The sense of gloom which had settled over crypto markets in late 2022, after a $1.5 trillion loss, has been replaced by a very different sentiment: greed. In the last 12 months, Bitcoin has risen by over 160%, adding around $530 billion to its market capitalization. This has been followed by a surge of smaller tokens, such as Solana, backed by Sam Bankman-Fried, and meme coins featuring dogs and frogs, as investors look to take risks again. A person who invested $100,000 in Solana at the start of this year would now have seen their portfolio increase to $800,000.
Much of the current enthusiasm is due to the expectation that the US regulators will soon approve the first ever Exchange-Traded Fund (ETF) investing directly in Bitcoin. A decision is due by Jan 10th, and crypto bulls believe it is sure to be a positive one. Michael Saylor, co-founder of MicroStrategy Inc. (a major Bitcoin holder), commented on Bloomberg Television that the approval of ‘spot ETFs’ will cause a “demand shock” as it provides a compliant and high-speed way for mainstream investors to access Bitcoin.
Despite this, there are still many who argue that cryptocurrencies are worthless and a haven for criminals. Binance, the largest exchange, had to pay a fine of $4.3 billion for a range of violations, and CEO Changpeng Zhao had to step down. Bankman-Fried has also been imprisoned for fraud at FTX, and liquidity has yet to recover from the collapse of his empire.
Below are a selection of charts showing how crypto fared in 2023:
– Bitcoin has outperformed stocks and gold and is still trading below its November 2021 peak of $69,000. Supporters believe that the halving event of 2024 will limit supply growth and support Bitcoin, as well as potential ETF demand.
– Marathon Digital Holdings Inc., Riot Platforms Inc., Coinbase Global Inc. and MicroStrategy have all seen their share prices rise in line with the crypto market recovery. Coinbase has been embroiled in a lawsuit by the SEC over accusations of running an unregistered platform, which it denies.
– Bitcoin derivatives experienced a surge in activity in 2023. Open interest in crypto options on Deribit exceeded $16 billion in December, while CME Group also hit a record level for Bitcoin futures open interest.
– The decentralized finance sector is still struggling to recover from the $40 billion TerraUSD stablecoin project collapse of 2022. The only exception is liquid staking, where the total value of locked assets has risen to a record this year.
– Weekly trading volumes for non-fungible tokens (NFTs) have climbed from less than $50 million in October to around $180 million this month. However, they are still a fraction of the $1.8 billion peak seen in 2022.
– Despite Bitcoin’s price increase, crypto markets still suffer from the collapse of Bankman-Fried’s FTX platform and his trading house Alameda Research in November 2022. The daily value of trades within 1% of the mid-price of Bitcoin on centralized exchanges has dropped by 55% to about $680 million since April 2020, according to Kaiko data.
– Binance remains the largest spot trading platform, but its market share has dropped to 44% from 65% at the start of the year, as other Asia-focused exchanges such as Upbit, Bybit and OKX have taken a larger slice of the market.
