The word “Crash” has triggered anxiety and panic in everyone’s mind within the DeFI Space throughout the year 2022 but the question is are we heading into another one? The DeFI Space has been on unending moves throughout 2023 as global tensions still seem to be brewing and the hopes for recovery are still quite strong as we approach the penultimate month of this year. So how has the market performed throughout the year? Are we heading into 2024 with a Bull Market or a Bearish one?
Beginning on a high…
You would not be the only one if you think that the DeFI slump will continue down to 2023 from what we experience with FTX. FTX was the third largest exchange in the world when it collapsed at the end of 2022 and brought with it a massive downfall to all the digital assets. Trust and Value were at all time low after an 18 months of rollercoaster ride filled with the pandemic and uncertainty but surprisingly DeFI saw an uptick in 2023.
The year 2023 carries on the momentum from the tail end of 2022 as panic sell were all around and Bitcoin reaches below 20K mark and bottoming out at around $16,529 at the penultimate day of the year. From there it was all uphill for the DeFI Space in January 2023 as it finally reached the $1 Trillion Market Cap and all thanks to the easing inflation across many countries that is paired with a significant rise in transaction volume across decentralized exchange by more than 27%. On the other side the positive note also comes from the introduction of the MICA regulatory framework by the EU regains a lot of trust from its users.
Despite the positive start the DeFI Space would stall in February as interest rate hikes carried out by the FED would continue to constrict its growth. Ethereum, who made up a majority of the trading activity in January, would hover between the $1,500 — $1,700 mark throughout February. This forms an early knock on effect of the interest rate hikes as inflation in many countries starts brewing and the community starts to shift safer assets.
This combination should enable the stall to continue in March 2023 as Bitcoin other digital has only spelled a positive return thrice in the last 9 years through the month of March but it would prove otherwise. In March we were introduced to another “Black Swan” event as 3 major US Banks would proceed to file for Bankruptcy with SVB being the most notable one with more than $200 Billion in losses and marking the third largest bank failure. An expected result of this is the slight depegging of the USDC Stablecoin leading to a significant drop in Market Cap of the DeFI Space.
Despite all this the DeFI Space managed to close out the first quarter with growth of 50% reaching $1.185 trillion and a 24-hour trading volume of $48 billion. Amongst all this, Bitcoin managed to grab the highlight once again with a growth of 70% and outperforming many major indexes in the first quarter of 2023. The DeFI along with NFT Space also posed a strong increase as the TVL grew by more than 37% and the NFT Trading Volume grew by 137% marking a positive sentiment towards the next quarter of 2023.
The Second Quarter of 2023 starts off with a sour taste as Regulatory crackdowns from the SEC start to disrupt the momentum. These crackdowns affected many of the large cap DeFI Projects with the most notable one being Ripple (XRP), Binance and Coinbase. These lawsuits are particularly significant because the SEC has identified several cryptocurrencies as securities, which has dealt a significant blow to the market.
The MICA Regulation was a huge boost when it was finalized at the end of April 2023 and provided a growth for the DeFI Space in May 2023 which was subsequently followed by a quiet June. Overall the second quarter of 2023 was a real test and low activity for the DeFI Space with some noteworthy events that could provide a huge boost going forward. Some of these events include Ripple (XRP) ruling in favor of SEC and Blackrock Bitcoin ETF that became a huge buzz in the second half of the year. It is also worth noting that despite the low trading activity in Q2 2023, Private and Public Fundraising for blockchain projects continues to show growth with the majority of it coming from the Asia region.
July was another quiet month generally for the DeFI Space as the low trading activity continues with the monthly spot exchange volume decreasing by 9.3% and marking the second-worst result of the year at $420.2B. Ripple (XRP) became a popular theme in the DeFI Space as its partial victory against the SEC marked a surge by more than 43% in July with other top 100 projects outperforming the market. July is also usually a good month for Bitcoin as it managed to reach the $30,000 mark towards the tail end of June but failed to hold on to it.
August would follow in the same mood as a slow correction would precede in the DeFI Space before a swift uptick would take place in September. Bitcoin and Ethereum prices saw a 20% increase from the tail end of September through the month of October and the momentum seems to continue. This increase would be followed by other digital assets in the DeFI Space taking its Market Cap to the $1.25 Trillion Mark for the first time since the mid of 2022.
Currently the DeFI Space is standing at more than 40% growth Year to Date with a limited upside still available in November and December. With this momentum continuing to rally, the question in everybody’s mind is the “Crypto Winter” officially over? Is this a cause of concern for an impending crash that is yet to come or will it be a sign of an upswing in 2024?
A Cause of Concern or A Course Correction
2023 was certainly a mixed bag in terms of growth for the DeFI Space as it shows major concerns but also a glimpse of momentum that it could go on to. Despite the social and economical disputes going on around the world, Bitcoin seems to be on the run for something promising with the Blackrock Bitcoin ETF being a prime example as it could be a major exposure and could be a catalyst for the next boom if it managed to get the approval necessary.
The DeFI Space also has stabilized in terms of its volatility throughout 2023 so far with steady declines and slower peaks as it is still on track to reach its all time high. There are still challenges that have to be faced with continued regulatory crackdown from the SEC that could drag down to 2024 with the US DeFI Regulation awaits. One of these challenges will be the impending rate hike posed by the FED as we approach the tail end of 2023 and this could cause another uncertainty within the DeFI Space.
At the moment another crypto crash seems to be a distant memory for all of us and 2023 seems to be just a shaky course correction that is still on track to present a healthy recovery for the DeFI Space. Booming markets in the Asia and EU Region paired with optimism from Bitcoin halving should be able to carry the momentum forward to 2024. While it can be difficult to predict how the next bull market cycle will look like, industry experts maintain a positive forecast going into 2024.
With this positive momentum available to us, it is then important to start doing your research and zoning in on the right digital asset for you to HODL on. Bitcoin and ethereum are obviously a favorite as they make up more than two-thirds of the global cryptocurrency market cap, but other leading altcoins have gained significant momentum heading into 2024. Now is the good time for you to dive deep into the fundamentals of the Digital Asset and pick the one that has both the potential to grow while also ensuring sustainability in your journey to the peak.
We at Nagaya Technologies are really excited about the recovery that is happening within the DeFI Space throughout 2023. We hope that beyond Nagaya can help boost growth within the DeFI Space and become a sustainable asset for the global community. Nagaya in itself is the World’s First Hybrid Digital Asset that has gold to back up its intrinsic value and maintain growth for the long term. Interested to know more about Nagaya, you can visit our website at www.nagaya.co
Or you can talk to us at t.me/nagayaofficial