Six charts tell you: Who will be the big winner of cryptocurrency in 2023?

Sure, we love looking at blockchain technology and wondering if all this could one day form the basis for an entirely new digital financial infrastructure. But what about money?

A cornerstone of capitalism is for investors to bet on the emergence of new technologies, and one thing that’s notable about blockchain is that the industry has developed its own market for betting on blockchain winners and losers.

With this in mind, what better way to gauge the performance of the digital asset market in 2023 than with the benchmark CoinDesk Market Index (CMI) and a breakdown of year-to-date returns across industry sectors?

The six charts below highlight some of 2023’s biggest takeaways.

CoinDesk Market Index (CMI) is 5 times higher than the S&P 500 this year

The CoinDesk Market Index (CMI) is CoinDesk’s broadest, most inclusive digital asset market indicator — “the S&P 500 of crypto,” as we like to call it. In the year to Dec. 21, the CMI more than doubled, up 125% to be exact. As the chart above shows, most of this year’s returns came in the first and final quarters; during that period, there was a lot of downturn before the green shoots began to show, bringing a lot of painful anxiety (and layoffs) to the crypto industry. Bitcoin (BTC), the largest cryptocurrency by market cap, outperformed the benchmark, while Ethereum (ETH), the second largest, lagged behind.

CoinDesk Computing Index (CPU) Leads Industry Index Returns

The CoinDesk Computing Index (CPU) led the gains among the CMI sector indices, returning 167% in 2023. The index corresponds to the computing sector in the CoinDesk Digital Asset Classification Standard.

The definition of the industry index is as follows: "The industry index includes projects that aim to enable decentralized sharing, storage, and transmission of data by removing middlemen and ensuring privacy for all users. All projects that aim to collect, transmit, store, and share data and web services in a decentralized manner play a key role in building Web3 infrastructure. This includes on-chain and off-chain data transmission, social data platforms, peer-to-peer secure data transactions, open networks, free-market private computing, and decentralized file storage and file sharing."

The second-best performer among the industry indices was the CoinDesk Currency Index (CCY), which returned 150%. The index includes bitcoin (BTC), ripple (XRP), stellar (XLM) and dogecoin (DOGE).

Injective, RenderToken, Solana Lead CMI Token Returns

Can you say 32x? That’s the return of Injective Protocol’s INJ token (INJ). Injective is a blockchain built for finance that uses Cosmos blockchain technology and claims to be the fastest in Layer 1. In August, we reported on its “2.0” token economics upgrade, “substantially increasing INJ burns every week,” citing a blog post at the time.

RenderToken (RNDR), from Render, a GPU rendering network that migrated from Ethereum to Solana this year, surged 972%. (For its value, RenderToken is the best performer in the best-performing compute space.) Solana’s SOL is up 833%.

In the volatile digital asset markets, there is no guarantee that these gains are deserved or lasting. What is certain is that in 2023 the digital asset markets will re-emerge with the kind of stunning returns and high risks that have historically attracted many traders to the crypto space.

ApeCoin, Luna, DASH, BAL, OMG, ZEC are the biggest losers of CMI in 2023

We don’t have to stress this point too much here; in 2023, the biggest returns may go primarily to bullish crypto traders. But it’s also possible that some lucky or smart managers have managed to short the right projects, so to speak. Some of these projects are already failed, such as Terra’s LUNA (LUNA). Others have lost momentum in the market, such as EthereumPOW’s ETHW (ETHW), which finally achieved the earlier “Shapella” upgrade as the main Ethereum blockchain successfully completed its transition to a proof-of-stake blockchain, which enabled the first staking withdrawals. Ethereum Name Service (ENS) and Zcash’s ZEC (ZEC) represent projects that many crypto analysts still find interesting, but they have had a rough year.

Bitcoin extends its dominance

Sometimes it can be hard for the average investor to really understand this, but many savvy crypto traders actually view Bitcoin (BTC) as a safe bet. So from a risk and reward perspective, the original cryptocurrency has returned 164% for the year as of Dec. 21. (The chart above shows the year-to-date leaders in the CoinDesk Currency Index (CCY).)

XRP (XRP), the payment token used in the Ripple network, is up 83% for the year following an important decision in a pending SEC case.

The XLM (XLM) token from Stellar, which has been preparing throughout the year for its major “Soroban” smart contract upgrade expected to be launched in early 2024, followed closely with a gain of 73%.

CoinDesk Smart Contract Platform (SMT)

Regular readers of The Protocol newsletter will quickly recognize the index: the CoinDesk Smart Contract Platform Index (SMT); it captures the largest core blockchain infrastructure investments outside of bitcoin, including heavyweight Ethereum, as well as the multitude of Layer 1 and Layer 2 blockchain networks that are competing for relevance.

In 2023, the SMT index returned 107%, slightly below the benchmark CMI, at least in part due to the outperformance of Bitcoin, which is not a component of the index.

We’ve already discussed market leaders Injective and Solana. Ethereum’s ETH posted a respectable 87% gain, though the anti-“Flippening” crowd will surely note the huge gap to Bitcoin’s 164%.

Avalanche’s AVAX (AVAX) has seen huge success this year , following a narrative that could gain momentum from institutional blockchain adopters; the project played a leading role in a major concept demonstration conducted by JPMorgan and Apollo.

The Optimism ecosystem’s OP (OP) token gained momentum when Coinbase’s Base, along with several other projects, chose the technology as a template for building new layer 2 networks they wanted to build.

The SKALE token from Skale Network , which describes itself as “an Ethereum-native multi-chain network dedicated to scaling Ethereum DApps through high throughput, fast finality, and zero-gas transactions,” has been a huge success with a 151% increase in 2023.

Polygon’s MATIC token had a more muted performance, up 6.2% — despite being one of the most aggressive projects positioned at the forefront of ethereum’s Layer 2 race and a leader in the adoption of “zero-knowledge” cryptography.

On a relative basis, the Cosmos ecosystem’s ATOM token was also somewhat disappointing, up just 20%, despite its vision of a multi-chain, interoperable blockchain universe that has largely taken hold across the blockchain universe. And the ecosystem has attracted some major projects, including the new Layer 1 blockchain of decentralized derivatives exchange dYdX, which migrated from Ethereum’s Layer 2 network to its previous state.

What will happen to the crypto market in 2024?

What happens next?

But in the case of the cryptocurrency market, historically, the four-yearly Bitcoin halving (like the one expected next year) has driven four-year market cycles. But that history only goes back 14 years.

One area where crypto markets are exactly like traditional markets is this: No one really knows what will happen — everyone is just speculating.

Or as it used to be said about Wall Street stock pitchers: If they tell you to buy, it means they already have.