Research Summary

The report provides a comprehensive analysis of the digital asset market in 2023, focusing on Bitcoin and Ethereum’s performance, market trends, on-chain data, and the impact of inscriptions on the Bitcoin network. It also discusses the growth of the derivatives market and the shifts in the stablecoin market.

Key Takeaways

Bitcoin and Ethereum’s Market Performance

  • Bitcoin’s Resilience: Bitcoin’s market cap surged by over 172% in 2023, with corrections remaining below 20%. This indicates strong buy-side support and a favorable supply-demand balance. Bitcoin prices broke through the $30k level, catalyzing a significant market rally.
  • Ethereum’s Growth: Despite a sluggish performance compared to Bitcoin, Ethereum’s market cap increased by 90%. The deepest correction was -40% in early January, suggesting resilient demand flows, especially after the Merge reduced supply issuance.

Impact of Inscriptions on Bitcoin Network

  • Increased Transaction Counts: Bitcoin transaction counts hit new all-time highs due to the rise of Ordinals and Inscriptions. Inscriptions, primarily text-based and associated with the BRC-20 token standard, have seen over 300k transactions per day at their peak.
  • Contribution to Miner Revenue: Inscriptions have contributed between 15% and 30% of total transaction fee revenue for miners in 2023, highlighting their impact on the Bitcoin network’s economics.

Growth of Derivatives Market

  • Options Market Expansion: The derivatives markets for cryptocurrencies have matured significantly, with 2023 marking a year where Options markets have grown to match and even surpass Futures markets in open interest.
  • Shift in Futures Market Dominance: The regulated CME exchange has surpassed Binance in open interest within the futures market for the first time, indicating a shift in dominance and suggesting an influx of institutional capital.

Shifts in Stablecoin Market

  • Reassertion of Tether’s Dominance: Tether (USDT) has reasserted its dominance in the stablecoin market, with its supply climbing to over $90.6B and holding 72.7% of the market share.
  • Stablecoin Supply Pivot: Stablecoin supplies, which declined by 26% since March 2022, saw a pivot in October with supplies bottoming at $120B and starting to grow up to 3% per month, marking a potential return of investor interest.

Actionable Insights

  • Monitor Bitcoin’s Performance: Given Bitcoin’s strong performance and resilience in 2023, it would be beneficial to keep a close eye on its market trends and on-chain data for potential investment opportunities.
  • Understand the Impact of Inscriptions: The rise of inscriptions has significantly impacted the Bitcoin network’s economics. Understanding this trend could provide insights into future developments and potential investment strategies.
  • Explore the Growing Derivatives Market: With the significant growth of the derivatives market, particularly the options market, it would be worthwhile to explore this area for sophisticated trading and risk management strategies.
  • Keep an Eye on Stablecoin Market Shifts: The shifts in the stablecoin market, particularly the reassertion of Tether’s dominance and the pivot in stablecoin supplies, could provide valuable insights for investment decisions.

Related Research