitcoin prices can be affected by people’s attitude towards it.

The fear and greed index is a tool used by investors to gauge market sentiment. Fear reflects a market in which investors sell their assets because they are worried that prices will fall. Greed reflects the market where investors buy because they expect prices to rise.

According to the widely cited Crypto Fear and Greed Index on alternative.me, which tracks cryptocurrency trends, the market is currently in Neutral, meaning cryptocurrency holders generally do not expect gains or losses. However, this status is more optimistic than last month’s Fear status.

Critics of fear and greed indices say they can be useful as a barometer of sentiment, but they don’t work well to predict price movements.

Another good indicator of sentiment is the level of bitcoin outflows from crypto exchanges: in other words, the more bitcoin is moved out of cryptocurrencies and into wallets, the more investors hold onto their bitcoins, expecting it to appreciate in value.

Cryptoquant data shows that the pullback is about 8% higher than this time last month.

Sentiment Judgment: Passion is less negative than last month, which means prices may rise.

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Cryptoassets are highly volatile and unregulated in the UK. There is no consumer protection. Income tax may apply.



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