2023 Crypto Synthesis

The year 2023 in the crypto world was eventful, with both inglorious events like the SBF trial and a number of positive elements throughout the year.

Let's take a look back at the crypto year of 2023.

Negative Events that Drove Crypto Market in 2023

Let us explore some of the major events that played a negative role in driving the overall crypto market in 2023.

• SBF Trial

Sam Bankman Fried, the founder and ex-CEO of FTX, a crypto exchange, played a big role in the crypto world in 2023. He got into trouble for things like cheating customers, messing with the market, and breaking finance laws. The police arrested him on December 12, 2022. This caused a lot of problems in the crypto world – people lost trust, and the government started looking closely at the rules. What Sam did also made TerraUSD, a type of digital money connected to his exchange, fall apart. This caused a huge crash in the market, wiping out $45 billion. Many crypto fans said he was greedy and not careful, and blamed him for making the industry look bad. On November 2, 2023, a jury in New York said he was guilty of all seven charges, and now he might go to jail for up to 115 years. His trial in 2023 had a big effect on how people felt about crypto, changing how investors acted and making the whole industry more shaky.

• CZ/Binance US Problems

In 2023, Binance, the biggest crypto exchange worldwide, had lots of legal problems with the US government, and this really shook up the crypto market. First, on March 27, 2023, the US Commodity Futures Trading Commission (CFTC) sued Binance and its founder, Changpeng "CZ" Zhao, for doing things like running unregistered exchanges and broker-dealers. Then, on June 5, 2023, the US Securities and Exchange Commission (SEC) added more trouble with 13 charges against Binance and CZ. They said Binance sold things like BNB and BUSD without the right paperwork and tricked investors. The SEC also accused Binance of letting US customers trade on the not-so-legal Binance.com platform and secretly controlling the Binance.US platform.

Later, on November 21, 2023, the US Department of Justice (DOJ) and the Treasury Department got involved, and they made a deal with Binance for $4.3 billion. CZ, the founder, also said sorry and quit being the CEO. Furthermore, the DOJ accused Binance and CZ of breaking laws about money laundering, sanctions, and licenses. They even said Binance mixed up and moved customer money around and did tricky trading stuff.

All these legal troubles made the crypto market feel uncertain and scared. It showed that crypto exchanges, stablecoins, and the rules they follow have risks. Binance's trading volume and market share went down significantly after the legal issues. Many people took their money out of Binance, and the exchange’s own crypto coins, BNB and BUSD, lost a bunch of their value. Because Binance was having a hard time in the US, the whole crypto market became shaky, and investors didn't feel as sure and trusting in the industry.

• SEC Lawsuit Against Kraken & Coinbase

In June 2023, Coinbase, the biggest U.S. crypto exchange, got into trouble with the SEC. They said Coinbase didn't follow the rules – it ran its crypto trading platform without the right registrations for things like being a securities exchange and broker. The SEC also said Coinbase didn't register its staking program, where people earn money holding onto crypto. The SEC claimed Coinbase made lots of money illegally by letting people trade crypto-like securities, and they said that the exchange tricked investors about how it controlled and watched over the trades.

The SEC also accused that Coinbase sold things like Coinbase Coin (CC) and Coinbase Dollar (CD) without the right paperwork.

Similarly, in November 2023, Kraken, a crypto exchange in New York, faced a lawsuit from the SEC. The SEC made almost the same accusation against Kraken that it did against Coinbase. These lawsuits showed the SEC's strict approach to regulating crypto, making it harder for people to trust and use crypto in 2023.

Positive Events That Drove Crypto Market in 2023

Now that major negative events have been covered, below are the details of positive events from 2023 that drove overall crypto market sentiment.

• Bitcoin ETF

In 2023, Bitcoin spot ETFs played a big role in the crypto world by tracking the real-time price of Bitcoin. These ETFs attracted lots of big and small investors, both from institutions and regular people. The SEC, which usually said no or delayed approval of these ETFs, changed its mind in late 2023 and seemed more open to them. This made the market think that at least one Bitcoin spot ETF could get approved in January 2024, which would be a really big deal for the whole crypto industry. Major institutions like BlackRock, Fidelity, WisdomTree, and VanEck applied for Bitcoin spot ETFs, hoping to be the first and meet the high demand. 

The idea of having Bitcoin spot ETFs made more people want Bitcoin, and its price went up to almost $45,000 in December 2023. This excitement about Bitcoin ETFs also made other cryptocurrencies like Ethereum, Cardano, and Solana rise in value. Overall, the crypto market had a positive trend in 2023, with investors getting excited about the innovation and potential of the ETF industry.

• Ripple’s Victory Against SEC

In 2023, Ripple had some wins in court against the SEC, which improved the mood in the crypto world. In July, the court decided that Ripple didn't break the rules when selling its XRP on public exchanges but only made some sales that weren't considered investment contracts. This decision helped the XRP token's price go up briefly in July, reaching over $0.90. However, in November, the price dropped below $0.60 after the SEC appealed and asked for a jury trial. Even though Ripple's executives were cleared from some charges, the SEC still says XRP is a security, and Ripple broke the law by selling it without registering.

