The largest cryptocurrency has added $530 million to its market value since the beginning of the year
The feeling of collapse that dominated the cryptocurrency markets at the end of 2022, after the loss of $1.5 trillion, faded, to be replaced 12 months later by a completely different feeling: intense demand for them.
Bitcoin has recovered again and jumped more than 160% this year, raising its market value by about $530 billion. In its wake, a slew of small cryptocurrencies have emerged, from Sam Bankman-Fried-backed Solana to dog- and frog-themed meme currencies, as investors' appetite for risk revives. The investor who bought $100,000 worth of Solana coin at the beginning of 2023 will now receive gains exceeding $800,000.
Traded funds
This rise is due in large part to optimism that US regulators will soon, for the first time, approve exchange-traded funds that invest directly in Bitcoin. Investors will find out by January 10 whether this bet, which crypto bulls consider with near certainty to be a winning bet, has paid off.
Prospective Bitcoin funds stimulate the largest inflows of crypto assets since the end of 2021
“Approval of spot ETFs will be a major catalyst, and it will definitely create a sudden boost in demand,” Michael Saylor, co-founder of MicroStrategy, which buys Bitcoin, told Bloomberg TV: “Approval of spot ETFs will be a major catalyst, and it will definitely create a sudden boost in demand,” as mainstream investors lack... Currently, there is a token investment channel that is “highly capable and (regulatory) compliant.”
Digital asset markets still suffer from a lot of criticism from those who claim that cryptocurrencies are essentially worthless and are a haven for criminals. Binance, the largest cryptocurrency exchange, agreed in November to pay a $4.3 billion fine for a range of violations, and its CEO, Changpeng Zhao, was forced to step down. Bankman Fred was thrown into prison on charges of fraud in connection with FTX stock exchange transactions, and liquidity has not yet fully recovered as a result of the collapse of his empire.
Bitcoin surpasses stocks and gold
Bitcoin's rise this year has outpaced stocks and gold. Proponents say the quadrennial event scheduled for 2024 known as the halving will limit supply growth, providing support for the token along with potential demand for ETFs. The circulation of the largest cryptocurrency is still far below the record recorded in November 2021, which amounted to about $69,000.
Coinbase allows instant trading of cryptocurrencies outside America
Two Bitcoin mining companies, Marathon Digital Holdings and Riot Platforms, Coinbase Global, the largest cryptocurrency exchange in the United States, and MicroStrategy, which are the largest cryptocurrency exchanges in the United States, jumped. The software company turned Bitcoin investor is all in with the recovery of cryptocurrency markets. Coinbase's nearly 400% gain also survived a lawsuit filed by the Securities and Exchange Commission for allegedly operating an unregistered platform, an accusation the company rejects.
As for Bitcoin derivatives, they witnessed a surge in activity in 2023. The open interest for Bitcoin options on Deribit - the largest cryptocurrency options exchange - exceeded $16 billion for the first time in December, according to CCData. ). Open interest in Bitcoin futures has also reached historic levels at CME Group, which is now competing with Binance to be the premier marketplace for such instruments.
Non-fungible tokens
The DeFi sector has yet to recover from the collapse of the value of the TerraUSD stablecoin project by more than $40 billion in 2022. The only exception is the liquid proof-of-stake system, where the total value of locked assets rose to a record high this year, according to DefiLlama data is shown. Liquid Proof of Stake protocols have made it easier to access rewards earned when staking tokens to help power blockchains. The popularity of the proof-of-stake system on the Ethereum network increased after the Shanghai upgrade in April.
Doubts about value plague the non-fungible token market
Weekly trading volumes for non-fungible tokens — digital collectibles — have risen from lows of less than $50 million in October, to nearly $180 million this month, according to Nansen figures. But it is only a small fraction of the $1.8 billion peak recorded in 2022, suggesting that cryptocurrencies in general have a lot of work to do to bring back the level of interest that the sector sparked during the Corona pandemic, when the world was awash in stimulus.
While the price of Bitcoin jumped, the cryptocurrency market is still suffering from the repercussions of the collapse of Bankman Fried's FTX platform and its trading house, Alameda Research, in November 2022. The collapse contributed to a decline in liquidity, making token trading more difficult.
Major shifts in the market
This problem is evident in “market depth,” or the ability of the cryptocurrency market to sustain relatively large orders without unduly affecting prices. Kaiko data shows that the daily value of trades, which is 1% lower than the average price of Bitcoin on central exchanges, fell by 55% to about $680 million from about $1.5 billion in April of last year.
In conclusion, it can be said that there are significant shifts in the market share of cryptocurrency exchanges this year. The Binance platform is still the largest, but its share of spot trading fell to about 44% by mid-December from more than 65% at the beginning of 2023, according to Caico. Asia-focused platforms such as Upbit, Bybit, and OKX captured much of the business that Binance lost.
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