Important notes
In this blog series, we provide brief summaries of our Binance Research team's findings and invite you to delve deeper into the original reports.
In this article, we provide a summary of the Binance Research report, which talks about the top crypto topics to follow as we enter the new year.
Although it is too early to tell whether we are in a bull market, recent developments in areas such as Bitcoin, DeFi, stablecoins and NFTs paint a positive picture for the ecosystem in 2024.
2023 has been a year of renewed excitement in the crypto industry. Although it is too early to definitively declare that the bull market has started again, the situation looks more promising compared to previous periods. Based on their observations of recent activity and trends, the Binance Research team has compiled some key narratives and metrics to watch in the coming months. Below you can see the main crypto trends to follow as we enter the new year.
Bitcoin
2023 has been an eventful year for Bitcoin, with significant developments in all areas of the investment world. On the crypto side, we have seen the emergence of the Ordinals protocol, which enables new innovations such as inscriptions, often referred to as “Bitcoin NFTs”. On the traditional finance side, market optimism regarding the upcoming spot bitcoin ETF approvals in the US has led more traditional institutional investors to turn their eyes to the cryptocurrency ecosystem.
Bitcoin's year-to-date (YTD) performance
Source: CoinMarketCap, Yahoo Finance, Binance Research (December 5, 2023)
In light of these developments, BTC has outperformed many other major assets and indices in both the traditional and crypto worlds. As of December 5, 2023, the market value of BTC increased by 162% on an annual basis. Some of the most important developments in BTC to watch in 2024 include:
Spot BTC ETF approvals in the US
Although the possibility of regulated spot bitcoin exchange-traded funds (ETFs) gaining approval in the United States has long existed, there have been some notable positive developments in this direction in 2023. In August, US courts ruled in favor of Grayscale in a dispute between Grayscale and the US Securities and Exchange Commission (SEC) over the conversion of the Grayscale Bitcoin Trust (GBTC) into a spot BTC ETF.
This positive decision prompted numerous industry stakeholders, including the world's largest asset manager BlackRock, as well as Fidelity and Invesco, to file their own spot BTC ETF in the following months. Currently, there are a total of 13 spot BTC ETF applications being reviewed by the SEC. The nearest decision date among these applications is January 2024, while the latest is August 2024.
Dates for SEC decisions on spot BTC ETFs
Kaynak: Bloomberg, Binance Research
Bitcoin halving
Bitcoin miners are incentivized to verify transactions and keep the blockchain secure through two mechanisms: block rewards and transaction fees. To date, block rewards have generated the majority of miners' income. Block rewards are paid out for each new block created, on average every 10 minutes, and are halved every 210,000 blocks, or approximately every four years.
Given that BTC's fixed maximum supply is 21,000,000 units, the rarity is designed to increase the price over time, further increasing with the halving, reinforcing the narrative of BTC as a "digital gold" or safe-haven asset. When the Bitcoin blockchain was first launched in 2009, block rewards started at 50 BTC per block. Following halvings that took place in 2012, 2016 and 2020, the reward is currently 6.25 BTC per block. The next halving is expected to occur in April 2024. After this halving, the block reward will be 3,125 BTC per block.
Block rewards after Bitcoin halvings
Ordinals and inscriptions
One of the most important developments in Bitcoin in 2023 is the emergence of ordinals and inscriptions. The Ordinals protocol was launched at the beginning of the year and involves tracking each satoshi based on what founder Casey Rodarmor calls "Ordinals theory."
Sat is the smallest unit of bitcoin and each BTC contains 100,000,000 sat. The Ordinals protocol allowed each sat to be assigned a unique identifier. Optional content such as text, images, video, etc. can then be “written” onto the sats, creating “inscriptions” often referred to as “Bitcoin NFTs.”
Total number of BTC inscriptions
Ordinals and inscriptions also led to the emergence of BRC-20 tokens in March 2023, making it possible to deploy, distribute and transfer interchangeable tokens in Bitcoin. Inscriptions are unique implementations of the Ordinals protocol, while BRC-20 tokens are interchangeable versions of inscriptions.
After the initial excitement following the launch of Ordinals and BRC-20 tokens, the market calmed down a bit and then started to rise again. Activity revived significantly in November, with the total number of inscriptions reaching the highest level ever, exceeding 8,300,000, up 362% from October lows.
The emergence of Ordinals has brought new excitement and innovation to the Bitcoin ecosystem. This is another development that shows that we are in an important period in Bitcoin history as we enter 2024.
Stable Coin Supply
Stablecoin supply is a measure of the amount of capital available to invest in crypto assets at any given time and indicates potential buying pressure. The quarterly change in the supply of the top five stablecoins by market cap turned positive in the 4th quarter of 2023 for the first time since the first quarter of 2022. It is worth monitoring this metric in the coming months to see whether this change is temporary or represents a longer-term upward trend.
Net supply change of the top five stablecoins on a quarterly basis
NFT Volumes
Unique token (NFT) trading volumes have dropped significantly throughout 2023, falling to yearly lows every month from February through September. But in October this trend finally reversed and we saw a significant increase in trading volumes in November.
The point here is that November's most popular NFT type, Bitcoin NFTs, grew to a trading volume of over $375,000,000 USD. This growth of Bitcoin, which has long been considered unsuitable for NFTs and other applications outside of peer-to-peer (P2P) transactions, is a remarkable achievement, surpassing even Ethereum.
