Crypto Markets 2023 Review: Regulatory Pressure, Deeper Adoption, and Optimistic Outlook

This article will summarize the key events and developments that have occurred in the cryptocurrency space over the past 12 months.

Written by: M6 Labs

As we wrap up 2023, let’s take a moment to reflect on what has been a dynamic and event-rich year in the cryptocurrency space. This article will summarize the key events and developments that have occurred in the cryptocurrency space over the past 12 months.

January: A rocky start

Bitcoin prices dropped to a yearly low of $16,800 at the beginning of the year before recovering to around $23,800 at the end of the month. By mid-January, the total market capitalization of cryptocurrencies exceeded $1 trillion.

February: Kraken vs. SEC

In February, regulatory action took center stage. The SEC's intervention into Kraken's equity operations, which ultimately resulted in a $30 million fine, marked an important moment. The SEC alleged that Kraken failed to register its equity program. This is the first time the SEC has taken major action against equity services.

SEC Chairman Gary Gensler emphasized the need for appropriate disclosures for equity service providers. According to him, these services should comply with federal securities laws regardless of whether they are labeled "loan," "earn," "rewards," "annual percentage rate," or "equity."

As a result, Kraken paid the fine and shut down its rights services in the United States. The outcome of this case could lead to significant changes in the way crypto staking services operate in the country, potentially affecting the entire cryptocurrency market and its stakeholders.

March: Silvergate Capital closes

Silvergate, a prominent lender in the crypto industry, ended operations and liquidated its bank with over $11 billion in assets. The decision comes after its main service, Silvergate Exchange Network, ceased operations and comes amid various regulatory investigations.

April: EU and MiCA

The European Union has approved a groundbreaking regulation called the Market in Crypto-Assets (MiCA), creating a model for global cryptocurrency regulation. MiCA aims to provide a unified regulatory structure for crypto-assets, focusing on improving investor protection and promoting market stability.

May: Mastercard’s Web3 ambitions

Mastercard has partnered with various blockchain and wallet providers to create "Crypto Credential," a standard designed to build trust in the blockchain ecosystem for individuals, businesses, and governments. Mastercard aims to provide users with a smooth interactive experience in web3, highlighting its growing participation and belief in the cryptocurrency industry

June: Regulatory pressure intensifies

Regulatory concerns continued to heat up in June, with the SEC scrutinizing major players such as Coinbase. The SEC alleges that since 2019, Coinbase has failed to make appropriate disclosures and traded at least 13 cryptoassets that were considered unregistered securities, including Solana, Cardano and Polygon. The legal action had a significant financial impact on Coinbase, including a net customer loss of $12.8 billion and a sharp drop in its stock price. At the end of the month, Coinbase challenged the SEC's authority in court, arguing that the assets being traded were not securities.

July: Legal battles and new adventures

The SEC has lost its multi-year legal battle against XRP. The judge ruled that although Ripple violated federal securities laws by selling XRP directly to institutional investors, it did not violate those laws in the programmatic sale of XRP to retail customers.

Additionally, WorldCoin, launched by Sam Altman, aims to address income inequality and has attracted significant attention with its innovative approach.

August: The Rise of SocialFi

Social platform Friend.tech launched, allowing users to buy "shares" of account holders on X, and quickly gained popularity. The platform, which gives buyers specific privileges, has grown its user base to more than 100,000 addresses in less than 2 weeks since its launch on August 10. This surge in popularity contributed to the rise of the SocialFi phenomenon and inspired a number of similar platforms.

September: Mt Gox delays

Mt. Gox has extended creditor repayment deadlines by one year, according to the company's trustee. The now-defunct exchange's new repayment date is set for October 31, 2024. Mt. Gox’s creditors have been seeking compensation since the exchange was hacked in 2014, resulting in the theft of 850,000 BTC. The exchange eventually recovered approximately 20% of the stolen tokens.

October: SBF Trial Drama

Former FTX CEO Sam Bankman-Fried faces serious fraud and money laundering charges in a federal trial that began in early October. At the trial, his former close friends testified against him. The jury returned its verdict quickly, finding Bankman-Fried guilty of multiple crimes, including wire fraud against FTX customers and Alameda Research lenders, securities and commodities fraud against FTX investors, and conspiracy to commit money laundering.

November: CZ leaves Binance throne

In November, the crypto landscape changed further when Binance, one of the world’s largest crypto exchanges, reached a $4.3 billion settlement for sanctions violations and illegal transfers of funds. In addition, the settlement involves a personal fine against CEO CZ and his subsequent resignation from leadership positions.

December: Uplifting Finale

As the end of the year approaches, the value of Bitcoin has begun to rise, sparking optimism about impending ETF approvals and positive market trends. This renewed enthusiasm is fueled by expectations for a 2024 Bitcoin Harnin and early bullish market. Enthusiasm for multiple EVM chains has reached new heights.

Venture Capital Insights

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Despite a 68% drop in total investments from 2022, venture capital investment in crypto and blockchain startups remained strong in 2023, reaching $10.7 billion. This trend favors early-stage companies, with a significant portion of investment flowing into pre-seed, pre-seed, and Series A startups. NFT/gaming, infrastructure and web3 continue to dominate the investment landscape, demonstrating the enduring appeal and growth potential of these industries.

Analyze on the chain

Digital assets experienced a spectacular year in 2023, with Bitcoin’s market cap growing by 172%. The entire digital asset ecosystem, including Ethereum and alternative coins, has also seen significant growth, with market capitalization increasing by more than 90%.

This growth highlights the trend of rising Bitcoin dominance, a common phenomenon in markets recovering from prolonged bear markets like 2021-22. Despite Ethereum's relatively slow start and the ETH/BTC ratio falling to multi-year lows, it has still made progress in successfully implementing the Shanghai update and expanding its second-layer ecosystem.

Overall, digital assets have outperformed traditional assets such as stocks, bonds and precious metals throughout the year, with a sizable portion of the gains coming after a late rally in late October. The rally was triggered by Bitcoin's breakout of the key $30,000 price level and other important price thresholds.

A notable feature of the markets in 2023 is the limited depth of digital asset price pullbacks and corrections. Unlike historical patterns, where Bitcoin's bear market recoveries and bull market uptrends often experience corrections of at least -25%, and some even exceed -50%, the largest correction in 2023 is only -20% from relative highs.

This suggests strong buyer support and a favorable supply-demand balance throughout the year.

Ethereum has also experienced relatively minor corrections, with the largest occurring in early January with a -40% drop, indicating the resilience of the market backdrop as the Merge reduces supply issuance and stabilizes demand.

in conclusion

The industry demonstrated resilience and adaptability in 2023 in the face of regulatory challenges, market volatility and significant corporate developments. Looking ahead to 2024, the experiences and lessons learned from the past year will influence the trajectory of digital assets, heralding an exciting and promising future in the cryptocurrency space. Entering this new year, here are the most worthwhile aspects:

Major events awaiting:

• Launch of Bitcoin and Ethereum spot ETFs
• Further development of Base and Blast layer 2 networks
• Bitcoin Harning and its subsequent impact on price
• Inions market rises further
• Further acceleration in sectors such as DePIN and RWA.

Which one are you most looking forward to?