FMCPAY RESEARCH (VINCΞ, ANDREW)

The market’s recovery in October, driven by the Bitcoin spot ETF and the potential Fed interest rate pause, has pushed the BTC Dominance ratio to its highest level in 2 years at 51.13%. Besides BTC, Solana has experienced nearly 500% growth after losses related to FTX. Let’s talk about what happened in the crypto market in 2023 with FMCPAY.

2023 YEARLY CRYPTO MARKET REVIEW

1. Summary of the crypto market in 2023

• Starting 2023 with the consequences of FTX and a challenging macroeconomic context: FED raises interest rates to historic highs to curb inflation
• Chain of bank failures in March: Signature Bank, Silicon Valley Bank, Silvergate, and Credit Suisse. Bad news turns good, the government plans to print money again for relief, Bitcoin and gold benefit as a tool to prevent inflation
• Big guys Blackrock, Fidelity,… jumped into the market with a Bitcoin ETF proposal
• The rise of Ordinals/BRC-20, pushing Bitcoin network activity to a new record
• SEC sues Binance, Coinbase but loses lawsuit against Ripple – Judge declares XRP is not a security
• Sam Bankman-Fried (SBF) was convicted of 7 crimes and faces 115 years in prison
• Binance pleads guilty, pays a $4.3 billion fine, CZ resigns as CEO and faces up to 18 months in prison
• SOL is about to increase from the Breakpoint event, after Cathie Wood, VanEck shill went public and a massive airdrop from HST projects – Increased nearly 450% in the past 3 months
• Altcoin breakthrough – Listing and IDO activities are vibrant again. Project releases news: updates, new products – Completely different from the state of silence since the beginning of the year

2. Global Economy

Macro environment

Bitcoin has maintained its dominant performance throughout the digital asset ecosystem this year, while Ethereum and the broader Altcoin sectors have seen a surge in relative strength in recent months. The year-to-date growth in market cap for these sectors is noteworthy:

• Bitcoin: +141.6%
• Ethereum: +79.4%
• Altcoins (excluding ETH and Stablecoins): +62.3%

Bitcoin halving and potential ETF approval

As the market gears up for the approaching Bitcoin halving event, favorable macroeconomic factors indicate the potential for a Bitcoin bull run. By December, Bitcoin’s price had surged to its peak for the year, reaching around $44,000, representing an approximate 160% increase. However, this price is still approximately 37% lower than its all-time high of $69,000, achieved in 2021.

After experiencing initial halving pressure, historical data indicates that Bitcoin has consistently recorded gains post-halving. Additionally, optimism is building around the potential approval of the first Bitcoin spot ETF in the coming year. Crypto analysts anticipate a surge in retail investment if the ETF is introduced to the market.

3. NFT Market Overview

In 2023, non-fungible token (NFT) trading volumes experienced a substantial decline, reaching new yearly lows each month from February to September. However, October marked a turning point, witnessing a noteworthy increase in trading volumes that continued into November.

A standout development was the surge in Bitcoin NFTs, which emerged as the most popular NFT type in November, boasting a trading volume exceeding $375,000,000. This accomplishment is particularly remarkable for Bitcoin, which has long been deemed unsuitable for NFTs and applications beyond peer-to-peer (P2P) transactions.

The top 500 collections experienced a notable surge in floor prices, notably increasing by 42% in just one month, especially within the GameFi sector. This surge likened to a lighthouse in a storm, reflects the collective confidence of collectors and investors. 

The considerably shortened holding period further contributes to the narrative of a revitalized market, with traders now holding their NFTs for an average of 18 days, a stark departure from the 100-day average recorded in October.

Blur overtakes OpenSea in royalty market share:

Blur has emerged triumphant, seizing a substantial portion of the royalty market share previously dominated by OpenSea. The shifting dynamics underscore the adaptive nature of the NFT market, resembling rivalries in the tech industry where giants vie for ultimate supremacy. Blur’s victory goes beyond mere boasting rights; it directly affects market fees, creating a ripple effect in overall revenue generation.

ONCHAIN

1. BTC onchain

Although the price of BTC increased sharply to 45K, whale groups still accumulated strongly, in both accumulation trend Score indices. However, when looking at the number of stablecoin net flows on exchanges, we do not see many stablecoins being pushed onto the exchanges (a common sign when the market has cash inflow).

Besides, the stablecoin mint/burn index also shows the same thing when there are more stable coins burned than minted in the past 3 months. The fact that prices continue to increase and whale groups buy strongly is a good sign, but we should still be cautious when the market does not show signs of strong cash flow like previous increases.

