Research Summary
The report provides a comprehensive analysis of the 2023 crypto market, focusing on key themes such as institutional investment in high-quality cryptocurrencies, Ethereum’s dominance, the growth of decentralized finance, and the need for regulatory clarity. It also offers an outlook for 1H24, highlighting potential market shifts and investment opportunities.
Key Takeaways
Institutional Investment in High-Quality Cryptocurrencies
- Preference for Bitcoin: Institutional investors favored Bitcoin in 2023 due to its sustainable tokenomics, mature ecosystem, and liquidity. This preference was supported by the US debt ceiling showdown and regional bank failures. However, Ether was overlooked despite the launch of ETH futures-linked ETFs in the US.
Ethereum’s Dominance
- Leading Smart Contract Platform: Ethereum remained the dominant smart contract platform in 2023, with EVM-compatible chains retaining over 90% of total value locked. However, upgrades following the Merge have become more complex, slowing scalability progress and upgrades.
Growth of Decentralized Finance
- Steady Growth: The movement towards self-custody and decentralized finance protocols accelerated in 2023, with DEX to CEX volumes reaching a new peak. However, the number of daily active users remained mostly consistent throughout the year.
Need for Regulatory Clarity
- Increasing Regulatory Actions: There was decisive action to develop and implement crypto regulations in multiple jurisdictions in 2023. However, the US Congress has not yet passed any major bills clarifying crypto regulatory frameworks.
Outlook for 1H24
- Positive Outlook for Bitcoin: The report remains cautiously optimistic on Bitcoin over the next few weeks, citing the collective approval of multiple spot bitcoin ETF applications in the US as a potential paradigm shift for the asset class.
Actionable Insights
- Monitor Ethereum’s Progress: Despite its dominance, Ethereum’s complex upgrades following the Merge could impact its future performance. Investors should keep a close eye on these developments.
- Understand Regulatory Changes: With increasing regulatory actions worldwide, understanding these changes is crucial for navigating the crypto market effectively.
- Consider Bitcoin’s Potential: The approval of multiple spot bitcoin ETF applications in the US could significantly impact Bitcoin’s market position. Investors should consider this potential shift when making decisions.
