The year 2023 was a remarkable one for the cryptocurrency market, as it witnessed new highs, lows, and innovations. Among the various assets that investors could choose from, BTC, ETH, crypto stocks and ETFs were some of the most popular and profitable options. We will compare the performance of these four categories and analyze the factors that influenced their returns.
BTC: The king of crypto
BTC, or Bitcoin, is the oldest and most dominant cryptocurrency in the world. It was created in 2009 by an anonymous person or group using the pseudonym Satoshi Nakamoto. BTC is a decentralized digital currency that operates on a peer-to-peer network without any intermediaries. It uses cryptography to secure transactions and control the creation of new units.
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BTC started the year 2023 at around $43,000, after reaching an all-time high of $69,000 in November 2022. It faced some volatility in the first quarter, as regulatory uncertainty, environmental concerns, and competition from other cryptocurrencies weighed on its price.
However, it rebounded strongly in the second quarter, as institutional adoption, innovation, and network upgrades boosted its demand and value. It reached a new record in June 2023 from 2021 lows, making it the first cryptocurrency to achieve this rebound milestone.
BTC continued its upward trend in the third quarter, as more countries legalized its use as a legal tender, such as El Salvador, Panama, and Ukraine. It also benefited from the launch of several Bitcoin ETFs in the US and Canada, which made it easier for investors to access the asset without having to deal with custody and security issues. It surpassed $35,000 in September 2023, gaining more than 200% year-to-date.
BTC faced some challenges in the fourth quarter, as China intensified its crackdown on crypto mining and trading activities, causing a temporary drop in its hash rate and price. It also faced some competition from ETH and other altcoins, which offered higher returns and innovation potential.
ETH: The leader of smart contracts
ETH, or Ethereum, is the second-largest cryptocurrency by market capitalization and the most widely used platform for smart contracts and decentralized applications (DApps). It was launched in 2015 by Vitalik Buterin and other co-founders. ETH is a programmable currency that allows developers to create and run various applications that can facilitate transactions, agreements, and interactions without intermediaries or censorship.
ETH started the year 2023 at around $1200, after reaching an all-time high of $4,000 in December 2022. It faced some pressure in the first quarter, as high gas fees, scalability issues, and security breaches hampered its usability and adoption. However, it regained momentum in the second quarter, as it completed its long-awaited transition to a proof-of-stake (PoS) consensus mechanism, which reduced its energy consumption and increased its speed and security.
It also introduced several improvements to its network, such as EIP-1559 and EIP-3675, which enhanced its monetary policy and governance. ETH soared to new heights in the third quarter, as it benefited from the growth of various sectors that relied on its platform, such as decentralized finance (DeFi), non-fungible tokens (NFTs), gaming, and metaverse. It reached a new peak of $10,000 in August 2023, making it the second cryptocurrency to achieve this feat.
ETH maintained its strong performance in the fourth quarter, as it continued to innovate and attract more users and developers. It also faced some competition from other smart contract platforms, such as Solana, Cardano, and Avalanche, which offered lower fees, higher throughput, and interoperability. However, it managed to retain its leadership position and end the year at around $2400, up 200% from the start of the year.
Crypto stocks: The bridge between traditional and digital markets
Crypto stocks are shares of companies that are involved in or related to the cryptocurrency industry. They include miners, exchanges, brokers, custodians, payment providers, and software developers. Crypto stocks offer investors a way to gain exposure to the crypto market without having to buy or hold the actual coins or tokens. Crypto stocks started the year 2023 with high expectations, as they benefited from the increased popularity and adoption of cryptocurrencies in 2022.
They also enjoyed the support of the regulatory environment, which became more favorable and clearer for crypto-related businesses in many jurisdictions. Crypto stocks performed well in the first half of the year, as they reported strong earnings growth and expanded their products and services.
Some of the notable performers were Coinbase, the largest US-based crypto exchange, which went public in April 2023 and reached a market capitalization of $100 billion in June 2023; MicroStrategy, the business intelligence firm that became the largest corporate holder of BTC, which saw its share price increase by 300% in the same period; and Square, the payments company that integrated BTC and ETH into its Cash App and launched its own decentralized exchange (DEX) in May 2023.
Crypto stocks faced some headwinds in the second half of the year, as they encountered some challenges and risks. Some of the main factors were the increased competition from the traditional financial institutions, which entered the crypto space with their own offerings; the heightened regulatory scrutiny and enforcement actions from the authorities, which targeted some of the crypto companies for alleged violations or fraud; and the cyberattacks and hacks that compromised some of the crypto platforms and services.
Crypto stocks ended the year with mixed results, as they reflected the diversity and dynamism of the crypto industry. Some of the best performers were Galaxy Digital, the diversified crypto asset manager, which increased its assets under management by 400% to $40 billion in December 2023.
Bitfarms, the Canadian crypto mining company, which expanded its operations and increased its hash rate by 500% to 10 Exa hash per second in the same month; and PayPal, the online payments giant, which added more crypto features and options to its platform and reached 500 million active users in November 2023.
Crypto ETFs: The easy and convenient way to invest in crypto.
