The year 2022 was tough for Bitcoin, but 2023 has been a year of recovery. Despite low trading volumes, depressed crypto prices and tough economic conditions, Bitcoin has bounced back. It even experienced a surge in October after a summer slump. The cryptocurrency has increased by 164% since the beginning of the year and is currently trading above $40,000. This performance has surpassed traditional assets like gold and the S&P 500. In addition, Bitcoin’s market share of the total cryptocurrency market has grown from 38% to over 50%.
The overall crypto market cap has also increased to $1.7 trillion from $871 billion at the end of 2022, with ether’s price jumping 95%. Stablecoins, which are cryptocurrencies pegged to real-world assets like the US dollar, have also grown in popularity. Tether, the largest stablecoin, has seen its market cap soar to an all-time high of over $90 billion. However, the year has not been without its challenges. Several crypto giants like FTX and Sam Bankman-Fried fell in 2022, and in 2023, more have followed. Binance chief Changpeng Zhao plead guilty to breaking US anti-money laundering laws, while the co-founder of Voyager Digital and Celsius founder Alex Mashinsky also faced regulatory action.
Former industry poster child SBF was convicted of fraud in November. On the other hand, Ripple’s XRP token clocked gains of 82% for the year after a key legal victory. A US judge ruled that Ripple Labs’ sales of the token on public exchanges did not violate securities law. The fourth quarter of 2023 has seen a 55% run in Bitcoin’s performance, mainly due to bets that a spot Bitcoin ETF will be approved in the US.
Asset management giants like BlackRock and Fidelity are among the 13 companies that have submitted applications to the US Securities and Exchange Commission for the multi-billion dollar product. Such a fund is expected to pull in as much as $3 billion from investors in the first few days of trading and billions more thereafter. While some market watchers believe that the current Bitcoin recovery is still in its early stages, others are more skeptical. J.P. Morgan expects the crypto market recovery to continue through the expected approval of the Bitcoin ETF in early 2024.
However, it remains skeptical of the magnitude of success in adoption that the broader market is pricing in. The bank expects Bitcoin ETFs to pull in assets in the low to mid-single digit percentage range of the $1.7 trillion crypto market compared with some optimistic outlooks of 10%. If adoption falls short of investor expectations of around 10%, crypto markets could reverse their recent gains.