Bitcoin 2023 Review and Outlook

The year 2023 has been one of both recovery and rebirth for Bitcoin. Against the backdrop of a turbulent global economic environment, Bitcoin has reversed last year's downturn and entered a steady upward trajectory. At the same time, the rapid development of the Ordinals protocol has brought new vitality to the Bitcoin ecosystem. This article comprehensively reviews the development of Bitcoin in 2023 from four dimensions: the trading market, on-chain fundamentals, mining, and applicability.

Main Points

trading market

• Bitcoin's annual increase exceeded 158%, with the coin price rising from $16,500 to over $42,700.
• 87.76% of the chips are in a profitable state, and long-term holders have a higher profit level than short-term holders.
• The correlation between Bitcoin and traditional financial markets is generally low, but there are certain periods of correlation.

On-chain fundamentals

• The number of on-chain transactions for the year increased by 63% to 145 million, but the total transaction volume plummeted to 47.44 million BTC.
• The number of small address holders has significantly increased, and the holding period is trending towards long-term.
• Transaction fees surged by 367.88% to $641 million, with the average transaction cost increasing by 146.41%.

Mining

• The total annual mining revenue exceeded 9.8 billion USD, with an average daily transaction fee ratio of 19.26% in December.
• Mining difficulty increased by 90.35%, average daily hash rate across the network grew by 106.27%
• The annual growth of unit hash rate mining revenue increased by 85.21%

applicability

• The total number of Inscriptions has exceeded 49.46 million, and BRC-20 has become the main growth driver.
• The TVL of Bitcoin DeFi increased from 0.96 million USD to 2.99 million USD, a growth of 211.46%.
• The TVL share of the Lightning Network has decreased from 87.90% to 70.95%, with diversified ecological development.

Market Overview

In 2023, Bitcoin basically recovered from the decline of 2022, with an annual increase of 158.06%. The coin price rose from $16,500 at the beginning of the year to over $42,700 at the end of the year, approaching the level at the beginning of 2022. The upward trend throughout the year was clear and strong, with a daily average price change of only 0.29%.

Bitcoin will experience its fourth halving on April 19, 2024. Historical data shows that halving and coin price increases typically occur simultaneously. Currently, Bitcoin has entered the six-month period before the halving, which is expected to provide momentum for next year's coin price increase.

This year, the Bitcoin futures market has remained active, with the total open interest rising from $6.379 billion at the beginning of the year to $10.463 billion at the end of the year, an increase of 64.02%. However, the leverage ratio has decreased, dropping from 30.67% at the beginning of the year to 20.22% at the end of the year.

The MVRV indicator shows that this year's Bitcoin market price is basically in a state of being overvalued. The proportion of profitable chips has increased from 50.77% at the beginning of the year to 87.76% at the end of the year, with the overall profit situation being much better than last year. The profit level of long-term holders is higher than that of short-term holders, and this advantage is more evident at the end of the year.

Despite the deepening connection with traditional financial markets, the price of Bitcoin has generally not shown a statistical correlation with the Dow Jones Industrial Average and the US Dollar Index this year. Only during certain periods does Bitcoin exhibit a weak positive correlation with the Dow and a weak negative correlation with the Dollar Index.

On-Chain Fundamental Analysis

The number of on-chain active addresses for Bitcoin this year is approximately 948,700, which is a slight increase of 3.51% year-on-year. From the distribution of address balances, addresses holding between 0.001 and 1 BTC account for 97.24% and have seen significant growth. In terms of holding periods, the proportion of long-term holders for more than 2 years has significantly increased, with the share of those holding for 2-3 years rising by 6.7 percentage points.

This year, the number of on-chain transactions has increased, but the total value has decreased. The total number of transactions for the year exceeded 145 million, a year-on-year increase of 63%. However, the total value of transactions was only 47.4498 million BTC, a year-on-year drop of 2547%. This divergence was mainly caused by the explosion of the Ordinals protocol.

Transaction fees have increased significantly, totaling 641 million USD for the year, a year-on-year surge of 367.88%. The average transaction fee is 3.77 USD, up 146.41% year-on-year. The peak transaction fees occurred in May, November, and December, accounting for a total of 70.16% of the annual fee revenue.

Mining Development Status

In 2023, the total revenue from Bitcoin mining was approximately 9.849 billion USD, with a single-month revenue of 1.158 billion USD in November. Throughout the year, mining revenue showed an upward trend, and the proportion of transaction fees also increased, reaching 19.26% of the daily average transaction fees in December.

This year, the mining difficulty has been adjusted 26 times, with 19 increases. The current mining difficulty is approximately 67.31T, a year-on-year increase of 90.35%. The average daily hash rate across the network is about 562.1 EH/s, a year-on-year increase of 106.27%. It's worth noting that this year's hash rate growth is less than the growth in coin price, providing excess profit opportunities for the mining industry.

As of December 22, the daily mining revenue per T hash power under the FPPS model is approximately $0.11. According to statistics, the mining revenue per unit hash power for Bitcoin has increased by 85.21% this year, and overall, mining income is considerable.

Application Layer Development

The rise of the Ordinals protocol brings new opportunities for Bitcoin applications. As of December 19, a total of 49.46 million Inscriptions( have been created. There were two peaks in annual growth, one from late April to mid-September and the other from late October to present. During peak periods, the daily新增 Inscriptions exceeded 400,000 multiple times.

![2023 Bitcoin Annual Report: Coin price rebounded by 158%, total mining revenue exceeded 9.8 billion USD])https://img-cdn.gateio.im/webp-social/moments-e7966fc87acb4be4c823950c5e9f296f.webp(

In terms of type, images and text are the two main forms. In the first quarter, images were predominant, but starting in April, text rapidly became mainstream, closely related to the rise of BRC-20 tokens. Currently, BRC-20 is still maintaining its popularity, and the market for image-based Inscriptions is also gradually developing.

![2023 Bitcoin Annual Report: Coin price rebounded 158%, total mining revenue exceeded 9.8 billion USD])https://img-cdn.gateio.im/webp-social/moments-95f611f0180dbef49ecf9885e11994db.webp(

The TVL of Bitcoin DeFi has increased from $0.96 billion at the beginning of the year to $2.99 billion, a growth of 211.46%. Notably, the proportion of Lightning Network TVL has decreased from 87.90% to 70.95%, indicating that more rapidly growing applications have emerged in the Bitcoin network.

![2023 Bitcoin Annual Report: Coin price rebounded by 158%, total mining revenue exceeded 9.8 billion USD])https://img-cdn.gateio.im/webp-social/moments-b5852aece9a8f18fe658dbc89ec4640a.webp(