Compared to the end of 2022, the Crypto market seems to be gradually waking up and getting rid of the bear market, with the total market value increasing from $831.8 billion on January 1, 2023 to $1.238 trillion on March 31. The prices of BTC and ETH are now hovering around $29,000 and $1,900, respectively. BTC has performed particularly well, with an increase of nearly 72% this quarter.
This article analyzes the Crypto market value and potential in Q1 2023 from multiple dimensions. The encryption market seems to be recovering significantly.
1. Strong start, Crypto market value rebounds to $1.2 trillion
Crypto markets had a strong start to 2023, with a total Crypto market capitalization of $1.2 trillion at the end of Q1. This reflects a growth rate of 48.9%, or an absolute increase of $406 billion, compared to the $829 billion performance at the end of 2022.
At the same time, average daily trading volume also rebounded, rising to $77 billion in Q1 2023, a 30% increase from the previous quarter, after a month-on-month contraction in Q4 2022 (-33%). Trading volume rebounded in January 2023 when the market rebounded. Then in early March, trading volume soared due to market volatility caused by the banking crisis.
Trading volumes have been gradually declining since late March, when Binance removed some of its trading fee waivers for $BTC.
02. Bitcoin surged, achieving a positive return of 72.4%
In Q1 2023, among all major asset classes, Bitcoin ranked first with a quarterly return of 72.4%, followed by the Nasdaq Index (15.7%) and gold (8.4%).
In April, Bitcoin briefly surpassed $30,000, a rebound that was even more dramatic than the nearly 20% gain in the Nasdaq 100 Index (Bitcoin tends to rise in tandem with the index) and recovered some of the digital token's losses since 2022 following a series of cryptocurrency-related crashes. Despite this, Bitcoin is still down more than 50% from its all-time high in November 2021.
Even with the setbacks, Bitcoin’s rally has gained momentum over the past month after three U.S. bank failures rekindled the narrative among Bitcoin bulls that it offers a more attractive alternative to traditional finance.
In addition, analysts said that liquidity fell to a 10-month low after market makers lost access to U.S. banking funding provided by Silvergate Capital (SI.US) and Signature Bank (SBNY.US), which provided funding, could also explain the rebound, at least in part. With trading volumes falling, price swings may look more violent.
But to be sure, the cryptocurrency industry still faces enormous scrutiny.
03. Stablecoins fell 4.5%, with $USDC and $BUSD suffering the biggest losses
The top 15 stablecoins lost 4.5% ($6.2 billion) of their market cap due to Paxos shutting down Binance USD ($BUSD) and a brief decoupling of USD Coin ($USDC) amid the SVB collapse.
In February 2023, the New York Department of Financial Services ordered the stablecoin issuer Paxos Trust Co. to stop issuing new BUSD tokens, but the BUSD redemption business was not affected. After the news of stopping the issuance of BUSD was released, the market FUD sentiment was further deepened, and regulatory issues are hitting the prices of BNB and BUSD. BUSD also showed a slight decoupling phenomenon.
In March 2023, after Circle, one of the largest stablecoin issuers in the cryptocurrency circle, tweeted that $3.3 billion of its approximately $40 billion USDC reserves were deposited in Silicon Valley Bank, the price of its issued stablecoin USDC plummeted, the depegging status continued to expand, and even triggered a bank run.
However, the largest stablecoin, Tether ($USDT), further strengthened its market share, increasing its market capitalization by 20.5% ($13.6 billion). $USDC and $BUSD lost 26.9% and 54.5%, respectively, wiping out all their gains for 2022.
Meanwhile, True USD ($TUSD) entered the top five stablecoins, surpassing $FRAX. Binance minted 130 million $TUSD, followed by Tron minting another 750 million, driving its market cap up 169.3%. Outside the top 5 stablecoins, $GUSD and $USDP saw their market caps fall by 32.0% and 12.3%, respectively.
04. DeFi market value increased by about 65.2%, or US$29.6 billion
The market capitalization of the DeFi sector jumped 65.2% in Q1 2023, or $29.6 billion. This was mainly driven by the excellent performance of liquidity staking protocol governance tokens.
With the completion of the Ethereum Shapella upgrade, the market value of the governance token of the liquidity staking protocol increased by 210.9% in Q1. It has now surpassed the lending protocol and become the third largest sector of DeFi.
For users, liquidity staking is attractive in the following aspects: first, it is user-friendly. Users do not need 32 ETH to participate in network verification and benefit from it. It is a relatively stable and secure fixed-income product. Second, the pledged tokens can be withdrawn at any time without any threshold. Third, liquidity is released to improve the efficiency of fund use. Fourth, users can not only receive verification income, but also participate in income governance.
In addition, liquidity staking is expected to grow further as the ETH staking ratio is significantly lower than other L1 tokens. Currently only 14% of ETH is staked, while 58% is the average for L1 staking. The current market consensus is that once the Shanghai upgrade is successful and the uncertainty of liquidity risks and lock-up periods disappears, more funds will flow into staking protocols.
