Crypto Market 2023 Recap

As we close out 2023, let's take a moment to reflect on the dynamic and eventful year in the world of cryptocurrencies. This article will summarize the key events and developments that unfolded in crypto over the last 12 months.

January: A Mixed Start

The Bitcoin price dropped to a yearly low of $16,800 before recovering to ~$23,800 by the month-end. The total market value of cryptocurrencies surged past $1 trillion by mid-January.

February: Kraken vs SEC

Regulatory actions took center stage in February. The SEC's intervention in Kraken's staking operations, culminating in a $30 million fine, marked a pivotal moment. The SEC had alleged that Kraken failed to register its staking program. This was the first time the SEC took major action against staking services. 

SEC Chair Gary Gensler emphasized the need for proper disclosures from staking service providers. According to him, these services should adhere to federal securities laws regardless of how they are labeled – whether as 'lending,' 'earn,' 'rewards,' 'APY,' or 'staking.'

As a result, Kraken paid the penalty and shut down its staking services in the US. The outcome of this case could lead to significant changes in how crypto staking services operate in the country, potentially impacting the broader cryptocurrency market and its stakeholders.

March: Silvergate Capital Shut Shop

Silvergate, a prominent lender in the crypto industry, is wound down operations and liquidated its bank, with over $11 billion in assets. This decision followed the discontinuation of its key service, the Silvergate Exchange Network, and came amid various regulatory investigations. 

April: EU and MiCA

The European Union approved a groundbreaking regulation known as the Markets in Crypto-Assets (MiCA), creating a model for cryptocurrency regulations worldwide. MiCA is designed to offer a unified regulatory structure for crypto assets, focusing on improving investor protection and promoting stability in the market.

May: Mastercard’s Web3 Ambitions

Mastercard collaborated with various blockchain and wallet providers to create "Crypto Credential," a standard designed to build trust in the blockchain ecosystem for individuals, businesses, and governments. Mastercard's goal is to facilitate smooth interactions in web3 for users, highlighting its growing involvement and belief in the cryptocurrency industry.

June: Regulatory Pressures Mount

The focus on regulation continued to intensify in June, with the SEC scrutinizing major players like Coinbase. The SEC alleged that since 2019, Coinbase has operated without proper disclosures, trading at least 13 crypto assets deemed as unregistered securities, including Solana, Cardano, and Polygon. This legal action caused significant financial repercussions for Coinbase, including $1.28 billion in net customer outflows and a sharp decline in its share price. Later in the month, Coinbase disputed the SEC's authority in court, arguing that the traded assets are not securities.

July: Legal Battles and New Ventures

The SEC lost its multi-year-long lawsuit against Ripple concerning XRP. The judge decided that although Ripple breached federal securities laws by selling XRP directly to institutional investors, it did not violate these laws in its programmatic sales of XRP to exchanges for retail customers. 

Additionally, the launch of Sam Altman's WorldCoin, aimed at addressing income inequality, attracted significant attention for its innovative approach.

August: The Rise of SocialFi

The social platform Friend.tech, allowing users to buy "shares" of account holders on X, launched and rapidly gained popularity. This platform, granting buyers specific privileges, saw its user base grow to over 100,000 addresses in less than 2 weeks since its launch on August 10. This surge in popularity gave rise to the SocialFi phenomenon and inspired several similar platforms.

September: Mt Gox Delays

Mt. Gox extended its repayment deadline for creditors by one year, according to its trustees. The new repayment date for the now-defunct exchange was set for October 31, 2024. Creditors of Mt. Gox have been seeking restitution for a decade since the exchange was hacked in 2014, resulting in the theft of 850,000 BTC. The exchange eventually recovered about 20% of the stolen tokens.

October: SBF Trial Drama

In a federal trial that began in early October, ex-FTX Chief Sam Bankman-Fried faced serious fraud and money laundering charges. The trial saw testimonies from his former close associates pitted against his own. The jury delivered a swift verdict, finding Bankman-Fried guilty of multiple charges, including wire fraud against FTX customers and Alameda Research lenders, securities and commodities fraud against FTX investors, and conspiracy to commit money laundering. 

November: CZ Leaves Binance Throne

In November, the crypto landscape was further reshaped as Binance, one of the largest global crypto exchanges, settled for $4.3 billion over charges of sanctions violations and money-transmitting breaches. Additionally, the settlement involved a personal fine for CEO CZ and his subsequent stepping down from the leadership role.

December: An Uplifting End

As the year drew to a close, Bitcoin's value began its ascent, sparking optimism for upcoming ETF approvals and positive market trends. The anticipation of the 2024 Bitcoin halving and the possibility of an early bullish market contributed to this renewed enthusiasm. Hype for inscriptions reached new highs across multiple EVM chains.

Venture Capital Insights

Despite a 68% decrease in total investment from 2022, venture capital funding in crypto and blockchain startups remained robust at $10.7 billion in 2023. The trend favored early-stage companies, with a significant portion of investments directed toward pre-seed, seed, and Series A startups. NFT/gaming, infrastructure, and web3 continued to dominate the investment landscape, indicating these sectors' enduring appeal and potential for growth.

On-Chain Analysis

In 2023, digital assets experienced a remarkable year, with Bitcoin's market cap peaking at a 172% increase. The broader digital asset ecosystem, including Ethereum and altcoins, also saw significant growth, with market caps rising by over 90%. 

This growth underscored a trend of rising Bitcoin dominance, a common occurrence as markets recover from extended bear periods like 2021-22. Despite Ethereum's slower relative start and a decline in the ETH/BTC Ratio to multi-year lows, it still showed progress with successfully implementing the Shanghai update and expanding its Layer 2 ecosystem.

Digital assets overall outperformed traditional assets such as equities, bonds, and precious metals throughout the year, with a substantial part of the gains occurring after a late October rally. This rally was ignited by Bitcoin surpassing the critical $30k price level and other key pricing thresholds.

A notable aspect of the 2023 market was the limited depth of price pullbacks and corrections for digital assets. Unlike historical patterns where bear market recoveries and bull market uptrends for Bitcoin often experienced pullbacks of at least -25%, with some exceeding -50%, the largest correction in 2023 was just -20% from the local high. 

This indicates strong buy-side support and a favorable supply-demand balance throughout the year. 

Ethereum also experienced relatively minor corrections, with the most significant being -40% in early January, suggesting a resilient market backdrop influenced by reduced supply issuance from the Merge and steady demand.

Conclusion

Faced with regulatory challenges, market volatility, and significant corporate developments, the industry demonstrated both resilience and adaptability in 2023. As we look forward to 2024, the experiences and lessons of the past year are set to influence the trajectory of digital assets, signaling an exciting and promising future in the realm of cryptocurrencies. Moving into this new year, here are the biggest events to look forward to:

• Bitcoin and Ethereum spot ETF launches

• Further development on the Base and Blast layer 2 networks

• The Bitcoin halving and its subsequent impact on the price

• The further rise of the Inscriptions market

• Sectors such as DePIN and RWA picking up further steam.

Which one are you looking forward to the most?