Jan 13

11 min read

Cryptocurrency Market Monthly Recap -January 2023

I. Major Assets: Latest news

1)Major assets : What happened in December

Major digital assets continued to decline in December. However, volatility was lower than in November. BTC ended 2022 with a 64.2% drop, the second worst in its history. However, in 2022 it remains the leader compared to other assets, with ETH and SOL down 67.5% and 94.1% over the year.

Traditional assets also lost ground, with the S&P 500 and NASDAQ down 5.90% and 8.37%. In December, BTC recorded significantly lower volumes than the previous month, with USDT trading volumes on centralized exchanges down 42.6% from the previous month.

2) Rounding up 2022: KEY

- 2022 has been a negative year for the leading cryptocurrencies and the market in general. After hitting all-time highs in November 2021, Bitcoin and Ethereum corrected throughout the year, dropping 64.2% and 67.4% respectively from peaks. The total market capitalization has fallen from $2.2 trillion to $820 billion.

-2022 was remembered for a massive market correction, and the second quarter was the worst for bitcoin in history.

- In 2022, the number of addresses with a balance of ≥ 1 BTC has grown by 20%. This is a positive signal indicating an increase in the number of market participants and the accumulation of coins in the wallets of those who believe in the long-term potential of bitcoin.

- Bitcoin mining hashrate and difficulty have increased by almost 50% over the year. The income of bitcoin miners fell by 43%.

- The volume of trading on spot exchanges decreased by 50%, in the DEX segment — by 32%.

- The community witnessed the collapse of the $18 billion algorithmic stablecoin UST.

- Grayscale’s GBTC discount has fallen to an all-time high of 48%.

- The rate of Ethereum issuance has decreased significantly amid the transition of the network to the Proof-of-Stake algorithm.

- In 12 months, the volume of funds blocked in DeFi app smart contracts has decreased by 75%.

II. Asset Performance: Summary

1) Major Assets

BTC

2023 started with +5% bitcoin price, which returned to mid-December levels. BTC prices for the first 11 days of 2023 are moving up, although at levels still lower than December 14th. After the FTX crash, the 2022 yearly low hit below $15,500 on November 9, and after returning to those levels on November 22, the price has always remained above $16,000, with $17,000 crossing from 1 to 14 December. However, by December 17, it returned to $16,500 and then began to rise on January 2, 2023.

At the time of writing this article (Jan_13), Bitcoin has risen to $18K, having shown a +3% performance the week before, finally reaching 17K.

ETH

Price was around $1,200 at the end of December, ETH is up 11%, with the current price significantly higher than even June and July 2022. Since the FTX tragedy, the price of ETH has never dropped below the 2022 yearly low.The current price has reached $1,410, which proves that volatility of ETH remains stronger than that of BTC.

SOL

The Solana ecosystem started the year on a positive note with an increase in average weekly active addresses from 378.2M to 490.5M. While this is partly due to the BONK airdrop, the price trend suggests otherwise. The down phase for SOL also began on Dec.15 and ended on Dec. 29 with a 2022 yearly low of $8.4. SOL showed +29% during the first 2 weeks of January.

ADA

Cardano ended 2022 at $0.25, down 81.2% from the start of the year. It was the second largest annual drop in its history, surpassing the market’s 94.3% drop in 2018. After such a big drop, a good rebound could be expected in the event of a recovery in the crypto markets.

Crypto strategist Justin Bennett (111,700 Followers) says that the US dollar index (DXY) is testing its May 2021 trend line, which if it breaks could signal bullishness for crypto markets.

“DXY tested its May 2021 trend line today. Feels like a significant moment for markets.What a start to the year for Bitcoin. The stair-step price action has been exceptional from the start. Lots of opportunities. I still have my $16,722 long but have trimmed it to half ahead of today’s CPI (Consumer Price Index data).”

The strong rises of BTC, Cardano and Solana indicate that the panic that dominated the cryptocurrency markets in both November and December has dissipated. However, it remains to be seen if he will return or grant a relaxation period.

