A new year is a good time for taking our eyes off the day-to-day events and looking at the bigger picture. This exercise is particularly interesting when it comes to the crypto market: as the sentiment changes, we are quick to forget just how different the situation was just 12 months ago.
In the aftermath of the highly mediatized market crash and the FTX scandal (which some personalities used to proclaim as “the end of crypto”), the starting point of 2023 was not great. However, the crypto market has shown amazing resilience and valiantly fought back, all while stepping up its legal game.
What’s more, it attracted some very powerful men to its cause, including the CEO of the world’s biggest asset manager.
Let’s see what events marked the crypto market in 2023 and how they have shaped the outlook for 2024.
Crypto and regulators
At the beginning of 2023, various American crypto industry players suffered an unprecedented offensive by the Fed, the SEC, the OOC, the Treasury, as well as federal and some state governments. Later in the year, the SEC filed lawsuits against the industry’s heavyweights – Coinbase and Binance US.
The political outlook seemed particularly gloomy, but the judiciary branch, somewhat unexpectedly, has saved the day and showed that crypto can push back. The SEC lost not one, but two lawsuits: the one vs Ripple, whose cryptocurrency is now officially not a security, and the one vs Grayscale, which proved that the SEC’s rejection of its ETF application was unlawful.
The Binance lawsuit was settled, and its founder Changpeng “CZ” Zhao had to step down from the management, turning over the reins to Richard Teng. The choice of the new CEO is symptomatic of the crypto industry’s new focus on compliance: the man’s background includes the financial authorities of Singapore and Abu Dhabi.
In Europe, the new MiCA regulation has defined the legal landscape for crypto, setting the base for the industry’s further development.
Crypto and TradFi
At the beginning of last year, famous crypto investor Nick Carter wrote about crypto being targeted by “Operation Choke Point 2.0”. This is a hint at the US government’s 2013 initiative aimed to limit certain industries’ access to banking services, later recognized as unlawful.
Indeed, not only in America, but in many other countries, crypto companies often struggle to open a bank account. However, this trend is starting to reverse, with smaller banks seizing their opportunity and explicitly catering to the crypto clients. What’s more, some big names in banking used 2023 to continue exploring the opportunities the blockchain presents, with Deutsche Bank now providing crypto custody services, and Société Générale issuing a euro-pegged stablecoin for institutional clients. Despite Jamie Dimon still not understanding Bitcoin, many traditional finance institutions (including his own JP Morgan) are actively developing their crypto services.
The year 2023 was marked by probably the most influential person in traditional finance publicly backing crypto. Larry Fink, the CEO of BlackRock (AUM $805 trillion), applied for spot Bitcoin ETF, boosting the space, helping it to shake off the stigmas of the bear market. This ETF’s acceptance is still the major intrigue for 2024.
Crypto market
Bitcoin is often the first cryptoasset to move, dragging along the whole crypto market. This role will be even bigger in 2024, as Bitcoin dominance has grown from 41% at the beginning of last year to 53% now.
In one year, BTC has gained 160%, spiking from $16.5k to today’s $43.3k. The million-dollar question is what level it will reach in 2024.
The dormant markets together with the HODLing mindset have led to significant Bitcoin liquidity erosion in 2023. The upcoming halving, expected in April 2024, will make the leading crypto even scarcer. Furthermore, the possible spot ETF will lock up even more bitcoin, accentuating the liquidity issue.
In such a situation, we can see dramatic price swings in both directions. However, taking into account the current stage in the crypto cycle, many analysts agree that the upward movement is more likely, with the target oscillating from $68k (Bitwise) to $275k (VanEck). The most optimistic ones remind us that if Bitcoin is ever to attain parity with gold, it would be priced at $600k (Messari).
The alternative money and scarce store of value are still key narratives, but the Ordinals trend born in 2023 will also have an impact on bitcoin demand.
Written by D.Center
