5 Charts That Show How Crypto Changed In 2023
In 2023, the cryptocurrency industry experienced significant shifts, marking a departure from the turbulence of the previous year. Key trends included the narrowing discount to Net Asset Value (NAV) in GBTC, Binance’s notable loss of market share, a stablecoin squeeze with USDC, the emergence of Bitcoin NFTs, and an overall recovery in the crypto market. These data trends reflect a more stabilizing and evolving landscape, providing a sense of relief for participants after the challenges faced in 2022.
GBTC’s Narrowing Discount
Source: The Block
In a significant development, the Grayscale Bitcoin Trust (GBTC) witnessed its discount to net asset value (NAV) drop to its lowest point in over two years. This shift followed Grayscale Investments’ successful legal battle against the Securities and Exchange Commission in August, securing approval for the conversion of its flagship GBTC product to a spot bitcoin ETF.
Trading below a 10% discount for the first time since July 2021, GBTC’s historical premium, disrupted during the 2021 crypto credit crunch, is gradually resurfacing. The narrowing discount, which exceeded 40% before spot bitcoin ETF applications were filed by major players like BlackRock in June, reflects growing optimism regarding the potential approval of a spot bitcoin ETF by the SEC. GBTC has surged over 320% in the past year, outperforming bitcoin’s 160%.
USDC’s Volatility and Market Contraction
Source: The Block
In the tumultuous landscape of stablecoins in 2023, USDC, issued by Circle, faced a challenging journey. Starting the year with a substantial 32% market share, equivalent to $48.1 billion of the $153.1 billion total supply, USDC encountered a significant depegging from the U.S. dollar in March. Circle’s disclosure of holding $3.3 billion in reserves at the failed Silicon Valley Bank triggered a sell-off, causing USDC to plummet to as low as $0.88.
This event led to a 15% drop in USDC’s market cap within a 24-hour span, prompting investors to shift to alternatives like Tether’s USDT or exit the crypto market altogether. Major exchanges, including Coinbase and Binance, exacerbating the situation, temporarily halted USDC conversions. As a result, USDC’s market share continued to contract, falling to $26.2 billion (19%) of the $138.8 billion total stablecoin supply by the end of the year.
Meanwhile, USDT strengthened its dominance, commanding 71% of the market with $98.6 billion in supply. The relatively stable DAI maintained its position, while the new entrant, First Digital USD (FDUSD), secured $1.8 billion or 1.3% of the market. Binance further contributed to the reshuffling by encouraging users to convert to FDUSD in August amid the phasing out of support for Binance USD (BUSD).
Binance’s Declining Market Share
Source: The Block
Binance, once a dominant force in the cryptocurrency exchange landscape, faced a tumultuous 2023 marked by legal and regulatory setbacks. In November, U.S. authorities, including the Department of Justice and the Commodity Futures Trading Commission, reached a historic settlement with Binance, concluding a criminal investigation into money laundering and sanctions violations.
The $4.3 billion settlement, one of the largest in U.S. corporate history, led to criminal charges against former CEO Changpeng Zhao, who agreed to step down as part of a plea deal. The SEC also filed a lawsuit in June, alleging violations of U.S. securities laws, while in Europe, Binance exited the Netherlands and faced regulatory scrutiny in France.
Binance.US, the U.S. arm, saw staff cuts and business decline after restrictions on using U.S. dollars for crypto purchases. Overall, these legal challenges and operational changes led to a significant drop in Binance’s market share among non-USD exchanges, falling from over 70% at the start of the year to approximately 46% by the end of 2023.
Bitcoin’s Ordinals Protocol Sparks NFT Resurgence
Source: The Block
The NFT sector, traditionally dominated by blockchains like Ethereum and Solana, witnessed a surprising comeback in 2023, thanks to the emergence of Bitcoin Ordinals. Introduced in January by Casey Rodarmor, this protocol leverages satoshis, the smallest units of bitcoin, to enable the creation and trading of fully on-chain NFTs. Functioning as unique serialized identifiers, known as “Ordinals,” and the associated content or data, termed as “inscriptions,” these NFTs have found a niche in the Bitcoin ecosystem.
Despite debates over their legitimacy and concerns of being perceived as “spam,” inscriptions have extended to other chains, including Ethereum, Solana, Near, Polygon, Celo, and Fantom. The surge in Bitcoin transactions, reaching an all-time high of 633,000 average daily transactions in December, coincided with increased inscriptions-related activity, driving NFT trade volumes to yearly highs. Bitcoin-based NFTs accounted for approximately 59% of the $518 million in peak weekly NFT trading volume, marking a notable shift in the dynamics of the NFT market.
The Crypto Market Resurgence in 2023: A Year of Recovery and Growth
Source: The Block
After navigating the challenges of a tumultuous 2022, the crypto market witnessed a remarkable turnaround by the end of 2023. Bitcoin surged by approximately 160%, starting the year at $16,600, as reported by The Block’s price data. Ether, although trailing behind Bitcoin since March, still showed a substantial 94% increase from $1,200 a year earlier.
Despite the DeFi sector’s initial strong performance, it underperformed compared to Bitcoin and Ether, concluding the year with a respectable 67% gain. Notably, Solana emerged as the biggest winner among the top ten cryptocurrencies, skyrocketing by nearly 1,000% from less than $10 on January 1, 2023. With the anticipation surrounding the potential approval of a spot Bitcoin ETF and the upcoming Bitcoin halving event, the crypto landscape promises further exciting developments in 2024.
The various trends observed in the crypto industry in 2023 paint a dynamic and optimistic picture for the market’s future. GBTC’s narrowing discount signals increased confidence and optimism among investors. Conversely, Binance’s declining market share, coupled with legal challenges and regulatory hurdles, highlights the need for adaptability and compliance within the industry. The volatility and market contraction surrounding USDC underscore the challenges stablecoins faced during the year. Bitcoin’s Ordinals Protocol sparking the resurgence of NFTs signifies the industry’s ability to innovate and evolve. Finally, the broader crypto market’s resurgence in 2023, marked by significant gains in Bitcoin, Ether, and Solana, reflects a resilient and growing ecosystem. As the industry anticipates potential approval of a spot Bitcoin ETF and the upcoming Bitcoin halving event, the year’s developments set the stage for continued growth and transformation in 2024.