2023 Crypto Market Review: A New Journey from Bear to Bull (Part 2)

27 December 21:30

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![](https://gimg2.gateimg.com/image/article/1692587449analysis.jpeg)
## [TL；DR]: 
In 2023, the global crypto market is becoming increasingly regulated. Despite a series of enforcement actions against cryptocurrency, Hong Kong is actively embracing the crypto industry, and the overall trend is that the West is not bright and the East is bright.

<a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> saw a strong rise of 170% throughout the year, continuing to maintain its leading position in the industry. The spillover effect of funds also activated the entire crypto market in the fourth quarter, with AI, DePIN, RWA, and other sectors performing outstandingly.

In 2023, the crypto market experienced a turbulent year, but Gate.io has always maintained a stable development trend. The success of Gate.io proves that in a turbulent market environment, adhering to credibility, innovation, and social responsibility is the key to the success of a crypto trading platform.

(Follow the preceding paragraph)

## Stablecoins
Stablecoins are cryptocurrencies pegged to fiat currencies, typically based on US dollars, euros, or pounds. They are an important tool that can be used for trading, investment, and payment.

In 2023, the Stablecoin market underwent significant changes, mainly reflected in the following aspects:

The supply of Stablecoins first fell and then rose. The total supply of Stablecoins experienced a continuous decline from March 2022 to October 2023, with a monthly growth rate of 3% starting from October.

As of the writing date, the total market value of Stablecoins has rebounded to $130.758B, indicating that investor interest in Stablecoins is returning.
 ![](https://gimg2.gateimg.com/image/article/1703683521img_v3_026h_84db8065-1792-4bc9-8dc5-b2fd8be0bbix.jpg)
Source: DeFilLama
 
<a href="/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a> has issued the most additional shares and further strengthened its dominant position. Starting from the first half of this year, under the influence of regulatory pressure, capital rotation, and a deteriorating issuance environment, the dominant position of popular Stablecoins such as USDC and BUSD has significantly declined. Tether has once again become the largest Stablecoin, with a total supply of over $91B and a market share of 70%.
 ![](https://gimg2.gateimg.com/image/article/1703683551img_v3_026h_610a3a82-7a2d-46c9-ae60-6ebdedef4eix.jpg)
Source: glassnode
 
Decentralized Stablecoins are gradually recovering. In the bear market of 2022, the collapse of TerraUSD (USD) led to a period of silence in the algorithmic Stablecoin market. But in 2023, this situation improved as DeFi lending leader <a href="/price/aave-aave" target="_blank" class="blog_inner_link">Aave</a> pushed for the adoption of its Stablecoin GHO, and the DAII Stablecoin based on the Bitcoin ecosystem was launched at the end of the year. Even the original <a href="/price/terra-luna" target="_blank" class="blog_inner_link">Terra</a> team proposed a 1:1 exchange of UST for new Stablecoins, stirring up market expectations for algorithmic Stablecoins.
 
## In a High-interest Environment, RWA Enters the Field of Vision
RWA (Real World Assets), also known as Real World Assets, refers to assets that exist in the physical world off the chain and are tokenized before being purchased on the chain. These assets include real estate, bonds, commodities, stocks, etc., which are tokenized through blockchain technology, so that holding tokens represents owning corresponding assets in the real world.

The operating principle of RWA is to digitize the management and trading of actual assets through blockchain technology, convert them into tokens or other digital assets, and then use smart contracts to conduct transactions and transfers on the blockchain.
 ![](https://gimg2.gateimg.com/image/article/1703683584img_v3_026h_3f93436c-b40b-448f-a35a-9a1e2eaf43ix.jpg)
Source: PWC
 
Although the idea of tokenizing assets and bringing them onto the chain has been around since 2017, the unique market environment this year has finally led to significant breakthroughs in this field.

In the first half of 2023, with the rise of risk-free interest rates on US bonds and the pessimistic impact of the bear market in the crypto market, people began to seek more stable income channels, thus opening up explosive growth in the RWA track.

Take the treasury bond with the highest acceptance at present as an example, the TVL of treasury bond related RWAs has increased sevenfold this year, soaring from $100 million to $784 million.