2) Stablecoins

Market capitalization of stablecoins, $ billion

-During 2022, the capitalization of stablecoins decreased from $150 billion to $137 billion. -Stablecoins reacted strongly to all market shocks.

-Encouraged by the success of the Terra UST ecosystem, projects began to present their own algorithmic stablecoins. At its peak, the market value of the segment reached $180 billion. However, the model showed its vulnerability in the collapse of LUNA, and UST, with a market value of $18 billion, crashed.

-The efforts of others also failed. Attempts to launch algorithmic assets in the Tron, Near, Waves ecosystems and individual DeFi protocols like Aave and Curve have not been successful. Loss of parity with the US dollar has become a common occurrence throughout the year.

-At the end of December, Binance significantly reduced the issuance of its own stablecoin Binance USD (BUSD). Its capitalization fell from $22.2 billion to $16.8 billion (-24%).

3) DeFi / DEX

Top ecosystems by value of blocked funds ( TVL, $ billion )

In 2022, the volume of funds blocked in smart contracts for decentralized applications (TVL) decreased by 75%, reaching $58.96 billion on December 31. The dynamics is due to the problems of a number of large projects, as well as a protracted correction in the digital asset market.
The largest declines in percentage terms were recorded in May-June and October-November. The first was the collapse of the Terra ecosystem (-44%), the second was the collapse of the FTX cryptocurrency exchange (-28%).
Ethereum still accounts for the majority of blocked assets (over 68%). The ecosystem has strengthened its positions — in January 2022, the dominance index was estimated at 62%.
One of the worst performers was Solana, whose TVL dropped by 95% in 12 months. Alameda Research’s accounts held SOL with a total value of $1.2 billion (as of June 30) — this fact caused a collapse in the price and an outflow of cryptocurrency from smart contracts.
The problems of some players spurred the development of others — at the end of the year, the Tron, Arbitrum and Polygon blockchains entered the top five in TVL.

Trading volume on decentralized Ethereum exchanges, $ billion

The end of the year for decentralized Ethereum exchanges ended with a rapid decline in trading volume. The exception was November, when confidence in centralized platforms eroded with the collapse of FTX.

In December, the DEX indicator was the minimum in 2022 of $29 billion. The total volume in the segment for the year reached $782 billion, compared with $1.16 trillion a year earlier (-32%).

Trading volume on the leading spot exchanges, $ billion

Trading volume on the leading cryptocurrency exchanges fell to a two-year low of $380 billion in December.
The total figure for 2022 was $8.4 trillion, which is 50% lower than the value for 2021, which is logical given the market correction.
After the collapse of FTX, the share of the exchange was evenly distributed among competitors. At the end of the month, the top 3 platforms looked like this: Binance, Coinbase and OKX.

4) NFT & GameFi

NFT sales volume on different blockchains

Trading volume on the OpenSea NFT marketplace, $ 1 B

Source: Dune

The crisis in the industry did not bypass the segment of NFT but despite this, some interesting developments took place in it.

Several new players have appeared on the market — LooksRare and Blur marketplaces (the latter outstripped OpenSea several times in terms of daily trading volume), aggregators and other tools for maximizing profits.

Many traditional companies have identified NFTs as a way to diversify their businesses. Successful cases include Nike, Dolce & Gabbana and Tiffany. The leading position was secured by Bored Ape Yacht Club from Yuga Labs and CryptoPunks. Yuga Labs unveiled the Otherside metaverse and raised a significant amount by selling virtual plots of land to Otherdeeds. Other companies presented joint projects, collaborations with celebrities, etc. Digital collectible images appeared on the popular social networks Twitter, Instagram and Facebook.

Despite a significant increase in volumes and activity in blockchains, the overall hype began to rapidly subside in the second half of the year. This is traditionally evidenced by the falling volumes of the flagship OpenSea.

Separately, it is worth highlighting the Ethereum and Solana ecosystems, which during the year increased the volume of NFT trading by more than $20 billion and $2.4 billion, respectively.

