2023 has been a rollercoaster ride for the crypto sector. Believers who held during the coldest part of the crypto winter now see a presumably early phase of the bull market. Let us look at the highs and lows of this year and check what 2024 has in store.
Bitcoin Bear Market Low to Recovery
Bitcoin, being the king of all digital assets, is the barometer of the sector’s health. If it goes down, then it drags other assets with it.
The king of crypto started at the $16,000 level in January and ended with a green engulfing candle on the monthly chart. For those who know their charts, this is probably one of the first indications that we have reached the bottom and a market reversal is coming.
Lo and behold, Bitcoin breached the psychological $40,000 level in the first week of December. This is despite some FUD being thrown around the space.
Regulatory Actions Against Crypto
Several regulatory actions benefited and caused FUD within the crypto space:
XRP Court Ruling
XRP’s “winning” against the powerful US Securities and Exchange Commission, is probably one of the best news that came out in 2023. Southern District of New York Judge Analisa Torres ruled in favor of Ripple Labs. On July 13, 2023, the court ruled that Ripple Lab’s XRP token is not a security. The case that was started in December 2020 now has an ending.
The effect of the ruling can be seen in the charts. XRP token jumped from $0.47 to 0.93 in just 24 hours. Coinbase’s stock price also increased by 25% after announcing that it will be relisting the XRP token on its platform.
However, there is a caveat to the court ruling:
- On page 22 of the decision it says: “Therefore, having considered the economic reality and totality of circumstances surrounding the Institutional Sales, the Court concludes that Ripple’s Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act” This says that direct sales of XRP to institutions violated securities law.
- It can be considered a partial win since XRP that are sold directly to sophisticated buyers like banks or institutions can still be considered securities.
- But this is still a big win for the crypto sectors since regular sales through public exchanges cannot be considered securities. This is a blueprint for the whole sector.
Binance Double Trouble
Binance, being the world’s largest crypto exchange, has always been in the cross-hair of several regulators. It has always been subjected to several FUDs, but 2023 has been the worst for the platform.
BUSD was Targeted
BUSD was Binance’s stablecoin. It was created in partnership with PAXOS, a New York-based tech and finance company. BUSD is backed 1:1 to the US Dollar and was in the top 10 largest cryptocurrencies in terms of market cap.
Unfortunately, in February 2023, the SEC issued a Wells Notice to Paxos. This enforcement action targeted Paxo’s issuance of the BUSD stable, which according to the SEC is an unregistered security.
The New York Department of Financial Service (NYDFS) also targeted PAXOS and directed the stablecoin issuer to stop minting new BUSD.
Binance also gradually phased out BUSD and gave users up to February 2024 to redeem their assets. The graph below shows how quickly BUSD’s circulating supply fell from the top:
CZ Stepped Down as CEO, Binance Fined $4 Billion
Changpeng Zhao, also known as CZ, is one of the most influential persons in the crypto industry. He co-founded Binance and led the company to become the world’s largest digital assets platform. Unfortunately, being on top also meant that he was the target of multiple allegations.
CZ is no stranger to negative news, however, his latest scuffle with US regulators is one of the most damaging to him, to Binance, and the entire crypto market.
Binance and its CEO are accused of money laundering. CZ on his part pleaded guilty to breaking US anti-laundering laws. The deal orders CZ to pay a $50 million fine, while Binance will pay a record $4.3 billion in penalty. CZ also stepped down as CEO. He is currently out on a $175 million bond and is not allowed to leave the US. The sentencing is expected to happen in February 2024.
SBF in Jail
FTX’s collapse is being used by regulators to justify its iron-handed approach to crypto. We cannot blame them, since the failed exchange allegedly conducted several anomalous transactions to the detriment of its users.
Sam Bank-Fried (SBF), the disgraced ex-CEO of FTX, has been found guilty by a jury of all seven criminal counts against him. The former billionaire was convicted of wire fraud, securities fraud, commodities fraud, and money laundering. According to US Attorney Damian Williams, SBF perpetuated one of the biggest financial frauds in American history.
SBF could spend up to 115 years behind bars.
2023 was an opportunity for crypto to trim the bad parts.