According to a recent research report released by Citigroup, it is predicted that by 2030, there will be $4 trillion to $5 trillion in tokenized digital securities, and the trading volume of trade finance based on distributed ledger technology will also reach $1 trillion. This indicates that the RWA market is still in its early stages and has enormous potential for future growth.
 ![](https://gimg2.gateimg.com/image/article/1703683616img_v2_d1092a3b-43b1-46d0-b3d7-4132f027f7ix.jpg)
Source: rwa.xyz
 
In fact, in the crypto industry, RWA has already had some successful cases, such as the commonly used Stablecoins USDT and USDC. These Stablecoins achieve relative price stability by pegging to assets in the real world, providing important value support for the crypto market.

During this year, there were several important RWA track cases worth paying attention to:

Directly purchasing US bonds: MakerDAO is a giant in the DeFi field and is at the forefront of exploring the RWA field. They have attempted both the direct purchase and holding of assets model (MIP65) and the purchase of tokenized RWA model (through Centrifuge). Both of these models combine traditional finance (TradFi) and DeFi, providing new possibilities for the application of RWA.

Selling US Treasury Tokenization Products: In July 2023, <a href="/price/tron-trx" target="_blank" class="blog_inner_link">TRON</a> ecosystem launched the stUSDT product. StUSDT is a Stablecoin based on US treasury bonds, which allows USDT stakers to obtain RWA-based returns.

Real estate tokenization platform: Real estate tokenization - tokenizing partial ownership of real estate, allowing investors to easily invest. Holders not only have partial ownership, but also can receive real estate rental income. For example, RealT is a platform dedicated to real estate tokenization, established in 2019, and has processed over $52 million in real estate tokenization business to date.
 ![](https://gimg2.gateimg.com/image/article/1703683663img_v3_026h_389bceca-19cc-43ff-8e8d-7c33dd9748ix.jpg)
Source: rwa.xyz
 
Overall, the interest of institutions in tokenization will continue, as it has advantages such as capital efficiency, liquidity, and risk management, while traditional companies have a slower transformation and it is still too early to choose potential winners. In addition, the integration and interoperability of tokenization are crucial, otherwise, it will face challenges.

The interest in tokenization reflects the trend of the industry shifting from pure decentralization to centralization and semi-decentralization. With the improvement of the legal framework, tokenized liquidity is expected to be further unlocked.

## L2 Pattern: OP Sings Solo Play, ZK Ready to Launch
The <a href="/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> Layer 2 Scalability Solution is a coverage layer running on top of the existing Ethereum main network infrastructure, with advantages such as scalability, low transaction costs, and interoperability, which is expected to solve many bottlenecks in the industry.

Ethereum L2 mainly includes solutions such as Rollup, Plasma, sidechains, and state channels. This year, L2 projects represented by OP Rollup have taken the lead in occupying market share, while ZK Rollup is expected to explode in 2024.

Rollup: Rollup is currently the most mainstream Ethereum L2 solution, which packages transaction data into smaller bundles and uploads its verification results to the Ethereum main chain. Rollup can be divided into two types: zero knowledge proof (ZKP) Rollup and Optimistic Rollup.

ZKP Rollup: ZKP Rollup uses zero knowledge proof to verify transaction data, which has higher security but is also more expensive.

Optimistic Rollup: ZKP Rollup uses Optimistic to verify transaction data has lower costs, but there is also a risk of fraud.

Plasma: Plasma uses subchains to process transactions, which are independent chains running parallel to the Ethereum main chain and can communicate with the Ethereum main chain through aggregation protocols. For example, Loopering and <a href="/price/omg-network-omg" target="_blank" class="blog_inner_link">OMG Network</a> are both based on Plasma's Ethereum L2 solution, and have also made some updates this year.

Side chain: A side chain is an independent chain that runs parallel to the Ethereum main chain and can communicate with the Ethereum main chain through a bridging protocol. Side chains can independently develop their own consensus mechanisms and economic models, with greater flexibility, represented by <a href="/price/polygon-matic" target="_blank" class="blog_inner_link">Polygon</a>.