Big crypto exchanges like Coinbase, Crypto.com, and Kraken put XRP back on their platforms after the court's decision, showing support for Ripple. The SEC, under Gary Gensler, tried to appeal, but the appeal is still waiting, and the US magistrates haven't rejected it as of yet. The appeal doesn't affect the jury trial, which is set to start on April 23, 2024.

Meanwhile, charges against Chris Larsen, Ripple's executive chairman, and Brad Garlinghouse, the CEO, are still unresolved. The SEC accuses them of helping Ripple sell XRP without registering, and they want them to pay fines and follow the rules. Many in the crypto world hope the long legal battle ends with Ripple winning, as it could make the whole market grow and boost the industry's trust.

• MiCA Adoption in Europe

In 2023, the EU introduced a new set of rules called the Markets in Crypto-Assets Regulation (MiCA) to make things more consistent for crypto in the region. These rules covered crypto stuff like utility tokens, asset tokens, and stablecoins that didn't have clear regulations before. MiCA aimed to keep investors safe, make sure markets worked well, and encourage innovation in the crypto world. It started in June 2023 and was expected to be fully active by January 2025. MiCA made a big impact in 2023 by bringing clarity and harmony to crypto rules in the EU. It also made people more aware of the risks and benefits of dealing with crypto. These rules made the EU more appealing to crypto businesses and attracted more money and entrepreneurs from around the world.

• Tokenisation RWA

In 2023, a big thing in crypto was turning real-world assets (RWA) into digital tokens, known as Tokenisation RWA. This innovation allowed investors to easily get into a variety of assets like real estate, private equity, art, and commodities. It made things more secure, clear, and efficient. Tokenisation RWA also lowered the hurdles to enter the market, cut down costs, and reduced the need for middlemen in traditional asset markets. This opened up new opportunities for asset owners, issuers, and service providers, as well as for crypto platforms and protocols that used RWA tokens. Plus, it made the crypto market more liquid, diverse, and robust by linking the digital and physical sides of finance.

In the beginning, the RWA sector got a lot of attention, with capital interest jumping from about $1.3 billion to over $5.6 billion, according to Binance research, by September 5th, 2023. This pushed RWAs to the 6th position in the overall DeFi sector ranking by DeFiLlama. Furthermore, DEX volumes for RWA tokens hit record highs, surpassing 2 billion, showing a growing interest and demand in this new RWA sector.

Key protocols that made RWA tokenisation happen in 2023 included stUSDT, Ondo Finance, Backed Finance, MakerDAO, Creditcoin, Maple Finance, Centrifuge, and Goldfinch. These protocols brought a new dimension to the crypto world by turning real-world assets into easily tradable digital tokens.

• Payment Improvements (Stablecoins)

In 2023, using stablecoins became a big deal in the crypto market, especially for cross-border payments and remittances, considering the rise in global inflation. This growing use of stablecoins is good news for the crypto world, and it might make more people get into crypto. In 2023, lots of institutions and regular folks started liking stablecoins for payments. They saw that stablecoins had some advantages over traditional payment methods. Here's why they liked it:

1.     Lower Costs and Faster Transactions: Stablecoins made cross-border payments much cheaper and quicker because they cut out the middlemen, conversion fees, and delays in settling transactions. Some studies even say that using DeFi and stablecoins could save up to 90% of the costs and 80% of the time for remittances.

2.     Financial Inclusion: Stablecoins made it easy for anyone with a digital wallet and an internet connection to join the global payment system. You didn't need a bank account or a credit card. A report from Harvard Business Review said stablecoins could help millions of people who don't have access to banks or have limited access, giving them a shot at financial services and opportunities.

• Coinbase Layer-2

In August 2023, Coinbase, the biggest U.S. crypto exchange, introduced its own layer 2 blockchain called Base. This move had a positive impact on the crypto market in 2023. Base is a secure, affordable, and user-friendly Ethereum layer 2 network, designed for fast and easy development and use of decentralized applications (dapps) on the blockchain. It's built on Optimism, an open-source toolkit for the Optimism network, and it works not only with Ethereum but also with other blockchain systems like Solana.

The goal of Base is ambitious – to bring a million builders and a billion users onto the blockchain. It does this by giving them access to Coinbase's massive user base of 110 million verified users and $80 billion in assets. Additionally, Base launched the Base Ecosystem Fund, which supports early-stage projects building on Base.

Since its launch in August 2023, the Total Value Locked (TVL) in the Base has climbed to nearly $500 million. The community has been thriving, with daily active users surpassing 70,000 in November and December. A notable surge in daily trading volume for Ether on the network, going from 1 ETH to 79,354 ETH by December, signaled a positive trend in the entire crypto market. The crypto market as a whole experienced a bullish trend as investors embraced the innovation and potential of the industry.