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2023 was a year of recovery for the cryptocurrency market, following the challenging year of 2022. Asset prices and market sentiment improved throughout the year. But how did investors perform? In this article, we'll share our estimates of cryptocurrency returns for 2023 based on investor interactions with centralized exchanges, including a breakdown of estimated returns by country.
Our Approach: Calculating Cryptocurrency Returns and Estimating Returns by Country
We used on-chain data to estimate investors' cryptocurrency returns, based on the flow of assets in and out of services where cryptocurrencies can be converted into or out of fiat currencies. Specifically, we first measured on-chain macro flows of a selected group of assets, representing around 80% of the total market capitalization of all cryptocurrencies, and traded on major centralized exchanges that offer cryptocurrency-to-fiat conversion services. Then, by measuring the difference between the USD value of all withdrawals and the USD value of all deposits for each asset, we estimated the collective total returns for each asset. This method is based on the fact that any deposit made into a service offering offline withdrawal capability has the potential to be converted into cash, thus realizing any gains or losses for that asset. While not perfect, this method provides robust estimates of returns for popular assets traded on centralized exchanges.
Once we estimated the returns for investors using these services, we allocated these returns to individual countries based on each country's share of network traffic on each service's website. This combination of transaction data and network traffic is also the framework we use to calculate our annual Global Cryptocurrency Adoption Index.
Estimated Total Cryptocurrency Returns for 2023
Overall, we estimate that all cryptocurrency investors earned a total of $37.6 billion in returns in 2023.
While this total is far below the $159.7 billion in returns during the bull market period of 2021, it marks a significant recovery from the estimated $127.1 billion in losses in 2022. Interestingly, our estimate of total returns for 2023 is lower than that of 2021, despite similar growth rates in cryptocurrency asset prices between the two years. One possible explanation is that investors in 2023 were less likely to convert cryptocurrency assets into cash, as they anticipated further price increases, given that prices in 2023 never exceeded previous all-time highs, unlike in 2021.
Cryptocurrency Returns by Country in 2023
In 2023, the United States led the way in cryptocurrency returns, with an estimated $9.36 billion. The United Kingdom followed in second place, with cryptocurrency returns of approximately $1.39 billion.
Interestingly, we also observed that residents of some middle- and high-income as well as middle- and low-income countries seemed to achieve outsized returns, especially in Asia. We previously noted in our "2023 Cryptocurrency Geography Report" that countries in these income categories, especially middle- and low-income countries, had high rates of cryptocurrency adoption, maintaining significant resilience even during the recent bear market. Our estimates of returns suggest that many investors in these countries have benefited from adopting this asset class.
What Will Happen in 2024?
So far, the positive trends of 2023 have continued into 2024, with well-known cryptocurrencies like Bitcoin reaching historic highs following the approval of Bitcoin ETFs and increased institutional adoption. If these trends persist, we may see returns more closely aligned with those of 2021. As of March 13th, Bitcoin has risen by 65.4% in 2024, while Ethereum has risen by 70.2%. |
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Post time 29-3-2024 08:27:57