In contrast to the challenges faced in 2022, the year 2023 has proven to be a period of resilience and recovery for Bitcoin, defying skeptics and exhibiting a robust rebound. Despite the crypto market grappling with reduced prices, subdued trading volumes, and a challenging economic landscape, Bitcoin has not only weathered the storm but has also witnessed substantial growth.
Kelvin Koh, co-founder and managing partner at the investment firm Spartan Group, highlighted the remarkable recovery, stating, “We’ve had a nice recovery, but we’re just on the cusp of the new cycle.”
Bitcoin’s performance in 2023 has been unexpectedly positive, with a remarkable 164% surge since the beginning of the year, currently trading above $40,000. This growth has outpaced traditional assets such as gold (10% increase) and the S&P 500 (20% gain). Additionally, Bitcoin has expanded its dominance in the overall cryptocurrency market, surpassing 50% compared to 38% at the beginning of the year, as per CoinGecko data. The entire crypto market capitalization has surged from $871 billion at the end of 2022 to $1.7 trillion, with Ether witnessing a 95% price increase.
Bitcoin’s substantial gains in the latter part of the year can be attributed to the anticipation of a potential U.S. spot Bitcoin exchange-traded fund (ETF) and optimism surrounding a more accommodative monetary policy. Trading volumes have also rebounded, reaching $3.61 trillion in November, up from $2.9 trillion in January, according to CCData. Simultaneously, stablecoins, including Tether with a market cap exceeding $90 billion, have experienced significant growth.
However, 2023 has not been without its share of setbacks for major players in the crypto industry. Following the challenges faced by FTX and Sam Bankman-Fried in 2022, crypto giants like Binance chief Changpeng Zhao, the co-founder of Voyager Digital, and Celsius founder Alex Mashinsky encountered legal troubles. Additionally, former industry poster child SBF faced fraud charges and was convicted in November.
Looking ahead to 2024, much of Bitcoin’s optimism is linked to expectations of a U.S. spot Bitcoin ETF approval. Major asset management firms, including BlackRock and Fidelity, have submitted applications, with predictions that such a fund could attract billions of dollars from retail and institutional investors upon approval.
Despite the prevailing bullish sentiment, J.P. Morgan remains cautiously skeptical, expecting the crypto market recovery to persist through early 2024 but expressing reservations about the market’s current adoption expectations. The success of Bitcoin ETFs, if approved, is projected to attract assets in the low to mid-single-digit percentage range of the $1.7 trillion crypto market, potentially falling short of some optimistic outlooks of 10%.
For some market observers, the ongoing Bitcoin recovery appears to be in its early stages. Glassnode’s analytics platform indicates that the net dollar-denominated realized profit locked in by Bitcoin investors, at $324 million per day, remains significantly lower than the peaks observed in the later stages of the 2021 bull market, hinting at the potential for continued growth within the bounds of an early-stage bull market.