Crypto ETFs are exchange-traded funds that track the performance of a basket of cryptocurrencies or crypto-related assets. They offer investors a simple and convenient way to invest in the crypto market without having to deal with the technicalities and complexities of buying, storing, or securing the actual coins or tokens.
Crypto ETFs started the year 2023 with high demand, as they provided a solution for the investors who wanted to access the crypto market but were deterred by the barriers or risks of owning or trading cryptocurrencies directly.
They also appealed to the institutional investors who sought to diversify their portfolios with a new and emerging asset class. Crypto ETFs performed well in the first three quarters of the year, as they mirrored the performance of their underlying assets.
Some of the most popular and successful crypto ETFs were the Grayscale Bitcoin Trust (GBTC), which became the largest crypto ETF in the world with over $50 billion in assets under management in July 2023; the Purpose Bitcoin ETF (BTCC), which became the first Bitcoin ETF to be approved and listed in the US in February 2023; and the VanEck Digital Assets ETF (DAPP), which became the first ETF to offer exposure to a broad range of crypto-related companies in April 2023.
Crypto ETFs faced some challenges in the fourth quarter of the year, as they experienced some volatility and outflows. Some of the main reasons were the profit-taking and rebalancing activities by some investors who wanted to lock in their gains or reduce their exposure to the crypto market; the increased competition from other investment vehicles that offered more flexibility and variety to the investors; and the regulatory uncertainty and delays that affected some of the pending or proposed crypto ETFs.
Crypto ETFs ended the year with positive returns, as they demonstrated the potential and growth of the crypto market. Some of the best performers were the Bitwise 10 Crypto Index Fund (BITW), which tracked the performance of the top 10 cryptocurrencies by market capitalization and returned over 300% in 2023.
The Amplify Transformational Data Sharing ETF (BLOK), which invested in companies that used blockchain technology to transform their businesses and industries and returned over 200% in the same period; and the ARK Next Generation Internet ETF (ARKW), which allocated a portion of its portfolio to GBTC and other innovative companies that leveraged or enabled the internet and returned over 150% in 2023.
Builders, the Crypto bear market is almost over
If you are a builder in the crypto space, you might be feeling discouraged by the prolonged downtrend in the market. You might be wondering if your project will ever see the light of day, or if you should just give up and move on to something else. But don’t lose hope. The bear market is almost over, and the next bull run is just around the corner. Here are some reasons why you should keep building and stay optimistic about the future of crypto.
You know how hard it has been to survive the prolonged bear market that started in 2022. The crypto industry has faced many challenges, such as regulatory uncertainty, environmental concerns, security breaches, and low adoption rates. Many projects have failed, and many investors have lost faith in the future of decentralized technologies.
But there is hope on the horizon. According to some experts, the bear market is almost over, and we can expect a new cycle of growth and innovation in 2024. Here are some reasons why:
The adoption of crypto is increasing, especially in emerging markets where people need alternative financial solutions. More and more people are using crypto for remittances, payments, savings, and lending. According to a recent report by Chainalysis, the global crypto adoption index grew by 880% in 2023, with Vietnam, India, Pakistan, and Ukraine leading the way.
The innovation of crypto is accelerating, especially in the areas of decentralized finance (DeFi), non-fungible tokens (NFTs), and Web3. More and more developers are building applications that leverage the power of smart contracts, digital assets, and peer-to-peer networks. According to a recent report by DappRadar, the total value locked in DeFi protocols reached $500 billion in 2023, while the total sales volume of NFTs surpassed $100 billion.
The regulation of crypto is improving, especially in the major markets where governments are recognizing the potential of blockchain technology. More and more countries are adopting clear and supportive legal frameworks for crypto businesses and users. According to a recent report by CryptoCompare, the crypto regulatory index improved by 50% in 2023, with Singapore, Switzerland, Japan, and the UK leading the way.
These are just some of the signs that indicate that the crypto industry is maturing and ready for a new phase of growth. As builders, we have a unique opportunity to shape the future of this industry and create value for ourselves and our communities. We should not give up on our vision and mission, but rather double down on our efforts and prepare for the next bull market.
The fundamentals are strong. Despite the price fluctuations, the underlying technology and innovation in the crypto space are still advancing at a rapid pace. New protocols, platforms, applications, and use cases are being developed every day, offering solutions to real-world problems and creating value for users. The adoption and awareness of crypto are also growing, as more people, institutions, and governments recognize its potential and benefits.
The market cycles are natural. Crypto is a highly volatile and speculative asset class, which means it is subject to extreme highs and lows. This is not a sign of weakness, but rather a reflection of the market psychology and sentiment. Historically, crypto has gone through several boom-and-bust cycles, each followed by a period of consolidation and accumulation. These cycles are necessary to shake out the weak hands, test the resilience of the network, and create the conditions for the next wave of growth.
The future is bright. Crypto is not just a fad or a bubble. It is a paradigm shift that will transform the world as we know it. Crypto is not only a new form of money, but also a new way of organizing society, empowering individuals, and creating wealth.
Crypto is not only a challenge to the status quo, but also an opportunity to create a more open, fair, and inclusive world. Crypto is not only a technology, but also a movement, a community, and a culture. So don’t give up on your dreams. Keep building, keep learning, keep innovating. The bear market is almost over, and the best is yet to come.