Cryptocurrency Market in 2023: Five Reasons for the Rise and What to Expect in 2024

The Bullish Momentum of 2023 in Numbers

During 2023, those who invested in cryptocurrencies during the 2022 crisis saw significant gains materialize. The CoinDesk Market Index (CMI) grew by 123%, reaching 1,781.12 points, reflecting a market capitalization increase of nearly $750 billion. Bitcoin and Ethereum were the main protagonists, with weights of 62% and 20% respectively in the index.

The numbers speak clearly: the cryptocurrency market in 2023 experienced exponential growth, but this phenomenon was not accidental. Behind this momentum converge multiple macroeconomic, technological, and structural factors that must be understood.

The Five Pillars of Crypto Growth 2023

1. Anticipation of Bitcoin Halving in April 2024

Bitcoin’s protocol halves mining rewards every 210,000 blocks, approximately every four years. This mechanism, known as halving, guarantees a decreasing supply, making the asset progressively scarcer.

History suggests that this event generates significant bullish movements. After the first halving, Bitcoin appreciated 950% in six months and 8,342% in twelve months. The second halving produced increases of 38% and 286% in the same periods. The third, in May 2020, generated increases of 83% and 562%.

Investors, aware of this historical pattern, began to strategically position themselves in the second half of 2023, anticipating that the next halving in 2024 would reproduce similar dynamics. Bitcoin, as the dominant asset, dragged the rest of the crypto ecosystem along.

2. Expectation of a Spot Bitcoin ETF

Unlike the existing Bitcoin ETF, which operates with futures contracts, ongoing applications seek to create products requiring the direct purchase of Bitcoin as the underlying asset. Institutions like BlackRock, the world’s largest asset manager with $9.42 trillion under management, led these requests to the SEC.

If these approvals materialize in 2024, a gateway would open for massive institutional capital to enter the cryptocurrency market, generating unprecedented demand that, combined with the scarcity from halving, could significantly boost prices.

3. The Artificial Intelligence Phenomenon

The boom of ChatGPT and generative AI tools has transformed the technological investment landscape. Companies like Nvidia experienced extraordinary revaluations. In parallel, AI-linked cryptocurrencies emerged as a new investment category, with tokens representing utility in AI services based on blockchain.

This phenomenon expanded speculative interest into the crypto sector, particularly since September 2023, when the AI revolution captured the attention of institutional and retail investors.

4. The Dynamics of Volume and Market Capitalization

Prices do not simply rise because “supply is less than demand.” In reality, prices go up when buyers are willing to pay progressively higher quotes, while sellers abandon their positions amid the bullish surge.

In 2023, the total crypto market capitalization increased by 99.2%. Transaction volume reached $140 trillion, far exceeding the semiannual average of $79 trillion. This data reveals massive fresh capital inflow, combined with a “fear of missing out” (FOMO) on the next bull cycle.

5. Open Interest in Crypto Derivatives

Analysis of open interest in Bitcoin and Ethereum futures reveals the entry of new participants or the increase of positions from existing actors. Bitcoin futures reached 17,321 open contracts, while Ethereum futures hit 6,114.

This simultaneous growth in prices and open interest suggests that the crypto market in 2023 was driven by genuine demand expansion, not just unfounded speculation.

The Actors of the Crypto Ecosystem: Understanding Who Moves the Market

To forecast the future of cryptocurrencies in 2024, it is essential to recognize that the market operates through the interaction of nine main actors:

Projects and developers build the technological foundation. Venture investors fund early stages. Whales (large accumulators) can generate short-term volatility. Retail investors provide steady volume, though higher returns come from long-term strategies. Institutional investors are gradually entering. CEX and DEX provide liquidity. Traditional brokers offer crypto derivatives. Finally, regulatory agencies define the playing framework.

The interaction of these actors determines supply and demand, ultimately shaping price trajectories.

Three Macroeconomic Scenarios for 2024

Scenario 1: Monetary Easing and Recovery

If inflation continues to decline and economic activity stabilizes or improves, central banks are likely to pause rate hikes and begin cuts. This would benefit high-growth stocks, but the relative attractiveness of cryptocurrencies could decrease compared to less volatile options.

Scenario 2: Inflationary Rebound

If inflation picks up again and activity accelerates, rate hikes will resume. In this context, Bitcoin and assets with fixed supply could serve as inflation hedges, while other tokens with unlimited supply would face pressure.

Scenario 3: Stagflation

A slow-growth environment with persistent inflation would put central banks at a crossroads. This scenario is adverse for technology in general, but the search for inflation hedges could favor Bitcoin and the entire crypto market.

Cryptocurrency Investment in 2024: Is It Worth It?

The numbers from 2023 speak for themselves. Bitcoin posted a return of 79.85% (6.3 times higher than the S&P 500), while Ethereum reached 40.45% (3.2 times higher than the S&P 500). Smaller-cap projects generated triple-digit returns.

Yes, investing in cryptocurrencies in 2024 presents significant opportunities, but it requires a rigorous methodology. Diversification among high-cap assets (Bitcoin, Ethereum) and emerging projects with higher multiplier potential is advisable.

HODL Versus Trading

Historical evidence suggests that the best returns come from long-term accumulation strategies (hodl). However, crypto trading allows short-term gains with correspondingly higher risk.

A balanced approach involves reserving a portion of capital for long-term positions and another for trading operations, always managing risk professionally.

Conclusion: The Future Depends on Global Variables

The performance of the cryptocurrency market in 2024 will be conditioned by the balance between fighting inflation and global economic health. Geopolitical factors (conflicts in Ukraine and the Middle East) and political factors (U.S. election cycle) can also have decisive influence.

What seems clear is that the convergence of structural events (halving, possible approval of spot ETFs), and growing institutional interest in digital assets suggest sustained bullish potential. However, macroeconomic risks demand prudence and an investment strategy tailored to individual risk profiles.