1. GBTC discount narrows as optimism grows for spot bitcoin ETF approval
The Grayscale Bitcoin Trust (GBTC) saw a significant narrowing of its discount to net asset value (NAV) in 2023. The discount, which measures the difference between the market price of GBTC shares and the value of the bitcoin they represent, fell below 10% for the first time since July 2021. This narrowing trend can be attributed to increased optimism that the U.S. Securities and Exchange Commission (SEC) will approve a spot bitcoin exchange-traded fund (ETF). GBTC’s performance has been strong, with a 320% increase in value over the past year compared to bitcoin’s 160% increase.
2. Binance loses market share amidst legal and regulatory troubles
Binance, one of the largest cryptocurrency exchanges, faced a tumultuous year in 2023 with multiple legal and regulatory challenges. The company reached a settlement with U.S. authorities, including the Department of Justice and the Commodity Futures Trading Commission, in a criminal investigation into money laundering and sanctions violations. The settlement involved $4.3 billion in penalties and resulted in criminal charges against Binance’s former CEO. Binance also faced lawsuits and investigations in Europe for alleged regulatory violations and money laundering. These challenges led to a decline in Binance’s market share among non-USD exchanges, dropping from over 70% to around 46%.
3. USDC market share squeezed as investors flock to other stablecoins
The USDC stablecoin, issued by Circle, experienced a decline in market share in 2023. USDC started the year with a 32% share of the stablecoin market but saw its market share fall to 19% by the end of the year. This decline can be attributed to a combination of factors, including USDC’s depegging from the U.S. dollar and a sell-off prompted by Circle’s disclosure of holding reserves at a failed bank. Major exchanges also halted USDC conversions during this time. Tether’s USDT stablecoin strengthened its domination of the market, reaching 71% of the market share. DAI and new entrant First Digital USD (FDUSD) also gained market share.
4. Bitcoin NFTs gain traction with the launch of Ordinals protocol
Bitcoin, traditionally not known for its NFTs, saw a surge in interest in NFT trading with the launch of the Ordinals protocol in 2023. The protocol allows users to store and trade NFTs on the Bitcoin blockchain by utilizing satoshis, the smallest units of bitcoin. This innovation made it easier and cheaper to post fully on-chain NFTs on Bitcoin. Bitcoin-based NFTs accounted for around 59% of the peak weekly NFT trading volume in 2023. The use of inscriptions, or unique serialized identifiers, on other blockchains also contributed to increased NFT trade volumes.
5. Crypto market recovers, with Bitcoin and Ether leading the way
After a tumultuous year in 2022, the crypto market made a recovery in 2023. Bitcoin and Ether, the two largest cryptocurrencies by market cap, showed strong performance. Bitcoin gained around 160% in value, starting the year at $16,600. Ether lagged behind but still saw a 94% increase in value since the beginning of the year. The decentralized finance (DeFi) sector also performed well, with a 67% gain. Solana, a lesser-known cryptocurrency, was the biggest winner among the top ten cryptocurrencies by market cap, with a nearly 1,000% increase in value. The market’s recovery was driven by anticipation of a potential spot bitcoin ETF approval and the upcoming Bitcoin halving event.
Analyst comment
1. Positive news for the market. The narrowing of the GBTC discount indicates increased optimism for a spot bitcoin ETF approval, which could drive further market growth.
2. Negative news for the market. Binance’s legal and regulatory troubles have resulted in a decline in its market share, impacting the overall market sentiment and trust.
3. Negative news for the market. The decline in USDC market share, coupled with regulatory concerns, has led investors to flock to other stablecoins, potentially destabilizing the market.
4. Positive news for the market. The launch of Ordinals protocol has brought traction to Bitcoin NFTs, expanding the market and creating new opportunities for growth.
5. Positive news for the market. The recovery of the crypto market, led by Bitcoin and Ether, indicates renewed investor confidence and positive market sentiment. The strong performance of the DeFi sector and lesser-known cryptocurrencies adds to the overall market recovery.
