Daily Management Review

In 2023, Bitcoin Proves Its Sceptics Wrong


In 2023, Bitcoin Proves Its Sceptics Wrong
Was 2022 the year that "broke bitcoin"? If so, 2023 has been the year of healing from trauma.
Fortunately, despite low trading volumes, weak cryptocurrency prices, and challenging economic conditions, Bitcoin has rebounded. After a summer lull, it even got a boost in October.
"We've had a nice recovery, but we're just in the cusp of the new cycle," said Kevin Koh, co-founder and managing partner at investment firm Spartan Group.
In fact, 2023 has proven to be a remarkably successful year for bitcoin.
With a 164% increase since January 1st, the cryptocurrency market leader is now trading above $40,000. It has outperformed conventional assets, such as the S&P 500 (.SPX), which has gained 20%, and gold, which has increased by 10%.
According to CoinGecko data, Bitcoin also boosted its market share from 38% to over 50% of all cryptocurrencies. With ether's price rising 95%, the total value of the cryptocurrency market has increased to $1.7 trillion from $871 billion at the end of 2022.
A large portion of bitcoin's gains occurred later in the year when investor enthusiasm was rekindled by the prospect of a looser monetary policy and a possible U.S. spot bitcoin exchange-traded fund (ETF).
The aggregate spot and derivatives trading volume on centralised exchanges reached $3.61 trillion in November, up from roughly $2.9 trillion in January, indicating that trade volumes have also increased. This information is provided by CCData.
Stablecoins, or cryptocurrencies whose value is linked to a physical object like the dollar, have also increased in parallel. The biggest of these coins, Tether, has seen its market capitalization jump to an all-time high of more over $90 billion.
Following a turbulent 2022 that saw the demise of FTX and Sam Bankman-Fried, additional massive cryptocurrency failures have occurred in 2023.
Changpeng Zhao, the CEO of Binance, entered a guilty plea to violating US anti-money laundering legislation as part of a multibillion dollar deal with authorities.
The creator of Celsius, Alex Mashinsky, was detained in the United States in July and entered a not guilty plea to many criminal charges, including securities fraud. Meanwhile, the co-founder of Voyager Digital also found himself the target of American regulatory action.
Not to be forgotten is SBF, who was found guilty of fraud in November following a fast-paced trial.
Positively, Ripple's XRP token saw gains of 82% for the year following the industry's significant legal win when a U.S. judge determined that Ripple Labs' public exchange sales of the token did not violate securities law.
The majority of the 55% surge in bitcoin during the fourth quarter has been ascribed to wagers that a bitcoin ETF will be authorised in the United States, attracting capital from both individual and institutional investors due to the simplicity of obtaining exposure to the virtual commodity on a regulated stock market.
The U.S. Securities and Exchange Commission has received proposals from 13 organisations, including multibillionaire asset management firms Fidelity and BlackRock, for the multibillion dollar product.
In the initial days of trading, investors are anticipated to contribute as much as $3 billion to this fund, and billions more after that.
But not everyone has the same optimism.
J.P. Morgan anticipates that the cryptocurrency market will continue to rebound through the anticipated approval in early 2024, but the company is still dubious about the extent to which the wider market is pricing in the success of adoption.
In contrast to some bullish outlooks of 10%, JPM anticipates that the bitcoin ETFs would draw assets in the low or low to mid-single digit percentage range of the $1.7 trillion cryptocurrency market.
Crypto markets may reverse their recent gains if adoption doesn't meet investor expectations, which are estimated to be about 10%.
However, it appears to some market observers that the current bitcoin recovery is still in its early phases.
According to analytics company Glassnode, the net dollar-denominated realised profit locked in by bitcoin investors has reached $324 million each day. This is still significantly less than the heights attained during the later stages of the 2021 bull market, which exceeded $3 billion every day.
According to Glassnode, this indicates that the present performance of bitcoin is still very much consistent with an early-stage bull market as opposed to a late-stage one.