Bitcoin 2023 Review: Key Trends and Future Outlook

2023 will become one of the most important years in Bitcoin's history. Bitcoin inscriptions have pioneered a whole new concept and sub-market. The Bitcoin Layer 2 networks, sidechains, and scaling solutions have rekindled market interest. Traditional financial markets are beginning to view BTC as a serious asset class, with a dozen spot BTC ETF applications submitted in 2023, and multiple ETFs expected to be approved in early 2024. More importantly, BTC seems to be recovering from the most severe bear market the crypto market has experienced, having withstood the shocks of the collapses of projects like Luna and FTX, emerging stronger. Overall, the current state of Bitcoin is encouraging.

Network Status

In 2023, the various indicators of the Bitcoin network are generally improving:

• Hashrate has reached a historical high, doubling since the beginning of 2022, reflecting an increase in network security and enhanced miner confidence.
• The number of active addresses shows an upward trend, but the growth seems to have stalled at the beginning of 2024.
• The revenue from transaction fees has improved, and inscriptions have brought a new source of fees to the network.
• The inscriptions have caused the average block size to nearly double, leading to severe congestion in the memory pool.
• Small BTC transfers have decreased, with transaction volume dropping to the lowest level since 2020.
• The fee rate multiplier for FRM( has decreased from 80 times to between 12-40 times, but it remains at a relatively high level.

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Main Participants

) exchange

The exchange's BTC balance continues to decline, reaching its lowest level since 2018, reflecting a decrease in users' trust in centralized institutions.

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) miner

In 2023, miners overall hold more BTC than they sell. Miner income mainly comes from block rewards, while fee income remains relatively low. The upcoming halving will have a significant impact on miner income.

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) Institutions and ETFs

In 2023, traditional institutions showed a significant increase in interest in Bitcoin. Several well-known companies applied for spot BTC ETFs and were approved in early 2024, opening the door for substantial capital to enter the Bitcoin market.

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Technological Innovation

) inscription

At the beginning of 2023, Casey Rodarmor launched the inscription technology, allowing arbitrary data to be stored on the Bitcoin network. The market quickly embraced inscriptions, with over 59 million inscriptions already existing by the time of the report's release.

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) BRC20

Anonymous developer Domo proposed a simple token standard BRC20 based on inscriptions, creating a sub-industry with a market value exceeding $1 billion. $ORDI became the first BRC20 token listed on centralized exchanges.

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) Lightning Network

The development of the Lightning Network has stagnated in 2023, but against the backdrop of rising on-chain fees driven by Ordinals, it may find new uses in basic BTC transactions.

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) Other scaling solutions

Bitcoin Rollup and Drivechain scaling solutions have garnered renewed attention.

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2024 Outlook

• The cultural debate sparked by Ordinals may continue until 2025.
• Institutional ETFs bring new capital inflows and market participants to Bitcoin
• Technological innovation and ecological development are expected to continue the positive trend of 2023.

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