After a challenging 2022, bitcoin has made a remarkable comeback in 2023, with its value up 164% since the beginning of the year, surpassing the $40,000 mark. This performance has outperformed traditional assets, with gold up 10% and indexes up 20% over the same period. The leading cryptocurrency has also increased its dominance in the crypto market, with its market share increasing from 38% to over 50%, according to data from CoinGecko. The total market capitalization of cryptocurrencies expanded to $1.7 trillion from $871 billion at the end of the previous year.
Bitcoin’s resurgence was especially notable in October after its summer slump. Kevin Koh, co-founder and managing partner at Spartan Group, commented on the recovery, saying, “We’ve had a nice recovery, but we’re just at the cusp of the new cycle.” Ether, another prominent cryptocurrency, has seen a significant jump in price of 95%.
The latter part of the year has brought renewed investor interest, partly driven by anticipation of a U.S. bitcoin spot exchange-traded fund (ETF) and expectations of a more accommodative monetary policy. Trading volumes also increased, with combined spot and derivatives trading volume on centralized exchanges reaching $3.61 trillion in November, up from about $2.9 trillion in January .
Stablecoins also saw growth, with Tether, the largest stablecoin by market capitalization, reaching an all-time high of over $90 billion.
However, the cryptocurrency industry has faced regulatory challenges. Binance CEO Changpeng Zhao admitted to violating US anti-money laundering laws, leading to a multi-billion dollar settlement. The co-founder of Voyager Digital has faced US legal action and Celsius founder Alex Mashinsky was arrested in the US in July, pleading not guilty to charges including securities fraud. Sam Bankman-Fried, former CEO of FTX, was convicted of fraud in November.
In contrast, Ripple’s XRP token reported an 82% gain after a US judge ruled that Ripple Labs’ token sale did not violate securities laws, marking a significant legal victory for industry.
Looking ahead to 2024, much of bitcoin’s 55% fourth-quarter rally was attributed to expectations that a spot bitcoin ETF would be approved in the US, attracting both retail and institutional investors. Companies like NYSE:BLK and Fidelity are among the 13 candidates for the ETF. The fund is expected to attract up to $3 billion from investors in its first days and more after that.
JPMorgan, while expecting the crypto market recovery to continue with expected ETF approvals, is cautious about the potential scale of adoption, predicting that ETFs will attract assets in the range of low to mid-percentage of the $1.7 trillion cryptocurrency market, compared to a more optimistic prediction of 10%. The lack of adoption could lead to a reversal of recent crypto market gains.
Glassnode, an analytics platform, has shown that net dollar realized profits per day for bitcoin investors stand at $324 million, significantly lower than the peak of more than $3 billion per day in the late stages of the 2021 bull market. This shows that bitcoin’s current trajectory is still in the early stages of a bull market.
Reuters contributed to this article.
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