Crypto spot volumes dip to 2019 levels as prices seemingly start recovering
Data from CryptoCompare shows that the price of Bitcoin started the first week of 2023 trading close to the $16,700 mark, and throughout it moved up to now trade close to $17,300 as the industry appears to start recovering.
Ethereum’s Ether, the second-largest cryptocurrency by market cap, traded in a similar way, starting the week at $1,200 and quickly moving up to $1,330, where it’s currently trading.
The week started with a report from blockchain security company CertiK, which revealed that December 2022 saw the lowest monthly total for cryptocurrency theft for the past year, with $62.2 million worth of cryptocurrencies stolen.
That report was released shortly before CryptoCompare’s December 2022 Exchange Review, which revealed that total spot trading volumes in crypto in the final month of the year decreased by 48.4% to $544 billion. Top-tier spot volumes, which represent 92.6% of total spot volume, decreased 47.2% to $504 billion, while lower-tier spot volumes decreased 59.7% to $40.2 billion.
The figures mark one of the lowest periods of spot volume recorded since December 2019, and the highest market share Top-Tier exchanges ever recorded. Top-Tier exchanges are determined by the company, which ranks more than 150 global spot exchanges based on a comprehensive methodology that assesses counterparty, operational, trading, and security risks.
The crypto market rout saw Silvergate bank’s clients pull $8.1 billion in deposits during a “crisis of confidence” last year, forcing it to sell assets. The withdrawals came after the collapse of FTX, a Silvergate customer.
Silvergate is a Federal Reserve member bank and is listed on the New York Stock Exchange, and has recently come under heavy pressure as digital asset prices keep tumbling and several large industry players file for bankruptcy.
The week also saw cryptocurrency management firm Valkyrie Investments, one of Grayscale Investment’s rivals, announce a plan to become the sponsor and manager of the Grayscale Bitcoin Trust (GBTC) fund. As part of its plan to sponsor GBTC, the Tennessee-based company also launched a fund to take advantage of its discount to net asset value (NAV).
Crypto industry has strong track record of fighting back, says Bernstein
A report published by AllianceBernstein (aka “Bernstein”) over the week noted that the digital asset market has historically seen strong returns after experiencing “crypto winter,” or periods of market stress.
The report notes that despite a slump in the value of Bitcoin last year, it has still increased in value by up to 60 times since its low in 2014 and roughly five times since its low in 2018. Similarly, Ether has increased in value by 14 times since its low in 2018, despite a 68% decline in value last year.
Per Bernstein, the cryptocurrency industry has a history of recovering from market downturns, and long-term consumer adoption of crypto should continue to be a focus for investors. The firm predicted that the monthly user base of the crypto industry could increase as much as 100 times over time, with gaming, social media, and digital commerce leading the way.
The report came as cryptocurrency prices recovered, but the industry appears to still be winding down, with Digital Currency Group (DCG) shutting down its subsidiary focused on wealth management, HQ Digital, over the “state of the broader economic environment and prolonged crypto winder” over the week.
Similarly, decentralized exchange SushiSwap announced plans to depreciate its lending and launchpad services – Kashi and MISO – over poor design and a lack of resources to maintain the offerings.
Federal agencies release joint statement on digital asset risks
Multiple US federal agencies started off the new year by releasing a joint statement in which they detailed the historical challenges facing crypto, and their efforts to maintain sound banking practices in wake of those challenges.
“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” the agencies stated. Eight specific risks were identified, including fraud, volatility, and market contagion.
The statement came during a week in which the US Department of Justice said it has taken custody of $450 million in Robinhood shares from collapsed crypto exchange FTX, and in which the U.S. Securities and Exchange Commission (SEC) filed a limit objection to Binance US’s proposed $1.02 billion purchase of the assets of bankrupt crypto lender Voyager.
Nasdaq-listed cryptocurrency exchange Coinbase reached a $100 million settlement with the New York Department of Financial Services over the week following investigations into failures to scale its compliance program.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies.