Cryptocurrency markets had an exciting and eventful year. It was marked by volatility, changes in the regulation landscape as well and trouble with DeFi yields. When it comes to various altcoins, the market was volatile and investor sentiment was too diverse to paint in any broad strokes.
However, the best cryptocurrencies out there, or at least those that have the widest acceptance, have proven to be pretty resilient and are experiencing growth. In this article, we’ll talk about some of the most important insights into market movement and how they’ll affect the future of the industry.
Bitcoin Holds
Bitcoin prices have an oversized role in the market, as Bitcoin is the oldest and most widely used cryptocurrency. Changes in Bitcoin’s marketing position usually affect the whole industry. Drops in Bitcoin value cause investors to doubt crypto in general.
Based on previous experience and detailed market analysis, the cryptocurrency community focuses on $28,000. It’s the pivotal number for Bitcoin value, since when it dips below it, chances are that the whole market may follow.
At this point, meaning during the Q3 of 2023, Bitcoin has managed to stay above the mark. As of the latest update, Bitcoin is trading at $28,366, according to CoinGecko data.
DeFi Sector
The deFi sector has had an interesting quarter that’s worth further analysis. The market for decentralized finance applications of crypto has declined by 13.1 percent. There are at least three main reasons why this has happened.
The overall yields from DeFi have diminished for months now and it’s started to show. The yields are now closer than you would get from traditional investment. The overall environment for cryptocurrency investment tends to be averse to risks and that’s what caused the yields to drop further.
Lastly, ETH is the cryptocurrency most associated with the DeFi sector and it’s been in decline for some time now as well. However, when inspected further the decline isn’t as simple as it seems. Layer-1 protocol Near showed promising growth. Ethereum’s Layer-2 solutions, particularly “Base,” have now recuperated.
Institutional Adoption
Cryptocurrency market value has always been dependent on how well it’s adopted by traditional financial actors and intuitions. It drives confidence in the cryptocurrency market in general and therefore it drives value as well. Recently, there have been several traditional financial institutions adopting the use of cryptocurrency.
Deutsche Bank
Deutsche Bank recently became one of the largest traditional financial institutions to start accepting cryptocurrencies. This is a huge step as it lends more credence to the industry and allows for more traditional regulations in the industry.
Deutsche Bank will, for the first time, be able to hold a limited number of cryptocurrencies for its clients. The same goes for tokenized versions of traditional financial assets. At the same time, the bank doesn’t plan to start trading in cryptocurrencies any time soon.
PayPal
PayPal has introduced a stablecoin of its own. Stablecoins are cryptocurrency coins tied to the value of traditional financial assets. PayPal is one of the biggest names in the world of digital wallets and it’s been trying to get into the cryptocurrency market.
BitPay, the leading cryptocurrency payment processor, added support for PayPal’s new products, as well. PayPal also recently introduced Ripple-affiliated XRP and Dogecoin (DOGE) trading pairs with PayPal’s PYUSD.
Grayscale Lawsuit
Another important milestone in the acceptance of cryptocurrencies came when Grayscale won its lawsuit against the SEC. Grayscale is the world’s largest crypto asset manager. It sued the Exchange Commission (SEC). The Commission rejected Grayscale’s attempt to convert the roughly $17 billion Grayscale Bitcoin Trust (GBTC) into a spot ETF.
The court decided that Grayscale was in the wrong and now there are two options. It can accept Bitcoin or try to reject it on other grounds.
Changes in Regulatory Landscape
Recently there have been a few important changes in the regulatory landscape of the cryptocurrency markets. Crypto investors are always carefully watching for regulatory changes since they can increase or decrease the market value of cryptocurrencies faster than almost any other development. Investors have always been drawn to crypto because of how unregulated and innovative it is. Now, when it’s more strictly regulated and widely accepted – it’s lost some of its charm.
Ripple Lawsuit
Ripple Labs has also sued the SEC for its refusal to allow the sale of Ripple’s digital token XRP on public exchanges. In early July the court decided that this decision was unlawful and that XRP should be traded just like any other financial asset. This October that court has once again ruled this way, leaving the SEC without the right to appeal.
This is an important event for the market as a whole and not just for Ripple Labs. It proves that the courts see cryptocurrencies as similar to traditional and well-regulated financial assets.
CFTC Settles Charges
The Commodity Futures Trading Commission continued its enforcement focus in the digital asset decentralized finance (DeFi) space, by issuing orders and simultaneously filing and settling charges against Opyn, Inc., ZeroEx, Inc., and Deridex, Inc.
The companies didn’t have the proper registration to provide financial services. Some analysts claim that the purpose of this action is to further regulate the DeFi market. There’s a growing need for regulatory agencies to work on providing guidelines for decentralized DeFi platforms. At first, such events will drive investors away from DeFi.
Microstrategy’s Bitcoin Purchase
MicroStrategy is a business intelligence firm and it just made one of the largest Bitcoin purchases ever. On Sept. 25 Microstrategy bought 5,445 BTC. The coins were bought for $147.3 million in cash at an average price of $27,053 per BTC. The aggregate purchase price for MicroStrategy’s total Bitcoin holdings amounts to $4.68 billion.
This is further helped by the fact that Microstrategy has a good year. It had its first profitable quarter since 2020. It’s important to note, however, that this is mostly due to tax relief. Net income of Microstrategy was $2.2 million in the third quarter of 2023. The purchase helped keep Bitcoin’s value over $25.000
Larger Market Movement
Changes in the cryptocurrency market are happening as a part of the larger changes in the financial markets. The US Congress has narrowly avoided the government shutdown, with a stopgap funding bill. This further shows how volatile the market is and how a tense political climate is contributing to it.
On top of that, Fitch downgraded the U.S. credit rating from AAA to AA+. This reflects the problems with the US financial institutions in the past three years. It won’t affect the role of the dollar abroad and at this point, the decision doesn’t affect the bonds market.
What Does It All Mean?
It’s difficult to predict how cryptocurrency markets will change and adapt, as it depends on numerous factors. However, the market movements we mentioned can be used to predict the future trends of the industry. Firstly, the market remains volatile even for the best cryptocurrencies out there, but for altcoins as well.
At the same time, there are more regulations around crypto than ever before. Traditional financial institutions are getting on the crypto market. The decentralized finance sector is also taking a hit, as it’s over-saturated.
It’s all happening at the time when the US credit rating is downgraded and there’s a growing financial crisis. In general, cryptocurrencies are a good investment, but it takes time and effort to study the market, before making purchases.
