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It’s fair to argue that 2023 will be remembered as a watershed year for Bitcoin, one marked by increased attention from mainstream investors and a seismic shift in the perception of digital assets. Once viewed as a speculative novelty, Bitcoin has evolved into a popular component of diversified portfolios, drawing interest from global financial institutions.

Insights from an ASX study last year highlighted this changing perception. It revealed that 15% of Australian investors already owned cryptocurrency, with nearly 30% considering investing in the future. This growing affinity for digital assets, led by Bitcoin, mirrors the year’s positive market trends and signals a key shift in global investment trends.

Despite challenging economic conditions, 2023 has been a standout year for Bitcoin, particularly in comparison to the previous year. Understanding the drivers behind Bitcoin’s growth over the past year is essential for investors considering adding crypto assets to their portfolio.

How Has Bitcoin Performed in 2023?

Just two years ago, Bitcoin surged to an all-time high of $US69,000 per coin, but 12 months later it was a different story and 2022 proved to be a catastrophic year for the crypto industry. The Terra Luna collapse and Sam Bankman-Fried’s FTX exchange meltdown—which resulted in billions of losses for investors—rattled confidence in crypto.

Bitcoin began 2023 just above $US16,000, but began to rise again as the year progressed, surprising many investors who had declared the crypto market dead. At the beginning of December, it was at a 12-month high of $US45,000.

Ironically, confidence in Bitcoin was bolstered by the failure of more mainstream investments, including the collapse of Silicon Valley Bank (SVB), which intensified the discussion around peer-to-peer currencies and decentralisation. As investors sought greater transparency after the apparent failure of the safe-as-houses traditional banking framework, Bitcoin became more attractive as alternative investment.

The momentum continued throughout the year, and the coin received a further bump with news of BlackRock’s BTC exchange-traded fund (ETF) application (and the ensuing wave of institutional interest in the crypto market).

Bitcoin’s ascent from $US16,000 to nearly $US45,000 within a single year, represents a remarkable 180% gain and underscores its potential for resilience even in the face of significant global headwinds.

Major Bitcoin Movements and Announcements

Several significant catalysts influenced Bitcoin’s price throughout the year. These include:

The Collapse of Silicon Valley Bank

The collapse of Silicon Valley Bank (SVB) stands out as a pivotal event that brought crypto back into the limelight after the 2022 bear market. SVB, ranked the 18th largest bank in the US, was plunged into turmoil after a sell-off in US Treasuries, leading to substantial unrealised losses within the banking sector. This incident illustrated the risks inherent in the fractional reserve banking system, where customer deposits are lent to borrowers, leaving only a fraction available for withdrawal.

The situation deteriorated further when SVB announced a substantial loss on its US Treasury and government bond holdings, leading to a sharp drop in customer confidence. A classic bank run ensued, with depositors withdrawing $US42 billion in a single day before it collapsed. US regulators stepped in to manage the crisis, but many customers’ faith in regulated banks was shaken.

The banking failure also underscored the critical advantage of decentralised currencies. The benefits of Bitcoin’s decentralised set-up and its capability for self-custody of funds became the narrative that helped drive the price of BTC up to over $US30,000 in April, and carried throughout 2023.

SEC Suits Against Binance and Coinbase

However, not all events this year have been positive for Bitcoin’s price. The US Securities and Exchange Commission (SEC) lawsuits against Binance and Coinbase, for example, have weighed heavily on the price of BTC and contributed to periodic slumps.

In June 2023, the SEC accused Binance and Coinbase of offering unregistered securities to the public, among other allegations. This legal action came amid ongoing debates regarding classifying cryptocurrencies—whether they are securities, commodities, or something else entirely. The suits specifically targeted 19 tokens, including major players such as Solana (SOL), Cardano (ADA), and Polygon (MATIC), which cast uncertainty over their status.

The crypto market plunged, as a result, with many coins experiencing double-digit drops in value over the following week. This was not entirely unexpected, as the SEC had previously issued a Wells Notice to Coinbase, signalling potential enforcement action. Binance, on the other hand, had been under the SEC’s scrutiny for years, particularly concerning its BNB token and the BUSD stablecoin.

In November, Binance pleaded guilty to a criminal charge and agreed to $US4.3 billion in fines to resolve a long-running Department of Justice investigation. Binance’s founder and CEO, Changpeng Zhao, also pleaded guilty to violating criminal US anti-money laundering rules and agreed to resign.

This case is unrelated to the SEC investigation. The SEC has indicated that it intends to use Binance’s guilty plea as further evidence for their own case.

While these lawsuits do not directly affect Bitcoin, which rebounded quickly after the initial announcement, the fact that the two largest crypto exchanges are being sued by the SEC has undeniably dampened investor sentiment during 2023.

BlackRock Dives Into Crypto

In June, shortly after the SEC lawsuits against Coinbase and Binance, investment company BlackRock’s iShares unit filed paperwork with the US Securities and Exchange Commission (SEC) to form the iShares Bitcoin Trust for a spot Bitcoin ETF. The proposed ETF was a notable step, especially considering the SEC’s history of rejecting other spot Bitcoin ETF applications from companies such as Grayscale, VanEck, and WisdomTree.

BlackRock’s stature and influence in the financial world, coupled with CEO Larry Fink’s political clout, positioned this filing in a different light compared to previous attempts by other firms. The spot Bitcoin ETF filing received attention not just for its potential to provide a regulated investment vehicle for Bitcoin but also for the market integrity and transparency standards it promised.

The announcement was also a breath of fresh air for the crypto industry, which was reeling from the regulatory crackdowns at that time. BTC received a noticeable boost in value following the news, with the price of Bitcoin rising to just shy of $US26,000.

This positive trend was reinforced in October when the proposed ticker for BlackRock’s spot Bitcoin ETF appeared on the Depository Trust & Clearing Corp.’s (DTCC) website. Although the inclusion of the ticker does not indicate imminent regulatory approval, its presence was interpreted by crypto traders as a sign of progress.

The market responded quickly, with Bitcoin’s price shooting to $US35,000 soon after the news.

Has Bitcoin outperformed equities so far this year?

While Bitcoin has performed well over the course of the year, there are many other assets that have put in strong performances over the course of 2023, with many markets leaving the bear market of 2022 behind them, despite challenging economic conditions.

Bitcoin’s 180% rise from January to December beat most other assets by a notable margin. However, some individual equities outperformed Bitcoin by a significant amount.

Here’s a comparison to put Bitcoin’s performance into perspective against popular market indices and individual stocks as of 13th December 2023:

While both Nvidia and Coinbase, among other individual stocks, outperformed Bitcoin, it’s worth noting that they both are linked to BTC. Coinbase is one of the largest crypto exchanges, and NVIDIA is the largest producer of dedicated Bitcoin-mining GPUs. This highlights a symbiotic relationship, where the success of Bitcoin and other cryptocurrencies directly influences the performance of crypto-adjacent companies.

Looking ahead, the anticipated Bitcoin halving event next year adds another layer of potential growth. Historically, such events have catalysed bullish trends in the cryptocurrency market, and this upcoming development bodes well for Bitcoin’s trajectory in 2024.