Chainalysis: 2023 Global Cryptocurrency Market Revenue Overview

Original Title: "2023 Cryptocurrency Gains by Country"

Written by: CHAINALYSIS TEAM

Compiled by: Yvonne, Mars Finance

2023 is a year of recovery for the cryptocurrency market. After a challenging 2022, asset prices and market sentiment have improved this year. But how did investors actually perform? In this article, we will share our estimates of cryptocurrency gains in 2023 based on investor interactions with centralized exchanges, including a breakdown of estimated gains by country.

Our Methodology: How We Calculate Cryptocurrency Gains and Estimate Gains by Country

We use on-chain data to estimate investors' cryptocurrency gains, based on the flow of crypto assets in and out of services where crypto assets can be converted to fiat. Specifically, we first measure the on-chain macro flows of a selected group of assets, which account for about 80% of the total market capitalization of all cryptocurrencies, and are traded on major centralized exchanges that provide crypto-to-fiat conversion services. Then, we estimate the collective total gains for each asset by measuring the difference between the dollar value of all withdrawals of that asset and the value of all deposits of that asset. This method is based on the fact that any deposit made into a service that offers offline withdrawal has the potential to be converted into cash, thereby realizing any gains or losses of that asset. While this method is not perfect, it provides us with a robust estimate of the gains of popular assets traded on centralized exchanges.

Once we estimate the gains of users on the crypto assets we track using this method, we allocate these gains to various countries based on each country's share of web traffic to each service's website. This combination of trading data and web traffic is also the same framework we use to calculate the annual global cryptocurrency adoption index.

Estimated Total Cryptocurrency Gains in 2023

Overall, we estimate that all cryptocurrency investors will have a total gain of $37.6 billion in 2023.

While this total is far lower than the $159.7 billion gain during the 2021 bull market, it represents a significant recovery compared to the estimated loss of $127.1 billion in 2022. Interestingly, our estimate of total gains for 2023 is lower than that of 2021, despite similar growth rates in crypto asset prices in both years. One possible explanation is that investors in 2023 are less likely to convert crypto assets into cash, as they expect prices to rise higher, given that prices in 2023 have not exceeded previous historical highs at any point, which is different from 2021.

The cryptocurrency market saw a relatively stable upward trend throughout the year before experiencing two consecutive months of decline in August and September. After that, the gains surged sharply, with the increases in November and December dwarfing those of the previous months.

Estimated Cryptocurrency Gains by Country in 2023

In 2023, the United States leads significantly in cryptocurrency gains, estimated at $9.36 billion. The United Kingdom ranks second, with cryptocurrency gains of approximately $1.39 billion.

Interestingly, we also see that residents of some middle-high and middle-low income countries seem to have achieved excess gains, particularly in Asia, with estimated gains in Vietnam, China, Indonesia, and India all exceeding $1 billion, ranking among the top six countries. We noted in the "2023 Cryptocurrency Geography Report" that countries in these income categories, especially middle-low income countries, have a high adoption rate of cryptocurrencies, maintaining significant resilience even during the recent bear market. Our gain estimates suggest that many investors in these countries have benefited from embracing this asset class.

What Will Happen in 2024?

So far, the positive trends of 2023 have continued into 2024, with the approval of Bitcoin ETFs and increased institutional adoption leading well-known crypto assets like Bitcoin to reach all-time highs. If these trends continue, we may see gains more consistent with those of 2021. As of March 13, Bitcoin has risen 65.4% in 2024, while ETH has increased by 70.2%.