Status Channel: A status channel is a protocol that allows two parties to conduct transactions without the participation of the Ethereum main chain. The state channel can improve the efficiency and privacy of transactions, but it requires the establishment of a trust relationship between both parties.

From the data, the Ethereum L2 protocol has made significant progress this year, with TVL climbing from $6B at the beginning of the year to $18.4B at the end of the year, and daily active users exceeding 800000. With the deployment and launch of more L2 solutions next year, the market competition for L2 will become more intense.
 ![](https://gimg2.gateimg.com/image/article/1703683732img_v3_026h_f22e4238-7965-491e-acda-b4da37d152ix.jpg)
Source: L2BEAT
 
The following are the current popular protocols for Ethereum L2 solutions:

Arbitrum: Arbitrum is an Ethereum L2 solution based on Optimal Rollup, with better Optimistic mechanisms and exclusive virtual machines, currently occupying the top market share.

<a href="/price/optimism-op" target="_blank" class="blog_inner_link">Optimism</a>: Optimism is an Ethereum L2 solution based on Optimistic Rollup, which has lower transaction costs and faster transaction speeds; After the launch of OP <a href="/price/stacks-stx" target="_blank" class="blog_inner_link">Stacks</a> this year, the market share of the project has significantly increased and is expected to catch up with Arbitrum.

StarkNet: StarkNet is an Ethereum L2 solution based on ZK Rollup, which is complex to deploy but has faster verification speed and strong scalability.

ZkSync: Compared to Starknet, the implementation of ZKsync is relatively simple, with lower costs and stronger privacy.

In addition, Base is one of the popular L2 networks that has emerged this year. It has become the dark horse of this year with its emergence of the thousandfold Turkish dog coin Bald and the popular social product Friend. tech. The user base and TVL of Base are still growing and have now surpassed ZKSync, with hope for the future.
 ![](https://gimg2.gateimg.com/image/article/1703683804img_v3_026h_1881f4a4-dc86-45ea-8777-ea5547a45aix.jpg)
Source: L2BEAT
 
From the perspective of the competitive landscape, in the L2 battle of 2023, Optimism and Arbitrum will take the lead, both of which have a starting advantage.

Arbitrum has a strong L2 main chain with strong business data, as well as a higher performance Arbitrum nova. With the huge network effect of its L2, it may generate numerous use cases in the gaming and social fields. OP, relying on its early intervention in the one-click chain delivery field and the advantages of institutional collaboration, has occupied a large market share, with a great potential to catch up in terms of ecological freedom, prosperity, and scale.

Overall, although the Ethereum L2 ecosystem has made some progress, it has been squeezed by competition from Bitcoin In_script_ion Ecology and L1 such as <a href="/price/solana-sol" target="_blank" class="blog_inner_link">Solana</a> this year. The Ethereum ecosystem did not dominate the market due to the expected upgrades in Shanghai in April and Cancun in Q4, and the ETH/BTC ratio has also fallen to a multi-year low. However, we believe that with further market recovery in 2024 and the landing of numerous ZK series projects, the L2 sector will become a new narrative focus.

Further review of the crypto market in 2023:

[2023 Crypto Market Review: A New Journey from Bear to Bull (Part 1)](https://www.gate.io/blog_detail/3631/2023-crypto-market-review-a-new-journey-from-bear-to-bull-part-1 "2023 Crypto Market Review: A New Journey from Bear to Bull (Part 1)")

[2023 Crypto Market Review: A New Journey from Bear to Bull (Part 3)](https://www.gate.io/blog_detail/3633/2023-crypto-market-review-a-new-journey-from-bear-to-bull-part-3 "2023 Crypto Market Review: A New Journey from Bear to Bull (Part 3)")

<div class="blog-details-info">
<div>Author:**Carl Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

BTC/USDT -1.76%

ETH/USDT -1.32%

GT/USDT + 0.24%

TL；DR

Stablecoins

In a High-interest Environment, RWA Enters the Field of Vision

L2 Pattern: OP Sings Solo Play, ZK Ready to Launch

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