2. On-chain Market Retail

• Bitcoin Sell Bubble

 BTC sell bubble shows that BTC is mainly taking profits from groups of short-term traders who have already made profits, another large part comes from bottom-fishing groups in the 16Kx area last November. Besides, a small number of BTC bought in 2018 and 2019 also took profits.

• Bitcoin Profitable Days 

The tiny red dot that has appeared on BTC profitable days represents the number of days in Bitcoin trading history that holding Bitcoin is profitable compared to today’s price. At the uptrend stage, we see this index last for a while (red), then the market declines and the index returns to green in the downtrend. Currently, although it is still very early, this redbud has begun to appear.

3. Situation of futures contracts on CME 

After a long period of silence, futures contracts on CME are now active again, with an almost equal long/short ratio, short orders of 18,953 are slightly more than long orders is 18,061.

NARRATIVES

1. AI

The integration of AI agents represents a tangible fusion of AI and blockchain technology, elevating the capabilities and applications of blockchain. Transitioning beyond deterministic task bots, these AI agents now function with increased autonomy. Their roles encompass processing transactions, managing valuable assets, and facilitating value exchange on behalf of users. Envisioning a future scenario, AI agents may emerge as a predominant category of users within the blockchain ecosystem.

2. Layer 2

At the beginning of 2023, the Total Value Locked (TVL) in Layer 2 was only worth 4.5 billion USD. By December 31, 2023, it had impressively increased to 19.7 billion USD.

This surge in TVL is evidence of the growing importance of Layer 2 solutions. The cryptocurrency community is vocal about its assets, and the numbers don’t lie. Activity on Layer 2 networks is booming, with Layer 2 throughput sometimes surpassing the Ethereum mainnet by up to 600%.

At the start of 2023, the initial Layer 2 Transactions Per Second (TPS) was around 18. Throughout the year, it has continuously increased, and currently, the average TPS is over 60.

The Layer 2 boom is real, and projects can ride the wave with transactions surging faster than ever!

3. Game FI

The global GameFi market, valued at 9 billion USD in 2021, is projected to soar to 90.51 billion USD by 2031, boasting a robust CAGR of 27.13% according to research from Business Research Insights. This burgeoning sector, encompassing NFT and cryptocurrency games, gained significant traction during the COVID-19 pandemic as people sought entertainment at home. In terms of types, the market can be divided into NFT games and cryptocurrency games, with NFT games being the largest segment in terms of products.

Blockchain technology, a cornerstone of GameFi, ensures security against hacking and cheating, setting it apart from traditional games. 

The integration of technologies like the Internet of Things (IoT) and smart grids further solidifies GameFi’s future. GameFi were primarily built on the Ethereum blockchain but is now shifting to other chains such as Immutable X, Ronin, or Solana. This migration is not just a technical adjustment but also a response to challenges related to scalability, aiming to improve the overall gaming experience for both players and collectors.

4. Social FI

The long-anticipated potential of blockchain applications in the social realm has given rise to SocialFi, a term encapsulating the convergence of decentralized finance (DeFi) and social media. In 2023, there was a notable surge in product development within this subsector, with friend.tech specifically capturing the attention of many.

The recognition friend.tech received, particularly from influencers beyond the cryptocurrency space, underscored the promising potential of Web3 social applications. Other noteworthy projects in this domain, such as Farcaster, Lens Protocol, and Binance Square, have also made significant contributions. The year 2024 is poised to be pivotal for SocialFi, determining its ability to gain further traction and shaping the landscape of social interactions on Web3 for the years ahead.

5. Ordinals, Brc-20 & Inscriptions

One of the most noteworthy developments in the Bitcoin space in 2023 has been the introduction of ordinals and inscriptions. The Ordinals protocol, launched at the beginning of the year, revolves around tracking individual satoshis (sats) using what the founder, Casey Rodarmor, terms “Ordinal theory.”

The long-term trend will be NFTs directly attached to blocks with the new Ordinals protocol. Do you remember how crazy Cryptopunks were? Ordinals is still quite primitive, and it will undoubtedly be the foundation for dev in the upcoming wave.

6. RWAs

The on-chain feature of the #RWAs system is that the supply on the exchanges is extremely low, most of them are below 7%

(except for $TRUE 33.35%)

Currently for the #RWAs we have the following niches mainly: 

1. Private Credit: $CFG, $MPL, $GFI, $CPOOL
2. US Treasuries, Stocks: Swarm Market $SMT
3. Tokenize Stocks/Equity for the company: $TRADE, $STBU 
4. Carbon credit, Real Estate: $PRO, $PROPC.

The segment that is attracting the most capital is Private Credit, in addition, the Treasuries niche should also be paid attention to, because this is a beneficial niche for the government, so it will be enthusiastically supported by countries

In the Private Credit segment if comparing pairs: $CFG > $MPL > $GFI > $CPOOL.

