2023 was nothing short of an eventful year, most importantly marked by defining moments accelerating innovation and adoption in the crypto industry. While 2022 was labeled as the year of meltdowns, 2023 was the year of consolidation and resilience. At 21Shares, we are thrilled to share our Year In Review ahead of our Market Outlook 2024. One of the major challenges of this report is turning it into a coherent story summarizing the year and heading it toward the future. If we had to define the year 2023, it would be labeled by the following patterns:

1. Grappling with Inflation
2. Grayscale’s Regulatory Win: A Potential Spot ETF in the US
3. The Burgeoning Use Cases of Bitcoin
4. The Consolidation around Ethereum and Solana’s Resurrection
5. Liquid Staking Solutions and Tokenization
6. The Evolution of Interoperability
7. The Year of Settlements and a New Precedent

Figure 1: Performance of the Cryptoasset Market in 2023

Source: CoinMarketCap, 21Shares

Grappling with Inflation

In the last month of 2023, the US dollar hit a 4-month low amid anticipation of rate cuts in 2024. The Fed’s balance sheet increased by ~$2B since August. Moreover, Moody signaled negative indicators for the U.S. economy, lowering the credit rating from stable to negative. With $33.7 trillion in debt, a government shutdown dodged, many are afraid a recession may be underway in the case that the U.S. fails to honor its debt. Although Bitcoin’s bull run (up by ~160% year-over-year) leading up to the end of the year could have been triggered due to speculation around a potential spot ETF in the U.S., the weakening of credit ratings and sticky inflation strengthens Bitcoin’s narrative as a hedge against currency debasement.

Figure 2: US Dollar Hit 4-Month Low

Source: Bloomberg

Still under the second-order effects of the Russo-Ukrainian war, the world was still grappling with soaring inflation in 2023, imposing rate hikes to keep consumer prices in order. In the eurozone, annual inflation cooled down to 2.4% in November, the lowest in 16 months. This cooling could be attributed to the easing of oil prices, as opposed to the oil crisis of 2022. In the U.S., inflation started the year above 6%, cooling down to 3.1% in November, with prices of products and goods (excluding food and energy) unchanged in two consecutive months from October and unemployment claims falling against predictions to 205K unemployment insurance applications on December 21. Still below the 2% benchmark, we’re not out of the woods yet. In other economies, however, inflation is not holding back. For instance, the inflation rate in Argentina soared by over 160% in November. On the back of the devaluation of the Argentine peso, the data indicates that Argentinians are resorting to Bitcoin and U.S.-backed stablecoins as a hedge against the debasement of their peso.

With three rate cuts expected in the US in 2024, elections in November, and an escalating war in the Middle East that has yet to impact oil prices, Bitcoin’s narrative has never been clearer to investors around the world as a hedge against wealth confiscation and counterparty risk.
Read full report

Read full report here

What’s happening in January?

Source: Forex Factory, CoinMarketCal

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.