The year 2023 was very different from the crisis year 2022. Bitcoin and several altcoins have significantly increased their market capitalization. What caused this turnaround and restored optimism among investors? In this article, we summarize the results of the past year.
Crypto Winter is Over
The main news is the confirmed end of the "crypto winter." Bitcoin, a trendsetting cryptocurrency, has been steadily growing for the past 12 months, experiencing a price increase of over 170% in the last year. Moreover, Bitcoin is now closer to its all-time high in November 2022 than to last year's local low.
After the collapse of the FTX crypto exchange, most experts began to consider negative scenarios to be the most likely outcome. In particular, Bitcoin and altcoins are predicted to continue to fall and reach new lows. The resurgence of cryptocurrencies, following a prolonged bearish trend that lasted for most of 2022, has prompted the speculation of a new Bitcoin rally and is once again attracting investor attention.
Regulation
Contrary to the positive expectations for growth in listings, the entire previous year was marked by scandals and investigations by various authorities targeting representatives of the cryptocurrency industry. Almost all major cryptocurrency exchanges have faced lawsuits and fines from US regulators.
Although it started a long time ago, it was only in 2023 that regulators began to tighten their requirements for the cryptocurrency industry.
For example, in February, the New York Department of Financial Services ordered Binance's Stablecoin (BUSD) to stop issuing. By the end of the year, the exchange was forced to stop supporting its own stablecoin. There have been several other lawsuits against the exchange, including a lawsuit from the US Commodity Futures Trading Commission in March. In the autumn, journalists in The Wall Street Journal were alerted to suspicions that Binance was assisting in evading US and EU sanctions.
All of these events led to a record $4.3 billion fine for the cryptocurrency industry and the removal of the exchange's founder, Changpeng Zhao, as CEO.
Coinbase, the second-largest cryptocurrency exchange, is also under investigation, and regulators have brought several charges against it.
Meanwhile, XRP Ripple, a long-standing opponent of the SEC, has won its case and is currently safe from regulatory pressure, at least for the time being.
The New Life of NFTs
Perhaps the most high-profile event of the year for the crypto industry was the launch of the Ordinals Project in January. While not all users are excited about ordinal records (NFTs on the Bitcoin blockchain), one cannot help but recognize the tremendous success of the new project. By assigning numbers to individual satoshis, additional information in the form of text, audio, or video files can be entered directly into the blockchain. This approach does not require smart contracts or side-chain complaints.
Consequently, the demand for space on the Bitcoin blockchain has grown significantly, leading to an increase in transfer fees. At the same time, miner revenues have increased, and layer 2 protocols (such as the Lightning Network and Liquid) are always available for microtransactions. Moreover, the overall positive trend in the number of orders confirms that they have found a niche in the market.
NFTs within the Bitcoin blockchain appear more canonical. All information, including media files, is stored directly in the blockchain in an unchanged form, rather than just basic information with links to third-party storage, as implemented in other ecosystems. The popularization of NFTs to a multi-million audience will help develop the industry.
Development of Crypto Projects in Telegram
At the start of the year, the TON team integrated support for the USDT Stablecoin into their built-in crypto wallet, enabling them to broaden the range of their services. By the end of the year, they had announced plans to create a comprehensive payment tool for cryptocurrencies.
Owing to issues with Binance, some users started migrating to the p2p service offered by the Telegram crypto wallet, thereby enhancing the platform's appeal within the cryptocurrency community.
This also positively impacts the long-term prospects for the market, as the potential audience of cryptocurrency users worldwide is increasing significantly.
Cryptocurrencies Are Not Securities
Despite the toughening rhetoric from US regulators, cryptocurrency companies' victories in court also occurred in 2023. Although it is hard to call Ripple's victory a complete one, they will have to pay fines on most of the charges. However, from the preliminary conclusion of the judge, it follows that cryptocurrency is not a security by default but can be recognized as such only in a certain context.
Even though we can expect some problems in the future for crypto projects with the Proof-of-Stake mechanism and crypto exchanges that will support the trading of these tokens. The decision is a major precedent for a token not being recognized as a security outside of a certain context, which may even safeguard a large part of the market from future proceedings.
Layer-1 Blockchains
Although Ethereum remains the dominant Layer-1 network by most metrics, other solutions also catch up. We need to observe trends in 2024 to see if Ethereum will retain its leadership, and the most notable market player in this segment in 2023 is Solana due to the growing market capitalization of the SOL token.
SocialFi
The social potential of blockchain applications has long been of interest to the crypto community, leading to the emergence of SocialFi, an amalgamation of DeFi, and the social media sphere. In 2023, the sector saw an upswing driven by new products, notably the friend-tech project. By the end of November, it had generated over $25m in commissions. After rapid growth, the daily activity slowed down.
Currently, the project is in beta testing mode, with a full launch expected.
Attention friend.tech has attracted attention, especially among influencers outside the crypto space, and speaks to the good potential of social Web3 applications. Other notable projects include Farcaster, the Lens Protocol, and Binance Square. Activities in this area in 2024 will likely determine the shape of social Web3 interactions for years to come.
Bottom Line
Investors' anticipation of the approval of spot cryptocurrency ETFs in the US market, as well as future shortages due to Bitcoin halving, are encouraging. Simultaneously, global economic indicators are beginning to normalize, which will also affect the supply and demand balance in the future, bringing new capital to the market.
Against the backdrop of growing interest, the emergence of new players in the market, and changing infodumps, it is important to follow the key indicators of the sphere to understand trends and predict significant events.
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