The RISE of Crypto Meme Coins.
Meme Coins are a special part of the crypto space. It does not pretend to change the word of finance or pretend to be the next big thing. Meme coins are comical. It does not promise to have any utility, but some tokens have strong community support. And support is what it takes to make a token popular.
Shibarium
Shibarium is Shiba Inu’s (SHIB) layer 2 solution. It was launched in August 2023 and promises to bring utility to the meme coin. It promises to bring down the circulating supply by burning. As a layer 2 solution, it also promises to make transactions cheaper and faster. Shibarium also allows the creation of Non-Fungible Tokens. It is too early to say if the project is successful, but it shows that meme coins can also have utility
PEPE
PEPE is a meme coin created on the Ethereum network. It is based on the Pepe the Frog internet meme, that was created by Matt Furies. The crypto community was caught in surprise when the unknown coin suddenly reached a $1.6 billion market cap in May 2023. The once obscure token minted some crypto millionaires.
PEPE’s market cap reached $1.26 billion in May 2023 and has retreated to below $1 billion.
BONK
Another meme coin that rose in 2023 was BONK. It is the first Solana dog coin created “by the people, for the people”. 50% of the total supply was airdropped to the Solana community. It had a 25,000% increase within a year. Some traders were able to convert a few thousand dollars to millions. Its market cap reached $1.47 billion on December 23.
Bitcoin Spot ETFs are coming
Bitcoin Sport ETFs are probably one of the most watched developments in the digital asset sector. Approval of the applications will reshape both the crypto industry and traditional finance.
Major Companies that Have Applied for Bitcoin Spot ETFs:
- BlackRock’s iShares Bitcoin Trust is the most anticipated one. This is because BlackRock has around $9 trillion of assets under management. It also has a 575-1 approval record for its ETF application. This financial giant has a 99% win rate.
- Fidelity’s FBTC is also being closely monitored by investors. Fidelity is one of the largest asset managers with more than $4.5 trillion under management.
- Ark Invest and 21 Shares’ Bitcoin ETF. Ark Invest is smaller compared to BlackRock and Fidelity. It has nearly $7 billion under management. However, its CEO Cathie Wood is a well-known Bitcoin bull.
What to Expect in 2024
It is hard to predict what will happen in 2024. However, crypto has a few positive events that are expected to happen next year.
Bitcoin Spot ETF
Bitcoin Spot ETF approval in the 1st quarter, probably in January. The SEC has until January 10 to either approve or reject the Ark and 21 Shares BTC spot ETF. The regulatory body has already held multiple meetings with the applicants to apply changes to their proposals.
This is big for the whole crypto industry since it will have several positive impacts.
- Increased Adoption. Having spot BTC ETFs will bring Bitcoin mainstream. This will increase the adoption and recognition of cryptocurrencies as a legitimate financial instrument.
- Ease of Entry. One of the barriers for retailers to enter the market is the complexity of holding crypto. With crypto ETFs, there is no need to manage and secure your crypto wallet. Investors can now gain exposure to crypto without going through a crypto exchange and deal with managing private keys
- Influx of Institutional Investments. Having a BTC spot ETF will increase Bitcoin’s legitimacy and could attract Institutional investors, like sovereign and pension funds. As of December 2022, US retirement plans and accounts hold $37.8 trillion. While global sovereign wealth funds control over $10 trillion in assets. Even a 1% allocation to Bitcoin will greatly increase the market capitalization
- Bitcoin Will Run Like Gold. One of the applicants for the ETF is BlackRock. BlackRock is responsible for gold’s increase in value. BlackRock’s iShares Gold Trust (IAU) has significantly changed the price of the precious metal.
The Chart below shows how gold went up since BlackRock’s gold ETF was approved. We have to understand that gold is an “old” asset since it has been used since ancient times. It is also estimated that we can still mine 50,000 tons of the precious metal, with 190,000 tons already mined. Its supply is not as finite as BTC since there is still a lot to be mined both on Earth and in space, yet its value increased more than 100% since BlackRock’s ETF was approved in 2009.
