Cryptocurrency markets had an exciting and eventful year. It was marked by volatility, also changes in the regulatory landscape and problems with DeFi returns. When it comes to various altcoins, the market was volatile and investor sentiment was too diverse to describe in general terms.
However, the best cryptocurrencies that exist, or at least those that have the greatest acceptance, have proven to be quite resilient and are experiencing growth. In this article, we will talk about some of the most important insights about the market movement and how they will affect the future of the industry.
Bitcoin Holds
Bitcoin prices play a very important role in the market as Bitcoin is the oldest and most widely used cryptocurrency. Changes in Bitcoin's marketing position often affect the entire industry. Drops in Bitcoin's value make investors doubt cryptocurrencies in general.
Based on previous experience and detailed market analysis, the cryptocurrency community is focused on $28,000. It is the fundamental number for bitcoin valuesince when it falls below it, the entire market is likely to follow.
At this point, that is, during the third quarter of 2023, Bitcoin has managed to stay above the mark. As of the last update, Bitcoin is trading at $28,366, according to data from CoinGecko.
DeFi Sector
He Fi sector has had an interesting quarter that is worth analyzing further. The market for cryptocurrency decentralized financial applications has decreased by 13.1 percent. There are at least three main reasons why this has happened.
Overall DeFi returns have been declining for months and it has started to show. Returns are now closer to what would be obtained with traditional investing. The general environment for cryptocurrency investing tends to be risk-averse and that is what caused returns to fall further.
Lastly, ETH is the cryptocurrency most associated with the DeFi sector and has also been in decline for some time now. However, when you look deeper, the decline is not as simple as it seems. The Near layer 1 protocol showed promising growth. Ethereum Layer 2 solutions, particularly the โBaseโ ones, have already recovered.
Institutional adoption
The market value of cryptocurrencies has always depended on how well they are adopted by intuitions and traditional financial players. It builds trust in the broader cryptocurrency market and therefore also builds value. Recently, several traditional financial institutions have adopted the use of cryptocurrencies.
German bank
Deutsche Bank recently became one of the largest traditional financial institutions to start accepting cryptocurrencies. This is a great step as it gives more credibility to the industry and allows for more traditional regulations in the industry.
For the first time, Deutsche Bank will 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 does not plan to start trading cryptocurrencies any time soon.
PayPal
PayPal has introduced a own stablecoin. Stablecoins are cryptocurrency currencies pegged to the value of traditional financial assets. PayPal is one of the biggest names in the world of digital wallets and has been trying to enter the cryptocurrency market.
BitPay, the leading cryptocurrency payment processor, also added support for PayPal's new products. PayPal also recently introduced Ripple-affiliated XRP and Dogecoin (DOGE) trading pairs with PayPal's PYUSD.
Grayscale demand
Another major milestone in cryptocurrency acceptance came when Grayscale won its lawsuit against the SEC. Grayscale is the world's largest crypto asset manager. He sued the Stock 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 wrong and now there are two options. You can accept Bitcoin or try to reject it for other reasons.
Changes in the regulatory landscape
There have recently been some major changes to the regulatory landscape of cryptocurrency markets. Cryptocurrency investors are always on the lookout for regulatory changes, as they can increase or decrease the market value of cryptocurrencies faster than almost any other development. Investors have always been attracted to cryptocurrencies because of how unregulated and innovative they are. Now, when it is more strictly regulated and widely accepted, it has lost some of its charm.
Rippled demand
Ripple Labs has also sued the SEC for refusing to allow the sale of Ripple's XRP digital token on public exchanges. In early July, the court decided that this decision was illegal and that XRP should be traded like any other financial asset. This October that court ruled this way again, 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 demonstrates that courts consider cryptocurrencies to be 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, issuing orders and simultaneously filing and resolving charges against Opyn, Inc., ZeroEx, Inc. and Deridex, Inc.
The companies did not have the proper registration to provide financial services. Some analysts claim that the goal of this action is to further regulate the DeFi market. There is a growing need for regulatory agencies to work towards providing guidelines for decentralized DeFi platforms. At first, these types of events will drive investors away from DeFi.
Purchase of Bitcoin by Microstrategy
MicroStrategy is a business intelligence company and just made one of the largest Bitcoin purchases in history. On September 25, Microstrategy purchased 5,445 BTC. The coins were purchased for $147.3 million in cash at an average price of $27,053 per BTC. The aggregate purchase price of MicroStrategy's total Bitcoin holdings amounts to $4.68 billion.
This is further helped by the fact that Microstrategy is having a good year. It had its first profitable quarter since 2020. However, it is important to note that this is mainly due to the tax relief. Microstrategy's net income was $2.2 million in the third quarter of 2023. The purchase helped keep the value of Bitcoin above $25,000.
Greater market movement
The changes in the cryptocurrency market are occurring as part of broader changes in the financial markets. The US Congress has narrowly avoided a government shutdown, with a stopgap funding bill. This further shows how volatile the market is and how a tense political climate contributes to it.
Additionally, Fitch downgraded the US credit rating from AAA to AA+. This reflects the problems with American financial institutions over the past three years. It will not affect the role of the dollar abroad and, at this time, the decision does not affect the bond market.
What does this all mean?
It is 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 future industry trends. First of all, the market remains volatile even for the best cryptocurrencies out there, but also for altcoins.
At the same time, there are more regulations than ever surrounding cryptocurrencies. Traditional financial institutions are entering the cryptocurrency market. The decentralized finance sector is also being affected as it is oversaturated.
All of this is happening at a time when the United States' credit rating is being downgraded and there is a growing financial crisis. Overall, cryptocurrencies are a good investment, but it takes time and effort to study the market before making purchases.
