In this year’s review, we’ll take a swift journey through the significant on-chain developments. We’ll delve into the transformations witnessed in Bitcoin, Ethereum, Derivatives, and Stablecoins in 2023, setting the stage for an exhilarating future in this domain.
Key Highlights
- 2023 marked a remarkable period for digital assets. Bitcoin surged by over 172%, with corrections staying below 20%, and substantial capital inflows into BTC, ETH, and Stablecoins.
- The market surpassed several crucial technical and on-chain valuation benchmarks this year.
- October emerged as a pivotal month, particularly in terms of institutional capital movements.
- Long-Term Holders now possess a near-record amount of the Bitcoin supply, and a vast majority of the coins are currently held at a profit.
- Significant shifts in the market landscape are evident, including Tether’s resurgence as the leading stablecoin, CME futures overtaking Binance, and notable growth in the Options markets.
In 2023, digital assets, especially Bitcoin, had an amazing run. Bitcoin’s value shot up by 172%. Ethereum and other digital coins also did well, growing by about 90%.
Bitcoin became even more dominant, especially after the tough times of 2021-22. However, Ethereum faced challenges. Even though it launched the Shanghai update and expanded its L2 network, its value compared to Bitcoin dropped to a multi-year low.
Compared to stocks, bonds, and gold, digital assets performed way better this year. But the biggest jump happened after October. This surge began when Bitcoin crossed the $30k mark and hit other key price points.
Market cap performance
Gentle Dips:
In 2023, price drops were not as steep as usual. Normally, Bitcoin (BTC) would drop by at least 25% or even 50% during its high and low phases. But in 2023, the biggest drop was only 20% from its highest point. This suggests that there were more buyers than sellers throughout the year.
Ethereum’s Story:
Ethereum (ETH) also had fewer big drops. Even though Ethereum didn’t perform as strongly as Bitcoin, the fact that fewer new coins were being made (because of the Merge) balanced out with steady demand.
Bitcoin Breaking the $30k Barrier: A Recap
Throughout the year, Bitcoin broke many technical and on-chain barriers, highlighting its robust performance.
The year kicked off with a January surge that pushed prices above the Realized Price, a level that had been a ceiling since June 2022. However, October’s rally was the real game-changer. It not only surpassed all the remaining barriers but also broke the significant $30k mark. As of now, Bitcoin’s peak for the year stands at $44.5k, and it’s stabilizing around $43k.
Maturing Derivatives Markets
Between 2020 and 2023, futures and options markets became popular places for managing prices and liquidity. In 2023, the options market grew a lot, almost matching the futures market in size. The total derivatives volume is $248 Billion as of Dec 27, 2023. Big institutions are more interested in Bitcoin, using options for better trading and risk strategies.
Stablecoins Supplies
In the last market cycle, stablecoins became very important, often used by traders and as a main source of market money. But from March 2022, the total amount of stablecoins dropped by 26%. This was because of rules (like the SEC’s case against BUSD), investors choosing US treasuries over stablecoins with no interest, and less interest in the market’s downturn.
However, October changed things. According to a recent Binance study, after six straight quarters of decreasing net supply, the leading five stablecoins saw a net increase of $3.8 billion in Q4. The supply last showed growth in Q1 2022, surpassing $17 billion.
Crypto Rewind: A Look Back at 2023’s Pivotal Moments
The FTX Trial Saga
In 2023, the FTX trial involving Sam Bankman-Fried, the FTX exchange founder, made headlines. Following FTX’s 2022 bankruptcy, Bankman-Fried faced charges of misusing customer funds for personal ventures. After a month-long trial, he was convicted of fraud and theft. He awaits sentencing in March 2024, potentially facing 110 years in prison. This case emphasizes the importance of ethical conduct in the crypto industry and sets a precedent for future similar situations.
Binance’s Regulatory Issues
In 2023, Binance, a big crypto exchange, faced tough rules from U.S. authorities. They settled with the CFTC and the U.S. Treasury because of money laundering and sanctions problems.
Since 2018, the CFTC was looking into Binance for possible money issues. They found Binance moved more than $10 billion for groups trying to dodge U.S. rules. Because of this, Binance was accused of not following U.S. laws and not doing enough to stop bad money activities.
To fix this, Binance made big changes. They improved their tools to spot bad money moves and made their customer checks stricter.
Changpeng Zhao’s Exit
In November 2023, the crypto world saw a big change when Changpeng Zhao, or “CZ,” stepped down as Binance’s CEO. This move came after Binance settled with the U.S. government over some legal issues.
As part of a big $4.3 billion deal, CZ agreed to leave his CEO position. Before his exit, Binance faced many investigations, especially for not following money rules. U.S. agencies like the DoJ and CFTC were involved in these investigations.
Ripple vs. SEC Outcome
In a significant legal development, the SEC’s case against Ripple over XRP didn’t succeed. The judge decided that Ripple broke securities rules by directly selling XRP to big investors but not by selling it on exchanges for regular users. This decision is important because the SEC thinks most cryptocurrencies, except Bitcoin, are securities.
Sam Altman introduces WorldCoin
Also, Sam Altman introduced WorldCoin, designed to tackle income gaps with its special World ID system. But, this idea is under watch by regulators in many places. While aiming to be a global digital identity leader, WorldCoin might encounter challenges ahead.
Bitcoin ETF Endeavors
In 2023, the push for a U.S. Bitcoin ETF became a key topic in the crypto world. Big names like BlackRock, Fidelity, and VanEck, among others, sought approval for this ETF. They’ve been in talks with the SEC about things like how the ETF would work and how risks would be shared with investors. If approved, this ETF could make Bitcoin more accessible for all types of investors, without the usual crypto hassles. While the SEC had concerns about Bitcoin ETFs in the past, a 2023 court decision in favor of Grayscale has raised hopes for future approvals. Approving a Bitcoin ETF would be a major highlight of 2023, showing how the crypto market is growing up and setting new trends for the year.
The rise of Bitcoin ordinals
A groundbreaking innovation called Bitcoin Ordinals emerged, enabling the embedding of complete content onto satoshis, Bitcoin’s smallest units. Unlike standard NFTs that usually operate on separate blockchains like Ethereum, Ordinals are integrated within Bitcoin transactions, showcasing a notable technological advancement.
Crypto Regulations 2023: Summary
- The European Union (EU) set a global standard with its Markets in Crypto-Assets (MiCA) regulation, aiming to unify crypto asset rules and boost investor safety.
- Dubai pioneered by establishing the first-ever authority solely for virtual assets. Meanwhile, the UK categorized crypto assets as financial instruments, indicating stricter oversight.
- China, while banning general cryptocurrency use, aggressively launched its digital yuan (CBDC), with transactions skyrocketing from US$13.9 billion in August to US$249.9 billion by June 2023.
- In India, crypto assets now fall under the Prevention of Money Laundering Act (PMLA), making crypto exchanges subject to regulatory scrutiny.
Solana resurrection
Solana enthusiasts, optimistic about price rises, likely found encouragement from the renewed interest in alternative coins. Even after the recent pullback, Solana gave an year-to-date gain of over 1000%. outpacing Bitcoin’s 158% and Ether’s 86.5% gains. Additionally, Solana introduced a new NFT marketplace named Tensor last year, which has steadily gained traction among NFT enthusiasts. The renewed buzz around NFTs, including innovations like Bitcoin’s Ordinals NFTs, seems to have played a role in boosting Solana’s value even further.
Conclusion
In 2023, the crypto world saw a blend of tech advancements, market shifts, and regulatory shifts. These developments underscored the crypto sector’s growing strength, inching it towards wider adoption and clearer regulations. As authorities and financial entities grasp both the promise and complexities of crypto, we’re on the brink of a transformative phase, integrating crypto more deeply into the world’s financial fabric.
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