Bitcoin made an impressive comeback in 2023, surging over 160% and adding around $530 billion to its market value. This rally influenced smaller tokens, including Solana and meme-inspired coins, like those with dog and frog themes, as investors embraced risk again. For instance, an investor who put $100,000 into Solana at the beginning of 2023 would now see a gain exceeding $800,000.
Much of this surge is linked to optimism that US regulators might soon approve the first exchange-traded fund (ETF) directly investing in Bitcoin. The potential approval, expected by January 10, is seen as a significant catalyst that could drive a surge in demand from mainstream investors.
However, critics argue that cryptocurrencies have no intrinsic value and pose risks, as highlighted by recent fines and legal issues involving major players like Binance and FTX.
Bitcoin outperformed stocks and gold in 2023, with supporters anticipating a significant event in 2024 called the "halving" to limit supply growth. Despite the rally, Bitcoin is still below its November 2021 peak. Notably, companies like Marathon Digital, Riot Platforms, Coinbase, and MicroStrategy surged amid the crypto market recovery.
Coinbase faced a lawsuit from the SEC, but its value soared by almost 400%. Bitcoin derivatives saw increased activity, with Deribit's options open interest surpassing $16 billion. CME Group and Binance competed to dominate Bitcoin futures.
The decentralized finance sector struggled after the collapse of the TerraUSD stablecoin project, except for liquid staking, which hit a record in locked assets this year. Liquid staking protocols gained popularity on Ethereum after the Shanghai update in April, providing easier access to rewards for token pledging in blockchain operations.
Weekly trading volumes for nonfungible tokens (NFTs) have rebounded from October lows, rising to around $180 million this month from less than $50 million. However, this remains significantly below the 2022 peak of $1.8 billion, indicating the crypto market's need for revitalization compared to the pandemic-induced surge.
Bitcoin's price recovery is overshadowed by the aftermath of the collapse of FTX platform and Alameda Research in November 2022, contributing to liquidity issues. Market depth, a measure of the crypto market's ability to handle large orders without drastic price impacts, has declined by 55%, reflecting challenges in trading Bitcoin on centralized exchanges.
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