The report highlights that the total crypto market cap rose by about 50% throughout Q1 2023, from under $800 billion at the start of the quarter to almost $1.2 trillion at the end. Despite the recent increase, the cryptocurrency market still has a long way to go to reach its all-time high, as it is currently down 60% from its peak of almost $3 trillion.
The report attributes the recovery to several factors, including the increased adoption and recognition of Bitcoin as a hedge against inflation and de-dollarization, the net deflation of Ether due to EIP-1559 and ETH 2.0, and the resilience of decentralized exchanges (DEXs) and layer-2 solutions (L2s) amid regulatory uncertainty and scalability challenges.
The report also notes that Bitcoin outperformed most altcoins in Q1 2023, as capital flowed towards its relative safety and away from riskier assets. Bitcoin’s dominance increased from 40% to 46% over the quarter, while Ether’s dominance decreased from 20% to 18%. The report suggests that Bitcoin’s narrative became more topical and tangible amid emerging hyper-narratives around topics such as de-dollarization and hyperinflation, while Ether’s narrative was overshadowed by apprehension regarding the unlocking of staked Ether and a weak NFT market.
The report also covers other aspects of the crypto market, such as stablecoins, NFTs, L1s, L2s, DEXs, centralized exchanges (CEXs), and options volume. The report reveals that the total stablecoin supply decreased by about 10% over the quarter, from $138 billion to $124 billion, indicating a loss of faith in the market and/or anticipation of strong regulatory headwinds. The report also shows that NFT sales volume dropped by 80% over the quarter, from $2.4 billion to $480 million, as interest and demand for digital collectibles waned. The report also compares the performance of different L1s and L2s in terms of transactions, fees, and users, highlighting the trade-offs between security, scalability, and decentralization.
The report concludes by stating that Q1 2023 was an eventful quarter for crypto, marked by high volatility due to a low liquidity environment post-FTX, coupled with a range of factors including regulatory crackdowns, ongoing uncertainty regarding the pace of inflation, and concerns about the stability of the banking system. The report also states that Q2 2023 may bring more surprises and challenges for the crypto market, as well as more opportunities for innovation and adoption.
The full report can be accessed at https://coinmarketcap.com/alexandria/article/coinmarketcap-market-pulse-april-2023