Though in the beginning of 2023 there was a ton of fear, uncertainty, and doubt regarding Bitcoin and the cryptocurrency sector as a whole, digital assets have proven to be resilient. After a year of ups and downs, but mostly downs, the cryptocurrency market seems to have begun another bull run, but this time it feels a little different. With regulation coming, issues being put in the rear view mirror, and inflation out of control, Bitcoin and crypto could be in for a wild ride in 2024.
With an exciting 2024 in mind, let’s take a look at the five biggest stories for crypto in 2023. These aren’t necessarily in order of importance, as they’ve all played a role in this year’s price action.
Spot Bitcoin ETF
There is a fair amount of consensus among market experts that a spot Bitcoin ETF will be approved within the next few months. With that in mind, there are also varying estimates in the hundreds of billions of dollars regarding how much new investment money will flow into Bitcoin if and when these ETFs are approved. Bitcoin’s price responded to such rumors over the last few months of 2023, with its price jumping over $40k USD for the first time since April 2022.
The excitement over the potentiality of a spot Bitcoin ETF began with Grayscale’s legal victory over the SEC. The SEC originally rejected Grayscale’s application to turn their GBTC closed-end ETF into an open-ended one on grounds that the products were not “designed to prevent fraudulent and manipulative acts and practices.”
Grayscale then sued the SEC following their decision. Grayscale claimed that the SEC was violating the Securities Exchange Act with “unfair discrimination” against spot Bitcoin ETF issuers. As a result, a judge ordered Grayscale’s petition for review be granted and the SEC’s order to deny the GBTC listing application removed.
The victory for Grayscale helped spur other spot Bitcoin ETF hopefuls to refile their own applications or file new ones. Everyone from BlackRock to Fidelity is looking to get in on the action, and there will likely be a floodgate of ETF filings and/or offerings for other digital assets once Bitcoin gets approved.
Ripple Wins Against SEC
In a similar story to Grayscale, Ripple Labs finally won their legal battle with the SEC in the summer of 2023. This victory proved that XRP was not a security, and thus the SEC had no legal ground to go after Ripple Labs.
Over the years leading up to this decision Ripple had been delisted from many exchanges because it was labeled as a security by the SEC. Following the announcement of the court win, XRP shot up in price, moving from 47 cents USD to over 80 cents USD within 24 hours of the announcement.
The SEC’s appeal regarding their loss has been denied, and they’ve also had to drop charges against Brad Garlinghouse and Christian Larsen, who were two of Ripple’s executives.
In what was the conclusion of perhaps the biggest story of 2022, the Sam Bankman-Fried and FTX Exchange trials came to a close in fall 2023. Though there was a lot of lead up to the trials, they were done relatively quickly, as the trial only took a month from beginning to conviction.
A 12-member jury in federal court convicted SBF on all seven counts after hearing 15 days of testimony. Former Alameda CEO Caroline Ellison (SBF’s ex-girlfriend) along with former FTX executives Gary Wang and Nishad Singh, testified for the prosecution after entering guilty pleas. Their testimony stated that SBF directed them to commit crimes, including helping Alameda loot FTX, along with lying to lenders and investors about the companies’ finances.
Between the FTX trial conclusion and Binance’s settlement with the DOJ (more on this later), there has been somewhat of a cull of “bad” actors within the centralized sector of cryptocurrency. Hopefully this will help cryptocurrency adoption move forward.
Though it has become a bit of an afterthought, the issues that central banks faced in the US and Europe in Spring 2023 were certainly significant.
In early March 2023, Silicon Valley Bank, which was the 20th largest bank in the US, collapsed. Some smaller banks also collapsed. SVB depositors were unable to withdraw funds, while FDIC insurance also failed to cover any depositor with over $250k USD. As a result of the collapse, these banks had to be bailed out. The bailout was extremely similar to what happened during the mortgage crisis of 2008 that spurred the creation of Bitcoin. However, it’s worth noting that this bailout was actually more dollars than the one in 2008, which certainly doesn’t help inflation.
These events showed weakness in the banking system and this caused a loss of faith for some investors. Weaker banks began to face investor scrutiny, resulting in the European bank, Credit Suisse, facing serious issues as well. Credit Suisse had to be merged with UBS (Union Bank of Switzerland).
Though nothing else has come of these banking collapses as of yet, they certainly opened many people’s eyes to the fallibility of the banking system. It also certainly didn’t help the global economic situation that a ton more USD was printed and added to the already out of control US federal budget. Bitcoin certainly went up in price when this all happened, perhaps indicating that some investors have faith in its deflationary nature.
CZ and Binance
Binance is the largest cryptocurrency in the world by trading volume and has been for some time. They’ve faced regulatory scrutiny for almost the entirety of their existence as a company, but it all came to a head in 2023 when the CFTC accused them of illegally providing services to US residents through the non-US version.
Changpeng Zhao, who’s more commonly referred to as CZ, had already been facing scrutiny regarding his exchange’s proof of reserves in the wake of the collapse of FTX Exchange when this new legal trouble came about, and perhaps he began to think it was time for him to move on from the industry.
CZ and Binance have since decided to settle with the US Department of Justice for the no small sum total of $4.3 billion . As part of the settlement, CZ will step down from the company and will remain as an consultant, but not as an official role. Stepping into his shoes to no one’s surprise who has been following Binance for any time is Richard Teng.
Closing Thoughts: 2024 Could Be Even Bigger
It was a meaningful year for cryptocurrency in more ways than one. Though there is still a long way to go to mass adoption, the steps taken this year are in the right direction.
With the new money that is likely to flow into the sector in 2024, it will be incredibly interesting to see what are the top stories when we get to this time next year.