Blockchain analytics firms Chainalysis estimates in a new report that “all crypto investors achieved total gains of $37.6 billion in 2023.”
While this total is much smaller “than the $159.7 billion in gains made during the 2021 bull market, it represents a significant recovery from 2022, which saw estimated losses of $127.1 billion.”
Interestingly, their total gains estimate for 2023 is “lower than 2021, despite crypto asset prices growing at similar rates in each of those two years.”
According to Chainalysis, one possible explanation for this could be that investors in 2023 “were less likely to convert crypto assets into cash, under the expectation that prices would rise even higher given that they didn’t surpass previous all-time highs at any point in 2023, unlike in 2021.”
Crypto gains were relatively “consistent throughout the year before two straight months of losses in August and September. Gains rose sharply after that, with November and December dwarfing all previous months.”
The United States led the way in cryptocurrency gains “by a wide margin in 2023 at an estimated $9.36 billion. The UK placed second with an estimated $1.39 billion in crypto gains.”
So far, the positive trends of 2023 have “carried over into 2024, with notable crypto assets like Bitcoin achieving all-time highs in the wake of Bitcoin ETF approvals and increased institutional adoption. If these trends continue, we may see gains more in line with those we saw in 2021.”
As of March 13, Bitcoin is up 65.4% and Ether is up 70.2% in 2024.
2023 was a year of recovery for cryptocurrency markets, with asset prices and market sentiment improving over the course of the year after a challenging 2022, according to a comprehensive report from Chainalysis.
While commenting on how well did investors actually fare, Chainalysis noted that their 2023 estimates of crypto gains are based “on investors’ interactions with centralized exchanges, including a breakdown of estimated gains by country.”
Chainalysis explains that their methodology determines how they calculate cryptocurrency gains and estimate gains by country.
They claim to use on-chain data “to estimate investors’ cryptocurrency gains based on movements of crypto assets in and out of services where they can be on or off-ramped into fiat currency.”
Specifically, Chainalysis start by “measuring the on-chain, macro-level flows of a select group of assets that account for approximately 80% of total market capitalization for all cryptocurrencies, and which are traded on major centralized exchanges offering crypto-to-fiat conversion.”
Then, Chainalysis estimate “the total, collective gains made on each asset by measuring the differences between the U.S. dollar value of all withdrawals of the asset and the value of all deposits of the asset.”
According to Chainalysis, the methodology rests on the fact that any deposit to “a service offering off-ramping represents a potential conversion into cash, and therefore realization of any gains or losses on the asset.”
While the methodology isn’t perfect, Chainalysis says it gives us a strong estimate of gains “across popular assets traded on centralized exchanges.”
Once Chainalysis estimate gains on crypto assets for users of each service they track using this methodology, they distribute those gains to individual countries “based on the share of web traffic each country represents for each service’s website.”
This combination of transaction data and web traffic is also the same framework they use “to calculate their yearly Global Crypto Adoption Index.”