Fri, 02/23/2024 - 07:16
There's never a dull moment in the cryptocurrency market, is there? After Bitcoin lost 70% of its value in just one year from November 2021 to December 2022, the BTC bears were out in force as talk of a long crypto winter abounded. But what happened next sent the cynics fleeing with their tails well and truly between their legs. From the start of 2023, it's been a seemingly endless bull run for Bitcoin as the original digital currency has smashed key resistance after key resistance to finally break above the major psychological level of $50,000. And it doesn't look like it plans to stop anytime soon. With huge positive factors, such as the upcoming halving and increased institutional adoption following the approval of spot Bitcoin ETFs last month, the sky really is the limit.
As they say, a rising tide lifts all ships, and this is especially true of Bitcoin and the wider cryptocurrency market. Consequently, many other major coins and tokens have also enjoyed a positive trend of late. With one notable exception: Monero. Shooting to fame as a reliable, cheap and fast privacy coin, XMR took the crypto market by storm to match Bitcoin's gains in the last bull run of 2021. But since Binance's delisting and talks of tighter regulation, it's been in virtual freefall. In this piece, we'll take a closer look at the reasons behind these two polar opposite coins differing fortunes and their possible future movements.
It's all coming up Bitcoin
It truly has been a whirlwind year of growth for the OG crypto coin. Since January 2023, Bitcoin has risen from $16,529 to $51,097 as of the time of writing (on 21 February 2024) to record a highly respectable 210% increase. But even more importantly, this time round, the growth was steady and, crucially, based on solid fundamental factors. It wasn't like the 5x in 5-month bubble cycles of 2020 and 2017. These gains were steady and explainable using traditional analysis methods.
First, we had the long-anticipated approval of numerous spot ETF applications by the SEC, which drove the BTC price throughout the whole of last year. There were also other key regulatory milestones, such as the EU's adoption of comprehensive and innovative regulation on markets in crypto assets (MiCA) in June 2023 and high-level discussions in all major crypto focus areas in over 40 countries worldwide, including the Bahamas and Japan.
All of the above helped to push digital currency adoption in 2023 as more and more institutions added Bitcoin to their portfolios. In fact, we saw over $1 billion worth of BTC inflows from institutional investors last year, bringing Bitcoin's market capitalisation to more than $1 trillion for the first time in its history. This is clearly a good sign for HODLERs and those looking for stable returns from crypto and has even helped to drive the prices of most other major currencies like Ethereum, Solana, and Avalanche, though there have been some notable exceptions, as we'll discover.
Everyone's (not) a winner
As we've touched upon already, not all popular digital currencies were able to ride the coattails of Bitcoin this past year. Perhaps the biggest newsmaker amongst these was Monero, the true privacy coin for those who wish to maintain full anonymity in the cryptosphere. Monero uses a unique transaction mixing approach with the help of "ring signatures" and creates one-time addresses to ensure fund transfers are untraceable. It also has super-fast transaction speeds and very low fees. This has made it a darling of darknet merchants, which has understandably drawn the attention of regulators across the world. Countries including Japan, Australia, and the UAE have long been discussing the need to outlaw such anonymous coins precisely for this reason. It all came to a head on 6 January 2024 when Binance announced that it would be delisting XMR, sending its liquidity down to an all-time low of $1.8 million. Having reached a high of north of $170 in December 2023, it suddenly crashed to $105 in the weeks following the news. This was clearly against the grain for the market as a whole.
But what's particularly interesting is what happened next. The actual delisting took place this week, and far from dipping further as many expected, Monero has shocked the pundits in its reaction to the move. It's now up 10% in the space of just a few days and looks set to recoup its losses in the coming weeks. Whether regulators like it or not, Monero certainly has utility, and there's every reason for us to expect further XMR gains as legacy coins like BTC diverge further and further from the “original vision” of cryptocurrencies.
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