The current liquidity staking protocols in the market are facing fierce competition, and the newly born similar products are mainly focused on three directions: the first is to cooperate with other Dapps to provide more application scenarios for the generated derivative tokens; the second is to strive to be deployed on more L1 chains to maximize TVL; the third is to focus on improving the security level of the protocol.
To be precise, the future of the liquidity pledge agreement depends on the overall long-term development of the public chain, and its security will be of paramount importance. In addition, factors such as value capture capabilities and on-chain DeFi ecosystem construction also have a significant impact on the agreement.
05. NFT market picks up, Blur replaces OpenSea as the largest NFT trading market
NFT transaction volume rebounded significantly, jumping from US$2.1 billion in Q4 2022 to US$4.5 billion in Q1 2023, an increase of 68%.
Most of the NFT trading volume comes from Blur, a new NFT trading market launched in October 2022. In just 6 months, it overthrew the former market leader OpenSea, and its market share increased from 52.8% in December 2022 to 71.8% in March 2023. At the same time, OpenSea's market share shrank from 29.3% to 21.7% during the same period.
The Blur platform’s performance is so outstanding, and the carefully calculated airdrops certainly play a very important role in it. But what really retains users is Blur’s excellent performance: the Blur platform is simple and intuitive, strengthens the NFT infrastructure, and improves the experience of professional traders in the NFT market. Secondly, it runs ten times faster than other NFT markets, allowing users to quickly capture scarce NFT resources. In addition, the zero-fee and custom royalties firmly grasp the general user needs in the current market. Blur is also known as the "best NFT viewing tool" because of its professionalism and convenience.
Obviously, the emergence of Blur broke the NFT market that had long been monopolized by OpenSea and introduced a new round of competition into the NFT market. When the market is large enough, healthy competition will bring a positive cycle to the entire ecosystem to promote development.
06. SUI’s strong IEO, the road to new public chains is long and difficult
Last year’s Aptos airdrop created a wave of popularity for new public chains, and the Sui public chain, which is equally famous, was slightly inferior. We all know that Sui and Aptos are from the same school, they are both from Facebook’s Diem. Moreover, both teams explored and launched new public chains based on the Diem programming language Move.
Compared to airdrops, although it has the advantage of attracting a large number of community users and attention in the short term, it also has the disadvantage of selling pressure in the secondary market. When the wool-pulling party decided to follow the example of Aptos, it chose IEO. Currently, major exchanges such as Binance, Bybit, OKX, Huobi, etc. have listed its native token SUI. It is worth noting that if you successfully bought $0.1 SUI in the IEO event before, you now have a super high rate of return! It is a pity for the currency community that did not successfully participate.
Of course, for the public chain track, it is very important to tell the public chain story well, narrate the public chain story into the ecosystem and implement it. For example, Ethereum's smart contracts, Cosmos and Polkadot with cross-chain narratives, Solana with high performance, and PlugChain with efforts on the dual tracks of oracle and cross-chain protocol. For SUI, it naturally has its own public chain narrative. In terms of technology trends or industry narratives, Sui focuses on faster, cheaper and friendlier.
If Layer-1 blockchains are to succeed, they must provide new use cases and frictionless experiences. Sui does this through its object-based data model, which allows extensible packages to bypass consensus for fast transactions and grant the ability to store arbitrary data values, which is clearly Sui's original technical advantage. In addition, Sui allows Android-style transaction signing permissions and PTBs, which facilitate large-scale batch processing of atomic composable transactions.
In fact, the development potential of public chains is huge, but the road ahead is long and difficult. The narrative of each successful public chain is based on countless technical polishing day and night and a long development cycle. The public chain that can truly lead the next round of industry narratives must reconstruct new things with the logic of crypto, rather than optimizing existing things to add icing on the cake.
In short, public chains have never lacked stories, but they lack perseverance and courage!
Crypto’s first half of 2023 has brought mixed feelings to most crypto practitioners. On the one hand, the bank runs in several US banks and the continued crackdown on centralized exchanges by regulators have impacted market confidence; on the other hand, crypto assets represented by BTC and ETH have performed quite well in the secondary market. In addition to price factors, we also believe that multiple signals in the crypto field are showing strong signs of recovery and growth. Coupled with the Web3.0 wave in Hong Kong, it has also injected new vitality into the crypto market. Compared with the end of 2022, the Crypto market seems to be gradually waking up and getting rid of the bear market. The total market value has increased from US$831.8 billion on January 1, 2023 to US$1.238 trillion on March 31. The prices of BTC and ETH are now hovering around US$29,000 and US$1,900, respectively. Among them, BTC performed particularly well, with an increase of nearly 72% this quarter.
C3 Tip: The views, thoughts and opinions expressed here are the author’s alone. This article does not contain investment advice or recommendations. Every investment and transaction involves risk.
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