Apart from BTC and ETH, payment-related assets are the largest category by trading volume, and TradFi will transfer more trading to altcoins.

Author: Wintermute

Translator: Felix, PANews

The 2023 cryptocurrency market experienced a series of peaks and valleys. From the rebound at the beginning of the year to the volatility in the middle of the year, it ultimately ended with an optimistic market sentiment (driven by the expected approval of spot ETFs). When market activity slowed down, the industry narrative shifted to "Build". Last year, Wintermute focused on expanding its OTC business and developing new products.

The latest milestones include the integration of Wintermute Asia with CME, significant upgrades to OTC options products, and the development of more derivative products. Since its launch in November last year, the OTC trading volume of Wintermute Asia has reached 210 million USD, and the demand from counterparties for this product has grown exponentially.

At the beginning of the new year, Wintermute shared its business dynamics and reflected on some trends observed through OTC in 2023.

As trading volume shifts off-exchange, OTC trading volume grew by over 400% in the second half of the year

Despite the market downturn in 2023, all of Wintermute's vertical businesses continued to grow. In the spot market, while the total on-exchange trading volume decreased by about 13% from the first half of the year to the second half, off-exchange trading volume grew by over 400% during the same period.

Although the off-exchange trading volume in the first half of 2023 was initially lower compared to the second half of 2022, it was equivalent to the off-exchange trading volume in the first half of 2022. This indicates that despite the decrease in trading volume, counterparties' strategies for cryptocurrency trading remained firm. With the market warming up in the second half of 2023, trading activity significantly increased, with the number of trades growing by over 6 times, exceeding 29 million transactions. During this period, the highest off-exchange trading volume in a single week exceeded 2 billion USD.

In 2023, Wintermute provided OTC trading for 206 assets and 495 trading pairs. The following are the overall asset trading trends observed by Wintermute.

Payment-related assets are the largest category by trading volume in the cryptocurrency market, second only to BTC and ETH

Excluding BTC and ETH (which consistently maintained the first and second positions), the trading volume and market share of payment-related assets were the highest. The market share of payment-related assets increased from 13% in the second half of 2022 to 20% in the second half of 2023.

As a result of the SEC-Ripple case ruling, XRP to some extent drove the growth of payment-related assets.

Other categories in the second half of 2023 included Meme, DeFi, and other smart contract platforms. These categories maintained strong market shares, accounting for 37% and 38% in the second half of 2022 and 2023, respectively.

L1 and L2 trading volumes continue to grow, with ETH and MATIC leading the way

The off-exchange trading volume of L1 assets followed the overall trend, decreasing by about half from the second half of 2022 to the first half of 2023, and then soaring by 350% in the second half of 2023. Ethereum had the largest trading volume, accounting for 68% of the market share.

It is worth noting that Ethereum's market dominance gradually declined from the second half of 2022 to the second half of 2023.

In the second half of 2023, the trading volumes of Solana, Avalanche, Cardano, and Polkadot ranked in the top 5. Compared to Ethereum, most other L1 assets maintained strong trading volumes in the first half of 2023, with Polkadot being an exception, showing a slight decrease in trading volume.

Compared to L1, L2 trading activity decreased by about 30 times, with Polygon, Arbitrum, and Optimism experiencing the most significant declines. However, overall L2 trading activity continued to grow, increasing by about 160% from the second half of 2022 to the second half of 2023.

DeFi remains strong, with a slight increase in market share and a significant increase in nominal trading volume

Although the nominal trading volume of DeFi increased by about 7 times from the second half of 2022 to the second half of 2023, the market share decreased from 16% to 11%. Within DeFi, Yield Farming had the largest trading volume, followed by oracle, lending, and DEX assets.

Yield Farming maintained a strong dominant position throughout 2023, accounting for around 35% of the overall DeFi trading volume, with a nominal trading volume increasing by over 9 times during the same period.

From the second half of 2022 to the first half of 2023, the trading volume (decreased by about 30%) and market share (decreased from 11% to 8%) of oracle-related assets slightly declined, but rebounded in the second half of 2023, accounting for 26% of the overall DeFi trading volume. This was mainly at the expense of DEX assets. Although the nominal trading volume of DEX assets increased by over 3.4 times, its market share within DeFi significantly decreased during the same period (from 31% to 13.5%).

From the first half of 2023 to the second half, the market share of lending-related assets increased by 10 percentage points (from 13% to 23%).

From the second half of 2022 to the second half of 2023, the nominal trading volume of derivative assets initially soared by 10 times, and the market share increased from 0.6% to 6.9%. However, by the second half of 2023, the market share of derivative assets had dropped to 0.5%.

TradFi is resurging and shifting towards altcoin trading

In terms of the overall trading volume of Crypto Native and TradFi, the market share ratio was 81%:19% in the second half of 2022. In the second half of 2023, TradFi reappeared, adjusting the ratio to 72%:28%. This indicates that TradFi's interest resurged in the second half of 2023, and this interest is expected to continue growing into 2024.

In each period, BTC and ETH dominate the trading volume in both TradFi and Crypto Native counterparties.

However, a closer look reveals some interesting phenomena. In the second half of 2022, the dominance of BTC and ETH in these two counterparties is evident, with the combined trading volume market share of Crypto Natives at 82.7% (BTC at 44.9%, ETH at 32.8%), and TradFi's trading volume market share at 94% (BTC at 62%, ETH at 32%).

This phenomenon changed in the second half of 2023, with the market share of BTC and ETH in both counterparties decreasing by over 15%. The trading volume market share of Crypto Natives is at 65.3% (BTC at 49.9%, ETH at 15.4%), while TradFi experienced a larger decline, at 72.1% (BTC at 50.3%, ETH at 21.8%). The proportionate growth of non-BTC, non-ETH trading volume indicates an increasing market interest in altcoin trading.

These trends indicate that not only is TradFi's interest resurging, but its interest is becoming more diversified.

Apart from BTC and ETH, Solana and payment-related assets saw the fastest growth in trading volume among Crypto Native counterparties. In contrast, for TradFi counterparties, DeFi-related assets saw the fastest growth.

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