Can Bitcoin reach $30,000 in 2023?

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Bitcoin (BTC -0.45%) fortunes turned south in 2022 as the token’s value fell 64% and investors and traders began to question the future of the crypto -cash. Bitcoin has failed to be an inflation hedge while falling behind upgraded blockchains like Ethereum (ETH -0.82%) and Solana (SOL -1.67%) in utility .

As the calendar shifts to 2023, will Bitcoin gain traction and pull back to $30,000, or is the bull crushed? Here’s what you need to consider this year.

The digital store of value is Bitcoin’s best bull case

Bitcoin has long been touted as a revolutionary new form of currency, with its decentralized network and cryptographic security measures making it a safe and potentially disruptive force in the world of finance. However, over the years it has become increasingly clear that Bitcoin’s true strength lies not in its use as a medium of exchange or payment system, but rather as a store of value.

Network security and decentralization are arguably Bitcoin’s greatest strengths, and for those looking to park money to maintain value, it’s a decent option. But that might not be enough in 2023, especially as risk and leverage among major crypto players come to light.

The risk of liquidation is very real

While using Bitcoin as a store of value may sound positive, it is not without its risks. One of the main concerns is that large holders are forced to sell. Michael Saylor’s company MicroStrategy (MSTR -5.15%) holds 132,500 bitcoins as of December 27, at an average purchase price of $30,397 per token. MicroStrategy also has $2.4 billion in debt, and its operations can’t handle that. If Bitcoin falls further, there is a very real risk that MicroStrategy will need to liquidate its tokens.

Digital Currency Group is another concern with its Grayscale Bitcoin Trust (GBTC 0.83%) now trading well below the net asset value of its Bitcoin holdings, meaning there is further liquidation risk. At the time of writing, GBTC is trading at a 45% discount to its net asset value, a gap that has persisted for some time.

GBTC Discount or Premium to NAV data by YCharts

GBTC has attempted to change its structure to allow for more liquid trading and potentially the redemption of trust assets, which could mean selling Bitcoin. This discount could lead to a massive sell-off and a flood of sell-offs in the market, undermining confidence in Bitcoin’s value.

Lack of bitcoin payments is a problem

Despite its hype and the attention it has received over the years, Bitcoin has not yet been widely adopted as a payment system. This contrasts with other cryptocurrencies like Ethereum and Solana, which have more robust payment ecosystems and native smart contract capabilities.

Without a solid foundation as a payment system, it’s hard to see how Bitcoin can maintain its status as a top cryptocurrency outside of those who simply want to store value. And the number of people looking for a digital store of value in a rising interest rate environment may be limited.

Bitcoin is in for a tough year

I don’t think Bitcoin will hit $30,000 this year, and the risk that it could fall further does exist. Investors are moving into productive assets, like stocks and dividend-paying bonds, and out of risky assets like bitcoin. If we’ve learned anything in 2022 it’s that bitcoin’s value is tied to speculation more than anything else, and without blockchain uses like payments or smart contracts, I think this cryptocurrency will end by being eclipsed by more innovative competitors.

Travis Hoium has positions in Ethereum and Solana. The Motley Fool has positions and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.

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