Now, Bitcoin is an asset with a hard cap of 21,000,000 and is still in its infancy compared to other investment instruments. It is up to our imagination how much Bitcoin will moon after an ETF approval.
The Bitcoin Halving
The Bitcoin halving reduces the amount of Bitcoin being awarded to miners by half. It happens every four years until all 21 million Bitcoins have been mined. This ensures this asset’s scarcity and makes it inflation-resistant.
Historically speaking the halving is followed by a parabolic rise to an all-time high. New investors flock to crypto whenever the pump starts.
The next one is expected to happen sometime in April 2024, so all eyes will be on Bitcoin once we reach April.
The Halving plus the possible approval of the spot ETFs would probably usher in a bull run that would break previous highs.
A lot numbers are being floated on what is the possible top for the upcoming cycle. Historically speaking we know that it go up, but how high will it get?
The percentage increase decreases after each cycle. The last 1700% rally was about half of the increase from the previous one. With this in mind, the next top will probably give us a sub-850% increase from the bear market bottom.
One way of getting an possible top is by using Fibonacci retracement. The 1.618 level will be like a magnet and is considered to be a likely minimum target. The 1.618 target right now is just above $100,000, which is about 500% increase from the bottom – below the expected maximum 850% increase.
Of course, the charts will never be 100% accurate. We are just looking at possibilities.
Political and Regulatory Considerations
Crypto regulations under the Biden administration haven’t been the best. In fact, the industry has been under siege.
On January 3, 2003, The Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a joint statement highlighting the risk of crypto to the banking system.
In March 2023, Silvergate the biggest crypto-focused bank which facilitated on-ramp and off-ramp transactions exited from the market. According to the company’s statement, “In light of recent industry and regulatory developments, Silvergate believes that an orderly wind-down of Bank operations and a voluntary liquidation of the Bank is the best path forward,”
The Whitehouse also proposed a 30% crypto mining tax to “save the planet”, even though the latest reports are showing that Bitcoin mining is getting the majority of its power from green sources.
The Upcoming Election
The upcoming US presidential election is big for the crypto industry. For the first time, several candidates have included it in their platforms.
- Vivek Ramaswamy is one of the most vocal supporters of cryptocurrencies. He believes that crypto is a powerful and innovative tool. He also supports the rights of individuals to custody of their digital assets. Vivek also opposes any attempt to tax or ban crypto mining. He also promised to reign in regulators who are overstepping.
- Robert F. Kennedy Jr believes that owning Bitcoin is an inviolable right. He also wants the US to remain the global hub for crypto. If elected president, he will make sure the CBDCs will see the light of day. According to him, Bitcoin is hope and an escape route when disaster strikes.
- Ron DeSantis slammed the Whitehouse’s war on crypto. He also promised to support the rights of people to own and trade digital assets. DeSantis is also opposing Central Bank Digital Currencies.
There are other candidates like Asa Hutchison and Dean Phillips who advocate for sensible regulation instead of stifling innovation.
If a pro-crypto candidate wins, this could be an event that could rival the Bitcoin halving. The US is still the biggest economy in the world and has the most millionaires. There are more than 24,000 individuals worth more than $1 million. A pro-crypto administration would signal to investors that it is safe to invest in digital assets without fear of government interference.
A pro-crypto US would also influence other countries to take the same stance.
A Possible Crypto Trifecta Event for 2024
Nothing can stop the Bitcoin halving unless an event stops the internet from functioning everywhere. There are two other events that we should all watch out for. The approval of Bitcoin ETFs, and the win of pro-crypto presidential candidates. If these possible scenarios become reality we are looking at a trifecta win for digital assets. This would make crypto mainstream.
Crypto being adopted everywhere is the dream of Satoshi Nakamoto. He dreamed of making sure that the people had something to level the financial playing field. Are we going to witness this in 2024? Well, we don’t know. But the stars are certainly aligning. Those who survived and built up their HODL bags during the bear market would certainly reap the rewards.
Are you excited?
The information presented in this article is for informational purposes only and should not be construed as financial advice. This article does not constitute an offer to buy or sell any financial instruments, or a solicitation to engage in any investment activity. Investing involves risk, and you could lose money.