NFT trading volumes in 2023
Note: “Other” refers to the remaining 10 chains that are among the top 15 chains by all-time NFT volume
After months of low prices and pessimism, the increase in trading volumes in November can be considered an indicator of positive market sentiment and the revival of the NFT space. It will be necessary to continue monitoring NFT trends in 2024 to see whether the market can sustain this revival.
Protocol Commissions
As the industry matures and protocols begin to generate revenue, commissions charged by major crypto projects will be an important metric to track. Commissions have increased steadily throughout 2023. In November, commissions for the top 20 crypto projects across all sectors increased by more than 88% compared to January.
Commissions of the top 20 crypto projects across all sectors
Note: "DeFi"; Lido refers to Uniswap, Convex, GMX, PancakeSwap, MakerDAO, Aave, dYdX, Venus and Curve. “NFT”; OpenSea refers to Manifold.xyz and Blur. “Other” refers to FlashBots and friend.tech.
With more than twice the commission return compared to all other protocols, Ethereum is by far the protocol that earns the most commission. Collectively, decentralized finance (DeFi) protocols are the top earners in fees after Ethereum. The leaders of this market are Lido and Uniswap. While DeFi projects and layer 1s (L1) dominate commission yields this year, NFTs also account for a significant portion of commission revenues. In this space, OpenSea is the clear leader, with nearly twice the commissions of Manifold and more than twice the commissions of Blur.
Generally speaking, commission income is an indicator of a sustainable business model. Therefore, it was encouraging that these figures increased throughout 2023. As we enter the new year, it will be important to closely follow which protocols and sub-sectors will increase commission income the most.
Tier 1s
While Ethereum is the dominant smart contract L1 by most metrics, other alternative L1 solutions have also shown promising performances throughout 2023, with some even outperforming Ethereum. It will be necessary to watch this trend in 2024 to see whether Ethereum will maintain its dominance in the L1 world.
Change in market value of major alternative L1s through 2023
Source: CoinMarketCap, Binance Research (November 30, 2023)
Solana exhibited the most remarkable performance of 2023, especially with the market value of the SOL token rising by around 56% in November. Toncoin has also made significant progress this year, and The Open Network's announcement of its partnership with Telegram in September was a significant development.
Numerous other developments occurred in all major L1s. Ethereum allowed withdrawals of staked ETH following the Shanghai Upgrade in April, giving rise to massive DeFi markets in liquid staking and LSDFi. As the ecosystem continues to grow, BNB Chain launched opBNB, an optimistic L2 based on OP Stack, and BNB Greenfield, a next-generation data storage platform.
SocialFi
The social potential of blockchain applications has been long anticipated, and DeFi and social media have come together with the emergence of SocialFi, short for “social finance.” In 2023, there was a product-oriented rise in this sub-sector, and friend.tech in particular attracted the attention of many people.
friend.tech's daily transaction count and protocol commissions
friend.tech managed to generate over 25,000,000 USD in protocol commissions from the day of its launch until the end of November. Its daily activity has slowed in the last few months after rising in August and September. However, the product is still in beta mode and the full launch is expected soon.
The attention friend.tech has received, especially from influencers outside the crypto world, has demonstrated the potential of Web3 social applications. Other notable projects in this space included Farcaster, Lens Protocol, and Binance Square. The extent to which SocialFi can attract more attention in 2024 will determine the shape of social interactions on Web3 in the coming years.
Last word
The last few months of 2023 have seen a refreshing shift in sentiment towards the crypto sector. With the agenda accelerating, new players entering the market and excitement increasing, it is necessary to stay one step ahead when following the main indicators and developments, and in this article we have summarized the important issues and critical metrics to watch as we enter 2024.
Further Reading
Binance Research: Major Trends in Crypto - December 2023
Binance Research: Explore Bitcoin's Evolution
Binance Research: Major Trends in Crypto - November 2023
Disclaimer: This content is produced by Binance Research; It is not intended to be relied upon as a prediction or investment advice, nor is it a recommendation, offer or solicitation to buy or sell any security or cryptocurrency or to adopt any investment strategy. The terms used and opinions expressed are intended to promote understanding and prudent development of the industry and should not be construed as the opinions of Binance or strict legal opinions. The opinions expressed are valid as of the date shared above and are the author's own opinions. These ideas may also change if conditions change in the future. The information and opinions contained in this material are obtained from proprietary and non-proprietary sources that Binance Research deems reliable, may not be complete, and its accuracy is not guaranteed. Therefore, no warranty is given as to accuracy or reliability, and Binance accepts no liability whatsoever (including liability to any person for negligence) arising from errors or omissions. This material may contain "forward-looking" information that is not based entirely on historical information. Such information may include, among other things, predictions and predictions. No guarantee is given that the predictions made will come true. Reliance on the information in this material is at the reader's sole discretion. This material is for informational purposes only and is not investment advice or an offer or solicitation to buy or sell any security, cryptocurrency or to adopt an investment strategy. No security or cryptocurrency should be offered or sold to persons in any jurisdiction where the offer, solicitation, purchase or sale is unlawful under the laws of that jurisdiction. Investing involves risk.
