Cryptocurrency markets began to recover in 2023, with market sentiment and asset prices improving after a rough 2022. Which countries gained the most from crypto last year? Chainalysis shares 2023 estimates of the biggest crypto gains based on traders’ interactions with centralized exchanges.
Calculating the biggest crypto gains
Chainalysis used blockchain data to estimate the profit investors made from cryptocurrency in 2023 based on crypto asset movements in and out of platforms where you can on or off-ramp them into fiat currency. They began by measuring the blockchain, macro-level flows of a select asset group accounting for about four-fifths of the total crypto market cap, which was traded on leading crypto exchanges. Then, they estimated the collective total gains made on each asset category by establishing the differences between the value of all asset deposits and the value of all withdrawals in US dollars.
After they established an approximate value of the gains on crypto assets for users of each platform, analysts distributed the gains to separate countries based on each country’s share of traffic to each platform’s website.
Total gains were $37.6B in 2023
Overall, analysts estimated total gains of $37.6 billion in 2023. In 2024, this amount will be at least triple, considering the gains were $159.7 billion during the 2021 bull market. It is also an impressive step up from 2022, in which investors lost $127.1 billion.
The gains were lower in 2023 than in 2021, although crypto prices grew at similar rates in both years. This could be explained by the fact that investors were less likely to exchange their crypto for fiat last year because they expected prices to rise further, which they did. Bitcoin has passed its all-time high by at least $4,000 this year, and Ethereum is approaching its all-time high and is anticipated to break it soon.
Estimated cryptocurrency gains by country
The US topped the charts for the biggest crypto gains by a long shot last year. US investors pocketed a collective $9.36 billion. The UK came in second with a projected $1.39 billion in crypto gains. A number of developing and lower-middle-income countries also posted record gains. For example, Vietnam, China, Indonesia, Russia, and India all passed $1 billion in estimated gains, placing in the top seven worldwide. South Korea also passed $1 billion. Germany, Turkey, and Argentina gained just under $1 billion, followed by Ukraine, Brazil, and Japan with $0.80-$0.85 billion.
Chainalysis has previously reported that lower middle income countries in particular continued to hold crypto despite the terrible bear market, demonstrating solid cryptocurrency adoption. The analysts believe many investors in those countries have profited a great deal from embracing the asset class.
Biggest crypto gains in 2024?
The positive trends of 2023 have not only carried over into 2024 but exceeded practically all expectations. Bitcoin has performed remarkably after the SEC approved Bitcoin ETFs, leading to higher institutional adoption. If these trends continue, we might see gains like those of 2021.
The SEC is expected to approve spot Ethereum ETFs, which would be excellent news for Ethereum investors in the coming months. At least ten companies, including BlackRock and Fidelity Investments, have applied to bring Ethereum ETFs to market. The SEC must decide on the first batch of spot Ethereum ETF applications in May.
Apart from Bitcoin, Ethereum is the only cryptocurrency whose futures contracts you can trade on the CME, which the CFTC regulates.
However, the first spot Ethereum ETF could be a long time in coming. The first batch of Bitcoin futures ETFs was approved back in October 2021, and the first wave of Ethereum futures ETFs was approved around two years later.
Rising interest rates could be crypto’s death knell
Skyrocketing interest rates were among the main causes of 2022’s crypto winter, leading to a series of crypto bankruptcies and plummeting prices of some of the most popular cryptocurrencies. Interest rates remain at two-decade highs. According to bond market estimates, there is a 63% chance the Fed will start reducing interest rates by June, but a delay might mean a headwind for high-risk assets like crypto.
In a session of the Federal Open Market Committee in January, it emerged the Fed would only decrease rates once it became more confident inflation was receding.
The effect of Bitcoin halving
Historically, Bitcoin prices have plummeted around a year prior to halving, but start rallying for roughly a year after it. Looking at 2024 and beyond, Bitcoin and altcoins seem poised for continued growth. Investors should prepare for this development by staying informed, taking possible regulatory changes into account, and considering the best risk management practices.
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