Looking back at the main trends that shaped the crypto space in 2023, and the main promises of 2024.

Here we are again at the start of another year – a great opportunity to take a step back and contemplate the previous year. I find it a useful exercise, especially when it comes to the crypto market. Without all the speculations and the sentiment of the moment interfering with our judgment, we can better evaluate the real meaning of events, and with it formulate a clearer outlook for the future.

For us, the most impactful trends of 2023 included regulatory challenges and triumphs, BlackRock endorsing crypto, Bitcoin’s shrinking liquidity, and the dethronement of Ethereum as a leader of all things web3. Let’s take a brief moment to reflect on their impact before diving headfirst into the new year.

Regulatory challenges and triumphs

The crypto market kicked off 2023 on shaky ground, reeling from the FTX fiasco and the deadly claws of the bear market. It was a perfect time for naysayers to forecast (yet again) Bitcoin’s demise and to accuse the crypto space of all imaginable sins. A perfect time for a government offensive too: in the US, key government agencies, such as the Fed, the SEC, the OOC, the Treasury, as well as federal and some state governments launched an unprecedented attack on various crypto players. Not even the industry giants like Coinbase or Binance eluded the SEC chairman Gary Gensler’s scrutiny.

At the beginning of 2023, the regulatory risk was cited as the most threatening for the crypto space, and some institutional actors started to reduce their crypto exposure or put on hold any crypto plans.

However, the principle of the separation of power manifested splendidly when crypto actors started to gain cases against the government in a court of law. By the end of summer, the SEC lost two lawsuits v crypto firms: the one against Ripple, whose cryptocurrency XRP is now officially not a security, and the one against Grayscale, which proved that the agency’s rejection of its ETF application was unlawful.

The summer also brought a seismic event that has turned the tables. Larry Fink of BlackRock, an asset manager with $8.5 trillion of assets under management, filed for a spot Bitcoin ETF. Suddenly the naysayers have made themselves discrete (except of course for JP Morgan’s Jamie Dimon, whose Bitcoin-hating tirades have already become a part of the act 😂).

With MiCA setting the legal framework for crypto in the EU, we could say that 2023 was the year of crypto regulation. No, the legal troubles are not over, especially in the US, where the legal limbo persists as powerful state agencies, politicians, and finance players are confronting each other. However, last year showed that the crypto space is powerful enough to push back against regulatory attacks and mature enough to recognize the need for compliance. Richard Teng, the new CEO of Binance, is indicative of this change: with no prior experience in tech or crypto companies, he is instead an ex-official of the financial authorities of Singapore and Abu Dhabi.

Bitcoin leading the way

Bitcoin remains the flagship of the crypto fleet, with BTC market dominance growing from 41% to 53% in a year. Its price gained an impressive 160%, soaring from $16.5k last January to $43k today.

Somewhat surprisingly, the blockchain also emerged as a new breeding ground for NFTs, or more precisely – the Ordinals, significantly increasing its activity.

Bitcoin’s diminishing liquidity was already an issue in 2023, and it will become even more important this year. The much-anticipated halving event will reduce Bitcoin inflation from around 1.7% to 0.84% in April 2024. What’s more, if spot Bitcoin ETFs get approved in the US, even more bitcoin will be locked in, further reducing the asset’s liquidity. This means more crazy price swings, so buckle up 😅

Web3’s promise nears

The larger crypto space saw a very interesting – and unexpected –  shift in 2023. As it happens, Ethereum is no longer the king of web3 🤷

Bitcoin’s NFT trading volume (cryptoslam) is almost 3 times higher than Ethereum’s, DEXes’ volumes on Arbitrum ($7.2 billion) and Solana ($5.1 billion) are inching closer and closer to Ethereum’s $9.4 billion (DeFiLlama), and of course, ETH price gain has been rather disappointing compared to the other smart contract platforms. While Solana skyrocketed 640% (yes, that much 🤯), and Avalanche gained 215%, ether scored “only” 87%.

This competition might be a good thing for the space, as the blockchains are pushed to constantly improve themselves, and new web3 projects can choose from a wider range of blockchains.

Last year, we saw continuous work on novel concepts, such as DeSoc (decentralized social, with Lens and Friends.tech), DePIN (decentralized physical infrastructure networks, such as storage networks Arweave and Filecoin), or DeSci (decentralized science, like VitaDAO). Crypto integration with AI has accelerated, and we should get ready for more innovations to come. The approaching bull market is a good opportunity for these projects to show what they have been working on in the bear period, and attract funding for customer acquisition, which is one of the most difficult aspects for every emerging technology.

In sum, 2024 promises to be a year of growth for the crypto market. We can expect further regulatory developments, deeper TradFi integration, and more web3 initiatives. Stay tuned 😊