Will crypto recover previous highs or will we see another price drop?

The cryptocurrency market has had an astonishing start to 2023, with nearly all coins in the green in the first two months of the year. However, even though many of the major currencies are up 30-50% for the year, they still sit well below all-time highs. The Bitcoin (quotation BTC), for example, is up 41% on the year, but at a price of $23.432 it is still significantly below its all-time high of $68.789,63.

If cryptocurrencies like Bitcoin are to recover their previous highs, several things need to happen this year. Here's a deeper look at some key catalysts that could send the cryptocurrency market back to all-time highs.

1. Macroeconomic prospects

The most important factor for the cryptocurrency market is probably the overall macroeconomic outlook, especially for the US economy. As a result, all eyes are on the Federal Reserve. Any hint of further rate hikes by the Fed may scare the market and this is one of the reasons why Bitcoin has failed to clear the $25.000 level.

The consensus is that if the Fed decides to tighten rates further, the cryptocurrency market will have a hard time going up. Any signs of Fed easing, however, would be great news for cryptocurrencies like Bitcoin. So, if cryptocurrencies have any chance of regaining previous levels, the market will need to see a pause in rate hikes.

2. Institutional adoption

Another key factor is the institutional adoption of blockchain technology. The emergence of more blockchain and Web3 technology use cases will increase the long-term investment value of many cryptocurrencies that can provide clear utility. 

For example, Visa is currently investigating possible use cases for Ethereum to process certain types of payments faster and cheaper. At the same time, Amazon recently partnered with Avalanche to offer blockchain technology solutions to customers through its Amazon Web Services (AWS) unit.

3. Cryptocurrency as an asset class

Institutional adoption can also be viewed from the perspective of large institutional investors, such as endowments and pension funds. If large institutional investors decide to allocate a larger share of their investment portfolios to cryptocurrencies, this would have a strong positive impact on cryptocurrency prices.

A game-changing event last year was the partnership between BlackRock and the cryptocurrency exchange Coinbase. The partnership will make it easier for BlackRock clients to invest in cryptocurrencies through Coinbase. This is a huge development because BlackRock is now the largest asset manager in the world, with nearly $10.000 trillion in assets under management.

Which cryptocurrencies are most likely to succeed?

Based on all of this, a number of criteria can be put together to determine which cryptocurrencies are best for long-term investment. Cryptocurrencies with proven utility and real use cases, for example, should be at the top of the list. Furthermore, cryptocurrencies that are the preferred investment targets of large institutional investors should also do well in a growing market.

For this reason, I am optimistic about Bitcoin and Ethereum in the long run. They are the two cryptocurrencies most likely to recover previous highs. There are many other interesting cryptocurrencies out there, but if you were to buy and hold just two cryptocurrencies this year, it would be Bitcoin and Ethereum.