III. VC Insights

2) VC: deals of the Month

$4.5m — Panoptic — 5 Dec.

$5m — Metagood — 8 Dec.

$10m — Forum3–9 Dec.

$20m — Nillion — 12 Dec.

$4.5m — Sooho.io — 13 Dec.

$7m — Dogami — 13 Dec.

$15m — Blocknative — 15 Dec

$7.8m — Revel — 19 Dec

$5.6m — Pods — 19 Dec

$14.2m — Easy Company — 10 Jan

$5.4m — Quasar — 11 Jan

$2m — Exactly Protocol — 12 Jan

$2m — Quantum Temple — 12 Jan

3) VC in 2023

Annual Venture Investment In Financial Services Companies

Financial services remained the leading sector for venture investment in 2022 despite an overall pullback in venture funding and shockwaves in the crypto industry. And fintech is expected to remain strong in 2023, with areas from payments to accounting management likely to lead the way. Payments could remain the most-funded sector within fintech, especially startups focused on B2B payments. On the other side, cryptocurrency and blockchain, which experienced a large increase in funding in recent years, will most likely face a pullback in the wake of FTX’s collapse.

Within the fintech sector, payments- and banking-related startups received the most venture funding over the past five years, Crunchbase data shows. Cryptocurrency startup funding exceeded these two leading sectors in 2021, but dropped back a bit in 2022. Blockchain technology also received more funding in 2021 and grew its share into 2022. E-commerce and insurance, meanwhile, fell as a proportion of overall dollars invested.

Source: Crunchbase

“It’s very clear that it’s easier than ever to offer financial services, whether as a standalone business or as part of incremental margin and revenue in an otherwise non-financial business,” said Ben Savage of Clocktower Technology Ventures. “And we believe that trend is going to continue for the rest of our lives.”

With the slump in new tech listings in 2022 and the nosedive in value in public technology stocks including fintechs, where do investors see opportunities in 2023? Here are some sectors that stand out: B2B fintech , Emerging markets and CFO stack .

Last year, the big themes in financial services were infrastructure building, embedded finance, consumer fintech and a big interest in buy now, pay later platforms. “With an increase in interest rates and the market downturn, consumer fintech and lending companies face choppier waters while those focused on enterprise payments have a greater potential for consistent growth in 2023. We expect consolidation as funding dries up, and fewer companies can scale up.”

Source: Crunchbase

However, in a Jan. 5 report, Galaxy’s head of firmwide research, Alex Thorn, Thorn stated that macroeconomic and crypto market conditions led to significant investment drawdowns in Q3 and Q4. This will likely continue into 2023, until macro and crypto market conditions improve.Thorn noted that there were 2,900 venture deals in 2022, though the fourth quarter saw the fewest deals and the lowest capital invested in two years. If this trend continues, crypto and Web3 firms may struggle to raise funds in 2023, Thorn suggested.

“The macro, monetary, and crypto asset environment portends a difficult year ahead for all involved. Startups will need to be laser-focused on fundamentals, taming operational expenses and driving revenue in 2023”. The current news cycle may be rough, but persistence and innovation combined with an improving economic outlook will restore the optimism that has always defined our industry.”

IV. 2023: First half outlook

What to expect in 2023?

After a significant financial hit in 2022, the crypto industry is looking forward to a strong recovery this year as new regulations come into effect that will make the crypto space more secure. In addition, India, which has taken over the G20 presidency, has announced cooperation and synergy between countries to develop international laws and frameworks in the field of cryptocurrencies.

It is expected that the next market cycle will be digital assets will be formed largely through developing standards and frameworks for regulated entities. Need clear guidance to avoid introducing innovations into regions where regulations are weaker and customers may be at greater risk. In the USA, we expect the new Congress to continue working on one or more ongoing legislative proposals who received bipartisan support such as Digital Consumer Protection Law, which will allow the CFTC to control spot markets for digital assets and/or McHenry-Waters stablecoin bill.