2023 was, by all accounts, a tough year for the crypto industry. January set the tone with a catastrophic low for Solana, owing to its deep relationship with the failed exchange FTX. Solana is a young upstart blockchain, whose meteoric rise in late 2021 was perfectly mirrored by its equally sharp decline twelve months later. The dramatic collapse of FTX and the subsequent arrest of its founder SBF triggered a precipitous drop for $SOL from a $250 all-time-high to just $8 in the opening weeks of 2023. The rest of the market was not far behind. The grandfather crypto, Bitcoin, began the new year at a dismal $16,000 — its worst in 2 years — with the second largest chain Ethereum in equally bad shape at $1,400. None of the “blue chips” would stay in their respective holes for very long, although some had a much longer climb ahead of them.

To complicate things further, February and March saw back-to-back Federal Reserve announcements of additional interest rate hikes. These rate hikes began in early 2022 and eventually settled at the current 5.5% level. The last time interest rates were in a similar range was 17 years prior, in the months leading up to the Global Financial Crisis. Markets everywhere — from stocks to equities to crypto — received the message from the Fed loud and clear: this was not the time to be risk-on. Impeded by those bearish headwinds, Bitcoin could not recover past the $25,000 resistance. Ethereum floundered at the $2,000 level, and would continue to do so for the rest of the year.

In mid-March, a disastrous turn of events saw three US banks — Silvergate, Silicon Valley Bank, and Signature Bank — placed in receivership within weeks of each other. All three were critical to the fund flows of cryptocurrencies based in the States, and their shuttering blindsided the industry. The biggest casualty? The second largest stablecoin in the world and the 6th largest crypto by marketcap, USDC, lost its all-important dollar peg. In what was arguably the longest weekend of 2023, people were faced with the awkward choice of redeeming their USDC tokens at 92-93 cents on the dollar. USDC did eventually recover its peg, in no small part due to the Federal Reserve promising to bailout any other troubled institutions should the need arise.

The global crypto marketcap would tread water for the next 3 months, oscillating between $1.1 and $1.2 trillion. In June, the US SEC would set the stage for the final act of crypto’s turbulent year: in a 168-page document, they filed a criminal case against Binance, the world’s largest crypto exchange and the issuer of $BNB, the 5th largest coin by marketcap. Ironically, the US SEC was also at the heart of that quarter’s local run-up, with $BTC leading a minor rally from $26,000 to $31,000 that began in June and would sustain until early August. The cause for the excitement? New applications for Bitcoin Spot ETFs from major players like Blackrock and Invesco, which if approved, would finally make BTC accessible to the $36T retirement fund market.

In late November, the machinations of US regulators would finally bear fruit: Binance would agree to pay a $4B fine for offering an unlicensed exchange service to US citizens. Its CEO, Changpeng Zhao (known to his fans as “CZ”), would step down as part of the settlement, and turn over the reins to Richard Teng. Although largely unknown to the broader community, Teng had been leading the MENA region for Binance for a number of years, and was amongst other things a former director at the Monetary Authority of Singapore. Unsurprisingly, the markets reeled from this news, with $BNB leading the losers at -20% overnight.

The spot ETF narrative was so powerful that it would continue to drive price rallies for $BTC. A 20% jump in late October and another 18% jump in late November canceled out much of the negative sentiment surrounding CZ’s depature. As of late December, $BTC is sitting at a 190% gain overall for the year. But the real success story was Solana, who many had written off as unsalvageable. In the closing days of 2023, $SOL would break out past the $100 psychological barrier, a 1100% gain from its January price. Other winners included Injective Protocol, a blockchain focusing on financial instrumentation which was at $8 in October and looks to be ending the year at $40, Celestia, a modular blockchain protocol that was jumped from $2 to $12, and Prime, a digital trading card game that’s up nearly 500% year to date.

2024 is a critical year for the crypto industry. Unlike other markets, crypto moves in a 4-year cycle. This involves approximately 2 years of faith-shaking bearish patterns, 1 year of sideways ambivalence, and 1 year of face-melting bull runs. The last 3 cycles — 2012-2015, 2016-2019, and 2020-2023 — have all produced market cap growth spurts in excess of 15x, usually followed by a 75% drawdown. (Historical data can not perfectly forecast the future, of course.)

Although bullish overall, the new year will not be without its upheavals. The Philippine SEC recently announced that it would be working with the National Telecommunications Commission to block public access to Binance. With nearly half of the world’s crypto trading volume on its order book, Binance is easily the most popular destination for Filipino crypto traders. But the SEC reportedly wouldn’t stop there. All other unauthorized exchanges — everyone from eToro to OKX — are potentially on the chopping block as well.

While this regulatory enforcement campaign has proven to be divisive with the general public, it is not entirely without precedent. The US led the way earlier in the year, and the overarching trend going into 2024 appears to favor locally licensed exchanges for each jurisdiction. This pivot will likely curtail the global dominance of international exchanges like Binance, ByBit, and OKX, none of which have fully accrued the cost of compliance in the jurisdictions they serve. The most successful version of this idea is UpBit, the South Korean exchange that is now so popular that its daily volume exceeds $500M. Here in the Philippines, we are positioning our very own GCrypto to be the primary exchange for the crypto-curious. You can find it inside the GInvest suite of products, within the GCash app.

Just as the Internet has woven itself into the very fabric of society over the years, the growth of the blockchain industry will eventually result in the tokenization of all financial instruments. Each cycle brings with it a more ambitious scope: 2014 was just exchanges and wallets, but 2017 introduced the concept of globalized fundraising and the first wave of decentralized finance and governance protocols. 2020 was defined by art, games, and airdrops, which brought an entirely different culture and community to the crypto universe.

2024 meanwhile looks like it could be shaped by several divergent narratives. On one end of the spectrum: real-world assets like nation-state treasury bonds are expected to enter the crypto markets for the first time. On the other: blockchain protocols for decentralizing AI generation and consumption. And in between those extremes, we have games making a comeback, new primary blockchains competing for the Ethereum crown, and a groundbreaking Bitcoin Spot ETF seemingly around the corner. All of this will be happening against a backdrop of easing interest rates, and a main-street investor population hungry for bigger returns.

With nearly every corner of the crypto universe having strong potential this year, discerning how to position your funds will be a challenge. For newcomers, the safest strategy is to restrict your investments to just the top 3 coins by market cap. Currently that means Bitcoin, Ethereum, and BNB. The major coins may not grow as much as the smaller, less established ones, but they also experience smaller drops when the market inevitably slows down.

More advanced investors should focus their energies on understanding one or two crypto investment categories deeply. With so many categories out there, it becomes impractical to research all of them. The areas I’m personally watching closely include infrastructure tokens ($LINK, $FIL, $LDO), web3 games ($RON, $IMX, $PRIME), and young layer-1 chains ($TIA, $SEI, $ALGO). Others may find that their interests lie in the exchange tokens, the NFT ecosystems, the memecoins, the DePIN tokens, or in any number of other areas. The idea is to narrow the scope to ensure a stronger overall investment thesis.

Investing in cryptocurrencies is vastly different from investing in stocks because stocks have no utility outside of the exchange. Cryptocurrencies meanwhile can be used to generate passive yield from liquidity farms, or receive a share of the trading fees in an exchange or marketplace. Holding certain cryptos can make you eligible to receive free airdrops, or allow you to vote on the strategic direction of a protocol. And yes, you can use cryptocurrencies to create other cryptocurrencies. However you decide to get involved in 2024, just know this: trading cryptocurrencies is just the tip of the iceberg.