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We’ve seen it all in crypto over the past year: banking crises, courtroom drama, legal victories, and a near-record fine for crypto’s biggest exchange. It's time to look back at the events that shaped crypto markets over the past year and consider what the coming year will bring. Get ready to go down memory lane!
🀩 Thawing crypto winter
The year 2023 was marked by a remarkable recovery in digital assets, after a challenging 2022 that saw the collapse of the Terra/Luna ecosystem, crypto lender Celsius, and FTX – the second-largest crypto exchange in the world at the time.
The Terra/Luna crash wiped out some $60 billion of users’ assets practically overnight and came as a huge shock, kicking off a domino effect that brought the entire crypto market to its knees. The total market capitalization dropped from over $3 trillion at its peak in 2021 to below $1 trillion in November 2022, with many altcoins plummeting in value by 90% or more.
READ: The State of Crypto Report: November 2023 edition
Bitcoin fell from its all-time high of $69,044 in late 2021 to a cycle low of $15,625 in November 2022, marking a 77% drop, while ether collapsed from a peak of $4,878 in November 2021 to below $1,000 following the fall of Celsius.
Since then, however, these leading digital assets have recovered by approximately 180% and 120%, trading at $43,577 and $2,197 at the time of writing, respectively (as of 8 January 2023). Top altcoins also experienced remarkable rebounds, led by Solana, whose native SOL token soared over 600% since the start of 2023. The table below shows the annual returns of all the crypto assets listed on Yield App (minus the stablecoins).
🛥️ Not smooth sailing
Yet the recovery was by no means smooth. In March, crypto and traditional financial markets found themselves on the brink as several US-based regional banks collapsed. Chief among them were Silvergate Bank, Signature Bank, and SVB Financial Group, which served the start-up and crypto community.
READ MORE about the March banking crisis
SVB’s collapse was particularly catastrophic for the USDC stablecoin, which at the time had a market capitalization of $43 billion. When SVB went down, USDC’s issuer Circle had $3.3 billion stuck with the lender. After it disclosed the news, its stablecoin briefly depegged, falling from $1 to $0.88, but quickly recovered.
However, the event dented the confidence of many investors and Circle drew criticism for its reliance on the traditional financial system. At the end of the year, USDC had lost $21 billion of its market cap to Tether, whose USDT stablecoin is the largest in the market at $90.6 billion versus USDC’s $24.1 billion. The banking crisis also caused a short-term sell-off in the wider crypto market, including an 11% drop in bitcoin’s price, though this didn't last long.
💸 Rising institutional interest
So what drove the crypto market’s rapid recovery in 2023? One of the key drivers was BlackRock – the world’s largest asset manager with $9.42 trillion assets under management – filing for a spot bitcoin ETF in the US. Long considered the holy grail of crypto ETFs, the US is yet to see the launch of a spot bitcoin ETF – though the first ever European spot bitcoin ETF went live on the Euronext echange in Amsterdam in August 2023.
While traditional and institutional investors can access the bitcoin futures market through ETFs, so far the Securities and Exchange Commission (SEC) has denied all applications for a vehicle tracking bitcoin’s spot price.
However, now that BlackRock has entered the game, the stakes have changed considerably and most market participants are expecting an approval come January 2024. Several other ETF providers, including ARK Invest and Fidelity International, have filed their own applications, which could all be approved at the same time. This could potentially spur a wave of institutional bitcoin adoption, which would drive its value higher. Some, including Standard Chartered, are predicting that the world’s largest crypto asset will hit $100,000 by the end of next year.
It’s not just bitcoin, though. Institutional interest in the digital asset market as a whole is on the rise. BlackRock has also filed for an ether spot ETF, while its CEO Larry Fink called crypto a “flight to safety” asset class. MicroStrategy doubled down on its bitcoin investment, taking its total holdings to $5.28 billion. Solana, Avalanche, XRP and other altcoins also announced partnerships with traditional financial institutions, signalling a resurgence of trust in the ecosystem.
⚖️ Global efforts and legal wins
On top of this, traditional financial players like Societe Generale, Citi, Deloitte, and Paypal dipped their toes into digital assets in 2023. This trend was clearly evident at the year’s leading crypto conferences, like TOKEN2049 in Singapore. Singapore is keen to position itself as a leader in the space, with its Project Guardian exploring the potential applications of tokenization in traditional asset management.
Singapore is not alone in this. This year saw Hong Kong U-turn on its anti-crypto stance as it allowed crypto exchanges to serve retail clients. The UK is also vying for a spot as a leader in the digital asset space, while the EU brought out its long-awaited set of crypto regulations under the Markets in Crypto Assets (MiCA) regime.
Even in the US, which remains strict on digital asset regulation, the ice is beginning to thaw. Over the past year we’ve seen several high-profile victories in court, notably XRP’s win of its long-standing case against the SEC. In July 2023, a judge ruled that XRP sold via exchanges couldn’t be considered a security and the SEC decided not to appeal this decision. This helped propel XRP to a high of $0.82 by the end of July 2023, more than a 100% increase from its 2023 low, though it has given up some of those gains since then. It is currently trading at $0.55 (as of 8 January 2023).
Other 2023 wins included Grayscale’s victory in its appeal against the SEC’s rejection of a request to convert the Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF back in June 2022. On the DeFi side, Uniswap secured a victory in a lawsuit that claimed it had sold unregistered securities.
LEARN MORE about Grayscale’s and Uniswap’s wins
🏛️ Regulatory scrutiny
However, less ideal developments included the SEC stating that a raft of stablecoins, including Solana’s SOL, ADA and Matic, should be considered securities. This could put the projects behind them on the chopping block for violating US securities laws.
Meanwhile, 2023 was also marked by Binance’s capitulation in its fight against the US securities watchdog. In November 2023, the world’s largest crypto exchange accepted liability for money laundering and failed to report 100,000 suspicious transactions, agreeing to pay a $4.3 billion fine – one of the largest ever levied. In addition, its CEO Changpeng “CZ” Zhao agreed to step down from his role and pay $50 million in fines. He may also face time in prison and is currently in the US awaiting trial.
The regulatory pressure led several key players to halt their services to US clients, including Binance itself, crypto exchange Kraken shutting down its staking service, and the closure of Crypto.com’s institutional service in the US.
😰 A day of reckoning for FTX
The year was also dominated by the anticipation of the high-profile trial of Sam “SBF” Bankman-Fried, the disgraced founder of failed crypto exchange FTX. Starting on 3 October 2023, the nail-biting trial stole the limelight in crypto news headlines for a solid six weeks, culminating in SBF being found guilty on all seven charges, including securities fraud and money laundering.
The saga is still not over – SBF is potentially facing another trial on additional charges in March 2024, with a verdict expected shortly after. He could be hit with up to 115 years in jail, though many experts believe the sentence will be less severe.
🗓️ Looking into 2024
Despite some headwinds, 2024 is shaping up as a positive year for crypto assets. Amid rising hopes of a spot bitcoin ETF approval in January, coupled with the bitcoin halving coming up in May, the bull market is likely to gather speed next year.
We’re also expecting an important update to the Ethereum blockchain called protodanksharing, which is set to reduce rollup transaction fees and increase Ethereum’s throughput. Read more about it here. The future is also looking brighter for altcoins like Solana, which are recovering from their Crypto Winter lows.
In addition, we expect to see growing institutional interest in crypto in 2024, while many jurisdictions across the globe will make progress on developing comprehensive regulatory regimes for digital assets. We’re excited to see what the next year brings!
Want to make the most of your crypto in 2024? Open a Yield App account today!
