The cryptocurrency market has had a strong start to 2023, with Bitcoin (BTC) and decentralized finance (DeFi) protocols leading the way in market capitalization gains. This is according to the first quarterly Crypto Industry Report published by CoinGecko on April 18th.
BTC emerged as the top-performing asset of Q1 2023, with a 72.4% gain in market capitalization, outperforming traditional assets like the NASDAQ index and Gold, which marked 15.7% and 8.4% gains, respectively. The report highlights that all major asset classes saw gains through the first quarter of the year, except for crude oil, which dropped by 6.1%. This decline was attributed to United States inflation data, which cited a reduction in oil demand and the ill effects of the U.S. banking crisis.
The overall cryptocurrency market capitalization reached $1.2 trillion at the end of Q1, marking a 48.9% gain of $406 billion from the cryptocurrency market cap of $829 billion at the end of 2022. The DeFi space was another standout performer, rising by $29.6 billion in value through the first quarter. The report cites the impressive performance of liquid staking governance tokens, which saw a 210% increase in market cap since the start of 2023.
Ethereum’s Shapella upgrade played a major role in driving the increase of capital flows into liquid staking pools, with the network’s upgrade finally unlocking ETH staking reward withdrawals. The report notes that liquid staking is now the third largest category in the DeFi sector. While Bitcoin and DeFi have been major movers thus far this year, the top 15 stablecoins saw their market cap drop by $6.2 billion. CoinGecko attributes this 4.5% drop in market cap to the shutdown of Binance USD by Paxos and the momentary depeg of USD Coin (USDC) during the collapse of Silicon Valley Bank in March 2023.
Tether (USDT) strengthened its position as the largest stablecoin by market cap in 2023, adding $13.6 billion since the start of the year, while USDC and BUSD recorded market cap losses of 26.9% and 54.5%, respectively. Non-fungible token (NFT) trading volume has also surged again in 2023, marking a 68% rise from Q4 2022 to $4.5 billion during the first quarter of 2023. NFT marketplace newcomer Blur accounted for the majority of NFT trading volume since its launch in October 2022, accounting for 71.8% of the NFT market share in March 2023.
Cryptocurrency enthusiasts have been keeping a keen eye on the market as Bitcoin and other digital assets continue to outperform traditional assets. The rise of DeFi protocols and liquid staking governance tokens has also been a notable trend in the industry, with Ethereum’s Shapella upgrade playing a significant role in driving capital flows into the DeFi space.
While the cryptocurrency market has seen significant gains in the first quarter of 2023, it remains to be seen how the market will perform in the coming months. As always, investors are advised to exercise caution and do their due diligence before investing in any digital assets.