Among them, $CPOOL is the project with the lowest cap (53M) with loans and revenue no less than its predecessors. Onchain shows that the majority of team/fund wallets hold tokens (~46.4% are in team/fund wallets, ~20.3% are in staking).

The token supply on the exchange is 6%. There are currently no tokens in the #RWAs reaching a $1B capitalization, so if that happens,

it $CFG likely be the first project to do so. $CPOOL is the project with the lowest cap among the 4 potential projects and has plenty of room for growth.

Long-term capitalization target $3B.

A few lines about the potential of the RWAs array: 

The RWAs segment is expected to reach 16 trillion by 2030 (according to Boston Consulting), the current capitalization of net tokens in RWAs is only about $ 2.1B, compared to the Eth 2.0 Staking segment of $ 23B, ETH staking token is $ 27B. The traditional finance market is keen to approach the decentralized finance market in harmony, governments are very supportive of this, accompanied by the approaching Bitcoin ETF event. Private Credit and Treasuries will be the 2 pioneers in the RWAs.

7. NFT

As we navigate the labyrinth of the NFT market in 2023, it’s clear that it’s not a homogeneous landscape but rather a rich tapestry comprising diverse segments, each with its own characteristics and trends.

– Collectibles:

Collectibles continue to dominate the NFT space, maintaining their supremacy even as the market undergoes subtle changes. Despite a slight decrease from October, the collectibles segment still commands a significant share, representing 75% of the USD trading volume. Similar to a collector carefully managing valuable assets, NFT enthusiasts actively engage in transactions and possess these digital treasures.

– GameFi:

The gaming sector within the NFT space is undergoing a notable transformation. Farming/mining games have proven to be the most active genre on Web3 in 2023. As of November 30, farming and mining games attracted 253K daily active addresses, followed by card games with 178K and “Play-to-Earn” games (M2E) with 166K.

Strategy and shooter games have the fewest players compared to other genres, with these two categories attracting 13K and 6K daily active addresses, respectively. The waning interest may be attributed to a lack of development, with existing games lacking modern gameplay mechanics.

– Metaverse:

The virtual world, commonly referred to as the metaverse, has tripled in quantity in November, creating echoes of the digital resurgence era. Despite this surge, the virtual world accounts for a modest 2% of the traded USD volume. This paradox is intriguing, emphasizing the growing interest in rich digital experiences while hinting at challenges that these virtual worlds face in converting volume into substantial market share.

– Utilities:

NFTs focusing on utilities are emerging as stars in the NFT galaxy, with utility tags becoming particularly popular. The Redbull Velocity Pass, offering exclusive privileges for the Art On Internet (AOI) Engine, garnered attention in November. This trend reflects a shift from purely collectible NFTs to those granting access rights, adding a functional layer to digital assets.

The NFT narrative is evolving, transitioning from a focus on pure collectibles to real-world applications. Virtual real estate transactions, led by Decentraland and The Sandbox, are gaining attention, providing users with tangible assets in the digital realm. Games like Axie Infinity, thriving on a player-owned economy, demonstrate the transformative potential of utility-oriented NFTs, bridging the gap between value in the virtual and real worlds.

8. Meme

Currently, many meme coins are attracting the interest of investors and users in the cryptocurrency community. Here are some of the meme coins that are gaining interest in the market:

• Dogecoin (DOGE): This is the best-known meme coin on the market, created in 2013. Dogecoin was originally born with the idea of being a joke but has since become a popular cryptocurrency with a large price and cap. Check Out the Latest Prices, Charts, and Data of DOGE/USDT
• Shiba Inu (SHIB): This is a new cryptocurrency released in 2020. Shiba Inu is based on the Ethereum platform and is seen as China’s version of Dogecoin. Check Out the Latest Prices, Charts, and Data of SHIB/USDT
• SafeMoon (SAFEMOON): This is a new cryptocurrency released in 2021. SafeMoon is considered a safe and secure cryptocurrency, developed on the Binance Smart Chain platform.
• Akita Inu (AKITA): This is a new cryptocurrency launched in 2021, also developed based on the Ethereum platform. The Akita Inu is seen as a version of the Shiba Inu and the Japanese Dogecoin.
• Pepe Coin (PEPE): It is a meme coin built on the Ethereum (ERC-20) blockchain and launched in 2023. The coin is named after the image of Pepe the Frog, a popular Internet symbol used in the meme community. With its token deflation mechanism and community-focused model, Pepe Coin is attracting special attention from investors and becoming an emerging meme coin with the ambition to replace Dogecoin and Shina Inu.