Bitcoin Sees 156% Surge in 2023 as Spot ETF Potential Drives Sentiment, Ethereum Pushes Forward With Robust 2024 Roadmap, Interest Rate Outlook Complicated by Strong Jobs Report, Arbitrum and Sei Start 2024 on the Rise

Takeaways

• Bitcoin gains 156% in 2023: Bitcoin (BTC) managed to close out 2023 with an impressive 156% gain, rising from ~$16k to over $42k as the leading crypto asset regained credibility following numerous high profile collapses in the previous year. Throughout the second half of 2023, BTC prices generated strong momentum as confidence grew around the possible approval of a US-based spot Bitcoin ETF.
• Despite volatile start to 2024 and negative ETF report, bitcoin remains in the $43k-$44k range: Anticipation of the coming spot bitcoin ETF decision (expected by January 10) was palpable on Wednesday, as BTC abruptly fell more than 10% following dissemination of a Matrixport report suggesting that the SEC could reject all pending ETF applications. As the story developed, there was no source to suggest that a decision to reject the ETFs had been made, and with most evidence so far suggesting there will be an approval announcement before the deadline next week, BTC bounced back to the $44k level.
• Ethereum co-founder Vitalik Buterin shares a robust 2024 roadmap: Ethereum will continue its focus on its six main priorities: the Merge, the Surge, the Scourge, the Verge, the Purge and the Splurge. With the approval of a US-based spot bitcoin ETF potentially days away, some market participants are already eyeing up a potential ether ETF this summer as the next catalyst for the second most popular crypto.
• Interest rates expected to fall in 2024, but strong jobs report may delay rate cuts: Minutes from the Fed’s December meeting showed that rates are most likely at their peak with nearly all officials predicting lower rates in 2024. There appears to be disagreement, however, on how long rates will stay at the current elevated levels. On Friday, the final jobs report of 2023 showed that employers added 216,000 jobs in December, well above expectations, and potentially complicating the outlook for a rate cut early in 2024.
• Sei and Arbitrum outperform to start 2024: SEI, the Sei Network’s governance token, is trading up +25% over the past seven days and reached a new all time high above $0.80 as the network continues to see growing adoption. Arbitrum (ARB) was another outperformer this week, gaining +28% over the past seven days, with the token briefly crossing the $2 mark.

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Bitcoin Surges 156% in 2023

Bitcoin (BTC) managed to close out 2023 with an impressive 156% gain, rising from ~$16k to over $42k as the leading crypto asset regained credibility following numerous high profile collapses in the previous year.

Throughout the second half of 2023, BTC prices generated strong momentum as confidence grew around the possible approval of a US-based spot bitcoin ETF. As the January 10 deadline approaches for the US Securities and Exchange Commission (SEC) to approve or reject a spot Bitcoin ETF, market participants are on edge waiting for any news that could point to how the SEC will rule.

Bitcoin Declines 10% on Bitcoin ETF Rejection Report, Pares Losses as Market Awaits ETF Decision

The anticipation was palpable on Wednesday when a Matrixport report sent to clients suggested that the SEC could reject all spot bitcoin ETF applications. Although the report was an opinion piece by a Matrixport analyst, a large sell-off ensued following the dissemination of the report and circulation across news outlets. The decline was exacerbated by the large amount of leverage built up in the market over the new year, with funding rates on perpetuals rising to over 50% annualized at one point. BTC dropped over 10% in less than two hours, from ~$45.3k to ~$40.6k as a cascade of liquidations took place.

According to Coinglass data, there was ~$700 million worth of liquidations on Wednesday, with bitcoin accounting for ~$168 million of this and ether $113 million. As the story developed, there was no source to suggest that a decision to reject the ETFs had been made, and with most evidence so far suggesting there will be an approval announcement before the deadline next week, the price of bitcoin bounced back off its lows returning to the $43.5k level.

Ethereum Priorities Remain Largely Unchanged in Updated 2024 Roadmap

Last weekend, Ethereum co-founder Vitalik Buterin shared a 2024 roadmap for the Ethereum blockchain, with a continued focus on six major priorities: the Merge, the Surge, the Scourge, the Verge, the Purge and the Splurge. The Block provided a summary of what each of these priorities entail: “the Merge (a robust proof-of-stake consensus), the Surge (a goal of 100,000 transactions per second across Ethereum and its Layer 2 networks), the Scourge (mitigating risks around MEV and liquid pooling), the Verge (easier block verification), the Purge (simplifying the protocol), and the Splurge (everything else).”

The price of ether (ETH) showed momentum in the first half of 2023, peaking in April at ~$2140 as the much anticipated Shanghai upgrade was completed, allowing users to withdraw staked ETH for the first time. Since then, ETH has been largely overshadowed by BTC and has struggled to find a strong narrative to push its price higher, only moving past its April high in December.

Notably, other Layer-1 blockchains such as Solana (SOL), Injective (INJ), and Avalanche (AVAX) have surged recently, adding to the frustration of some ETH proponents as the token remained in the $2,200-$2,400 range.

With the approval of a US-based spot bitcoin ETF potentially days away, some market participants are already eyeing up a potential ether ETF this summer as the next catalyst for the second most popular crypto.

Interest Rates Likely to Come Down in 2024, But Strong Jobs Data Complicates Outlook

Minutes from the latest Federal Reserve policy meeting were released on Wednesday. They showed that rates are most likely at their peak and nearly all officials are predicting lower rates in 2024.

There appears to be more disagreement, however, on how long rates will stay at these elevated levels, with some officials warning that rates could stay high for longer than anticipated. On Friday, the final jobs report of 2023 showed that employers added 216,000 jobs in December, well above expectations, and potentially complicating the outlook for a rate cut early in 2024.

Stocks faced a shaky start to the year with major US indices facing declines in the first trading days of the year. Some of the notable outperformers of 2023 faced a challenging start in the first trading days of the year, with fintech names particularly hit.

Oil prices have been rising as geopolitical tensions in the Middle East have continued to weigh on markets. An explosion at a ceremony in Iran, along with the shipping disruptions in the Red Sea, the escalation of Israel's war with Hamas following the killing of the Hamas deputy leader, and a shutdown of Libya’s top oilfield could all lead to major disruption to global oil supplies.

Sei and Arbitrum Surge to Start 2024 as Many DeFi Tokens Struggle

Despite a large number of tokens facing double digit declines this week, some have managed to buck the trend and post significant gains amongst the market troubles.

SEI, the Sei Network’s governance, is trading up +25% over the past seven days and reached a new all time high above $0.80 as the network continues to see growing adoption. The price rise follows similar large jumps we have seen across other Layer-1 blockchains in recent months, including Solana (SOL) and Avalanche (AVAX).

Arbitrum (ARB) was another outperformer this week, gaining +28% over the past seven days, with the token briefly crossing the $2 mark. Total Value Locked (TVL) on the network has been steadily rising since October, crossing $2.5 billion this week, narrowly stopping short of its all time high of $2.6 billion reached in November 2021. On-chain volumes on the network also skyrocketed on Wednesday to $1.8 billion, roughly double the volume on Solana.

-From the Gemini Trading Desk