Most crypto market participants agree that 2022 was a terrible year for cryptocurrencies. Terra Luna's collapse in May 2022 was the first significant failure, precipitating the fall of other crypto players like Three Arrows Capital. The FTX fallout later that year shook the market and turned it downside. It was awful.
Traders and investors learned several lessons the hard way. Decentralized finance (DeFi) is vulnerable to hacks. A stablecoin might not be as stable as everyone thinks. And the collapse of a major crypto exchange could send shockwaves worldwide. A few positive things happened in 2022, such as the upgrade of the Ethereum blockchain network to Ethereum 2.0.
Toward the end of 2022, the crypto community hoped for a better year. Many expected a surge in mainstream adoption and innovations in 2023. Likewise, more government regulation of the crypto market worldwide was anticipated. Have these expectations been met in 2023? As we approach the end of the year, we review the highlights of the crypto market in 2023.
Highlights of 2023 Q1
The crypto market started 2023 on a positive note, increasing its market capitalization by 48.9%. The total market cap went from $831.8 billion on January 1 to $1.238 trillion on March 31. This uptrend reversed some of the tremendous losses caused by the collapse of the FTX exchange. Many cryptocurrencies returned to prices before the Ethereum Merge, with Bitcoin (BTC) and Ethereum (ETH) selling at approximately $28K and $1.8K, respectively, toward the end of Q1.
Bitcoin performed particularly well in 2023 Q1, gaining nearly 72%. For comparison, traditional assets like the NASDAQ index increased by 15.7% in the same period, and gold only 8.4%. Likewise, the DeFi sector increased its market cap by 65.2% in the first quarter, driven by liquid staking governance tokens. The NFT trading volume also increased 68%, going from $2.1 billion in 2022 Q4 to $4.5 billion in 2023 Q1.
Spot trading volume across the top ten crypto exchanges rose by 18.1%, totaling $2.8 trillion in 2023 Q1. Decentralized exchanges (DEXs) outpaced centralized exchanges (CEXs) due to regulators' ongoing crackdown on CEXs worldwide. DEXs grew by 33.4% versus 16.9% for CEXs in 2023 Q1. However, the vast majority of crypto transactions still occur on centralized exchanges.
Not everything was good news in the first quarter, though. The top fifteen stablecoins saw their total market cap fall by 4.5%, shedding $6.2 billion. This price fall resulted from the Paxos' shutdown of Binance USD (BUSD) and the brief USD Coin (USDC) depegging during SVBās collapse. Tether (USDT), the largest stablecoin, added $13.6 billion to its market cap, an increase of 20.5%.
Highlights of 2023 Q2
After a spectacular start in Q1, the crypto market growth relented in 2023 Q2. The total market cap went from $1.238 trillion on March 31 to $1.240 trillion on June 30, a meager 0.14% increase. The prices of the two most prominent cryptocurrencies increased, with BTC trading at around $30K and ETH at $1.9K, respectively, toward the end of Q2. Those new prices represented a growth of 6.9% for Bitcoin and 6.0% for Ethereum. Despite the price uptrend, the BTC trading volume declined by 58.7%, going from $33.4 billion in Q1 to $13.8 billion in Q2.
The NFT trading volume dropped 35%. Likewise, spot trading volume across the top ten CEXs decreased 43.2%, totaling $1.42 trillion. Due to mounting pressure from regulators, Binanceās market share dropped from 61% in March to 52% in June this year. Spot trading volume across the top ten DEXs also dropped 38% from Q1 to Q2, totaling $155 billion. Uniswap maintained its leadership among all DEXs, with a market share of up to 70% in May.
The top fifteen stablecoins saw their total market cap fall again by 3.5%, losing $4.6 billion. Tether maintained its leadership by increasing its market cap by 4.4% ($3.48 billion).
Highlights of 2023 Q3
The total crypto market capitalization dropped 10% in 2023 Q3. On August 17, the BTC price plummeted from $29K to $26K. As a result, the total crypto market capitalization went from $1.2 trillion to $1.1 trillion within a single day. Yet, despite this downturn, the crypto market cap stayed up 35% year-to-date.
The NFT trading volume dropped 55.6%, going from $3.67 billion in Q2 to $1.63 billion in Q3. Likewise, spot trading across the top ten CEXs declined by 20.1%, totaling $1.12 trillion. The top ten DEXs also experienced a drop of 31.2% in trading volume, totaling $105 billion in Q3. The top fifteen stablecoins shed $4.8 billion in market cap in this period, a decline of 3.8%. Tether did not increase its market cap, but its market share grew by 2.6%.
Current Situation of 2023 Q4
Bitcoin broke above $35K in October for the first time since May 2022. In November, Bitcoinās price climbed above $38K. As of December 12, 2023, Bitcoin trades at around $41.5K. Ethereum also rallied in this period. In October, the ETH price was nearly $1.8K. In November, ETH traded at as high as $2.1K. Currently, Ethereum sells at around $2.2K. Other cryptocurrencies like Solana (SOL) also experienced significant price growth in 2023 Q4.
On November 2, FTX founder and CEO Sam Bankman-Fried (SBF) was found guilty on all seven criminal counts charged against him related to the collapse of FTX and sister hedge fund Alameda Research in late 2022. SBF will be sentenced on March 28, 2024, and he faces a maximum sentence of 115 years in prison.
A few weeks after SBFās conviction, Binance founder and CEO Changpeng āCZā Zhao resigned. He pleaded guilty to criminal charges as part of a $4.3 billion settlement with the U.S. Department of Justice. Binance has agreed to forfeit $2.5 billion to the government and pay a $1.8 billion fine tied to three criminal charges against the exchange. The U.S. Securities and Exchange Commission (SEC) also issued new charges against crypto trading platform Kraken on November 20, similar to lawsuits filed against Binance and Coinbase in June this year.
Conclusion
Major cryptocurrencies have been through a rollercoaster ride in 2023. But the overall performance of Bitcoin and Ethereum has been positive this year. As the global macroeconomic situation relaxed and inflation slowed down, other cryptocurrencies showed signs of recovery, too. However, most of the cryptocurrencies are way behind their all-time highs. Still, the market sentiments have slowly turned from fear to greed this year.
Regulators will continue to crack down on several crypto exchanges, particularly in the United States. However, tighter regulation might eventually benefit the crypto market as the conditions for institutional investments will be created. In conclusion, 2023 was a good year for cryptocurrencies. It was not excellent, but we at LetsExchange.io hope 2024 will bring a fresh start to the crypto world, paving the road to a new bull run.
Disclaimer
Please keep in mind that the above information is based exclusively on our observations and is provided for informational purposes only. It doesnāt constitute any kind of financial advice nor represents an official forecast. Cryptocurrency is a highly volatile asset, and you are investing in it at your own risk.