Crypto Market Insights 2023 Q3

TI Research

After Q1's surge and Q2's calmness, the overall market in Q3 showed a downward trend. Without the fervor of Bitcoin NFTs and Bitcoin spot ETFs, the market witnessed only a few lukewarm trends and frequent security incidents. So, what major events occurred in Q3, and what impact did they have? Let's review together.

After Q1's surge and Q2's calmness, the overall market in Q3 showed a downward trend. Without the fervor of Bitcoin NFTs and Bitcoin spot ETFs, the market witnessed only a few lukewarm trends and frequent security incidents. We reviewed the significant events and hot tracks in the past quarter, hoping to understand the development trend of the crypto industry better and summarize some patterns to better look forward to the future.

In the third quarter, institutions frequently encountered security incidents. First, there was the Curve crisis and the Balancer vulnerability, which shook the DeFi market. Later, there were issues like the theft of tokens by former team members of PEPE and the leak of private keys from the CoinEx exchange. However, it wasn't all bad news. In July, Ripple achieved its first victory against the SEC. In August, Grayscale won its lawsuit against the SEC, bringing hope to the market. Although these are only temporary triumphs, there is a belief that with the advancement of cryptocurrency legislation and the application for Bitcoin ETFs, a market recovery is just around the corner.

Q3 Crypto Market Cap Declined by 11%, Major Coins All Showed a Downtrend

In 2023 Q3, the total market cap of the crypto market stood at $1.08T, marking an 11% decrease. Bitcoin's market cap was $512B, experiencing a 14% decline, while Ethereum's market cap reached $190B, reflecting an 18% decrease. Simultaneously, both Bitcoin and Ethereum saw their market share drop for the first time this year, with decreases of 3.8% and 7.8%, respectively. Altcoins beyond the top 50, however, performed slightly better, with a 20% increase in market cap and a 35% rise in market share.

As the frenzy around Bitcoin Ordinals and Bitcoin ETF waned, the BTC price receded from $30,000 to approximately $26,000.

This quarter, spot market trading volumes continued their decline. It is projected that September's trading volume will be less than $300B, a drop of over 40% compared to the beginning of the year's $700B.

At the End of Q3, the Stablecoin Market Cap Dropped 2.5% to $124.3B from the Start-of-Quarter's $128.5B

At the end of Q3 2023, the total market cap of stablecoins was $124.3B, a decline of 2.5% from the beginning of the quarter's $128.5B.

The mcap of USDP, BUSD, and FRAX saw significant drops, decreasing by 50.7%, 43%, and 33.2% respectively. Conversely, the mcaps of DAI and TUSD experienced considerable growth, increasing by 25.8% and 15% respectively.

BUSD, a stablecoin issued by Paxos and promoted by Binance, saw its market cap continuously plummet due to the increasing regulatory pressure on Binance by the U.S. government.

In July, in a bid to attract funds, MakerDAO temporarily raised the interest rate for DAI, reaching a peak of 8%. Under these incentive policies, DAI's market cap surpassed $5B for the first time since April.

RWA Sector Market Cap Grew by Approximately 60%, with RWA Loan Issuance Increasing 77% and Tokenized US Treasury Bonds Surging 452%

Lending is currently one of the best-performing sectors in the RWA domain, providing new financing methods for small and medium-sized enterprises and offering higher returns for DeFi users.

As of Sep 24, 2023, a total of 1,748 loans were issued in the market, valued at $4.4B. The outstanding loan value stood at $555.8M, an increase of 77% since the beginning of the year. The average interest rate for these loans was 9.94%, generally higher than the yield of non-RWA lending.

With the continuous interest rate hikes by the Federal Reserve, the yields on U.S. government bonds have become attractive. Tokenized treasury bonds offer on-chain users a new investment option. Currently, the average yield for on-chain tokenized government bonds stands at 5.25%, while the yield for stablecoin lending on Aave V2 (Ethereum) ranges from 3.5% to 4.5%.

Curve Suffered a Network Attack, Losing $73.5M, with its Market Cap Declining 82% From its Peak

At the end of July 2023, due to issues with the Vyper compiler, Curve was attacked by hackers, resulting in a loss of $73.5M.

This incident not only exposed the security issues of Curve but also highlighted CRV’s concentrated holdings and Curve founder Michael Egorov's high-leverage lending.

Since the project's inception in 2020, Egorov has consistently used CRV for borrowing and lending on other DeFi platforms. As of Aug 1, 2023, Egorov had collateralized a total of 428M CRV (accounting for 47% of the then circulating supply) to borrow nearly $100M in stablecoins. Of these, his position on Aave was the largest, with 305M CRV (representing 34.3% of the circulating supply).

On September 28, 2023, according to the latest news from Lookonchain, Michael Egorov had repaid all debts on Aave. Now, Egorov has a collateral of 253.67M CRV (worth $132.52M) across four platforms and holds a debt of $42.7M. For details, refer to the news: Lookonchain: Curve founder Michael Egorov clears all debts on Aave.

Currently, the amount of CRV held and collateralized by Egorov has significantly decreased, but most of these positions have merely been transferred to other large holders.

Following its Mainnet Launch, Base Sees Rapid Growth, Surpassing the On-chain Activity of Optimism and Arbitrum

An increasing number of projects are utilizing the OP Stack to build Layer2 networks, with Base emerging as a prominent leader, attracting widespread attention.

Since the launch of the Base mainnet, both the number of traders and transactions have seen rapid growth. As of September 24th, the number of unique user addresses on Base exceeded 26M.

Furthermore, Base's surge in popularity has also impacted the activity levels of other Layer2 networks. In September, the average daily transaction count on Base surpassed 0.8M, while the transaction counts for Optimism and Arbitrum saw a decline, recording 0.5M and 0.4M, respectively.

Despite the market's downward volatility, risks and opportunities always go hand in hand. This quarter, a series of fluctuations reminded us that security and risk management are always the focus for investors. Although there's short-term uncertainty, with regulations being put into place and the upcoming results of ETF applications, the future we're looking forward to might just be around the corner.

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