The crypto industry is showing signs of recovery in 2023 with several promising narratives and metrics emerging. The Osiz Research team highlights key trends to watch in the coming months, including the revival of decentralized finance (DeFi), the rise of non-fungible tokens (NFTs), the increasing adoption of blockchain technology, the development of layer 2 solutions, the growth of the metaverse, and the potential impact of regulatory changes. 

By monitoring these trends, investors and enthusiasts can stay informed and make informed decisions in the dynamic crypto market.

Bitcoin

Bitcoin (BTC) has experienced a remarkable year in 2023, with notable advancements in both the crypto-native and traditional finance spaces. The emergence of the Ordinals protocol introduced innovations like inscriptions, often referred to as "Bitcoin NFTs," gaining popularity. Additionally, the anticipation of spot bitcoin ETF approvals in the U.S. has attracted traditional institutional investors to the cryptocurrency ecosystem. 

As of December 5, 2023, BTC's market capitalization surged by 162% year-over-year, outperforming various assets and indices. Significant developments to watch in 2024 include the Lightning Network's continued growth, regulatory clarity in key jurisdictions, and the potential impact of institutional adoption on market dynamics.

U.S. spot BTC ETF approvals

The SEC has been considering regulated spot bitcoin exchange-traded funds (ETFs) in the U.S. for some time, and 2023 brought positive developments. In August, a court ruled in favor of Grayscale in its dispute with the SEC over converting its Grayscale Bitcoin Trust into a spot BTC ETF. This ruling prompted other major asset managers, such as BlackRock, Fidelity, and Invesco, to file their own spot BTC ETF applications. Currently, 13 spot BTC ETF applications are under SEC review, with deadlines ranging from January to August 2024.

Ordinals and inscriptions

The emergence of ordinals, inscriptions, and BRC-20 tokens has significantly impacted Bitcoin in 2023. Ordinals enable the tracking and inscription of individual satoshis, leading to the creation of "Bitcoin NFTs." BRC-20 tokens, on the other hand, facilitate the deployment, minting, and transferring of fungible tokens on Bitcoin. 

While the market cooled off initially, November saw a resurgence in activity, with over 8.3 million inscriptions. These developments reflect a period of excitement and innovation in the Bitcoin ecosystem as it progresses into 2024.

Stablecoin Supply

The supply of stablecoins is an indicator of the available capital for cryptocurrency investment at any given time, signaling potential buying power. For the first time since Q1 of 2022, the quarterly net change in the supply of the five largest stablecoins by market cap has shifted to positive territory in Q4 of 2023. This development warrants close monitoring in the coming months to determine if it represents a temporary shift or a sustained uptrend.

NFT Volumes

In 2023, NFT trading volumes experienced a steady decline, reaching new yearly lows monthly until October when there was finally an uptick. Bitcoin NFTs were surprisingly the most popular, surpassing Ethereum with over $375 million in trading volume. This surge in November indicates positive market sentiment and a potential NFT market revival. Monitoring these trends in 2024 will be crucial to gauge the market's sustained recovery.

Protocol Fees

The fees generated by top crypto projects offer insight into industry maturation and revenue generation. In 2023, fees steadily increased, with November's fees for the top 20 crypto projects being 88% higher than in January. Ethereum dominates fee generation, surpassing all other protocols. 

Decentralized finance (DeFi) protocols, such as Lido and Uniswap, collectively rank second in fee generation. NFTs also contribute significantly, with OpenSea leading the market. Fee generation indicates sustainable business models, making it an important metric to monitor in 2024 to gauge project success.

Layer 1s

Alternative L1 solutions showed promise in 2023, with some outperforming Ethereum. Solana was a notable performer, with a 56% increase in SOL's market cap in November. Toncoin made progress with a partnership with Telegram. Ethereum enabled staked ETH withdrawals, leading to DeFi markets in liquid staking and LSDFi. BNB Chain launched opBNB and BNB Greenfield.

SocialFi

SocialFi, a convergence of DeFi and social media, experienced a product-driven surge in 2023 with friend.tech garnering significant attention. Generating over $25 million in protocol fees by November, friend.tech's daily activity has slowed down but a full launch is anticipated. The success of friend.tech and other projects like Farcaster, Lens Protocol, and Binance Square, indicate the potential of Web3 social apps. The future of SocialFi will shape social interactions on Web3 in the years to come.

The crypto industry has shown resilience in 2023, with key trends like DeFi, NFTs, and blockchain adoption shaping the landscape. Bitcoin's advancements, especially the Ordinals protocol and potential U.S. spot BTC ETF approvals, indicate a positive trajectory. 

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