The apprehension that enveloped crypto markets at the close of 2022, marked by a $1.5 trillion loss, has given way to avarice in 2023.
Propelling Enthusiasm and Unveiling Lucrative Investment Opportunities
In a remarkable turnaround, Bitcoin has surged by over 160% this year, contributing a staggering $530 billion to its market capitalization. This resurgence has sparked a broader enthusiasm for risk, propelling various tokens such as Solana and memecoins into the spotlight. For instance, an investment of $100,000 in Solana at the beginning of 2023 would now yield over $800,000 in gains.
The catalyst behind much of this success lies in the optimistic belief that US regulators are on the verge of approving the first exchange-traded fund (ETF) directly linked to Bitcoin. The outcome of this anticipation, expected by January 10, 2023, could be a pivotal moment for mainstream investors seeking a compliant investment channel for the cryptocurrency.
Michael Saylor, co-founder of MicroStrategy Inc., emphasized the potential impact of ETF approval, foreseeing a “demand shock” as mainstream investors gain access to a high-bandwidth investment channel for Bitcoin.
Despite the market’s positive momentum, skeptics argue that cryptocurrencies remain fundamentally worthless and attractive to criminal activities. Notably, Binance, the largest exchange, faced a $4.3 billion fine in November, leading to the resignation of CEO Changpeng Zhao. Additionally, FTX, led by Sam Bankman-Fried, encountered legal issues, resulting in a collapse that is still affecting liquidity.
Bitcoin’s performance in 2023 outpaced stocks and gold. With supporters pointing to the upcoming halving event in 2024 as a potential supply growth deterrent. However, Bitcoin is still trading below its November 2021 record.
Bitcoin miners and related companies, such as Marathon Digital Holdings Inc., Riot Platforms Inc. Coinbase Global Inc., and MicroStrategy, experienced significant gains during the market recovery. Coinbase’s impressive 400% gain persisted even amidst a lawsuit from the Securities and Exchange Commission for alleged unregistered platform operations.
Derivatives and options trading flourished in 2023, with Bitcoin options open interest on Deribit surpassing $16 billion in December. Similarly, Bitcoin futures open interest reached landmark levels at CME Group, competing with Binance for dominance in this market.
The decentralized finance (DeFi) sector faced challenges, notably with the collapse of the TerraUSD stablecoin project. However, liquid staking protocols experienced a record rise in locked assets, particularly after Ethereum’s Shanghai update in April.
Nonfungible tokens (NFTs) rebounded in weekly trading volumes, reaching about $180 million in December. Although a far cry from the $1.8 billion peak in 2022. This uptick suggests a gradual resurgence in interest compared to the pandemic-induced peak.
Conclusion: While Bitcoin’s resurgence is evident, the crypto market grapples with lingering effects from past collapses. The recent shifts in market share among exchanges, such as Binance’s decline and the rise of Asia-focused platforms, underscore the dynamic nature of the cryptocurrency landscape in 2023.