Original author:Wintermute
Original compilation: Felix, PANews
The crypto market in 2023 experienced a series of peaks and troughs. It started with a rebound at the beginning of the year, followed by volatility mid-year, culminating in positive market sentiment (driven by expectations of spot ETF approval). At a time when market activity has slowed, the industry narrative has shifted towards Build. Last year, Wintermute focused on expanding its OTC business and developing new products.
Latest milestones include the integration of Wintermute Asia with the CME, a major upgrade to OTC options products, and the development of additional derivatives products. Since its launch last November, Wintermute Asia has seen $210 million in options trading volume, with counterparty demand for the product growing exponentially.
On the occasion of the New Year, Wintermute shares business updates and reflects on some of the trends observed through OTC in 2023.
OTC trading volume increased by more than 400% in the second half of the year as trading volume moved to the OTC
Despite the market downturn in 2023, Wintermute continues to grow across all business verticals. In the spot market, although the total on-site trading volume dropped by about 13% from the first half to the second half, the over-the-counter trading volume increased by more than 400% during the same period.
Although the number of OTC transactions in the first half of 2023 was similar to that in the second half of 2022, there was an initial decrease in OTC transaction volumes in the first half of 2023. This shows that despite the reduction in transaction size, counterparties’ crypto trading strategies remain firm. As the market picked up in the second half of 2023, transaction activity increased significantly, with the number of transactions increasing more than six-fold to over 29 million transactions. During this period, there was the highest single-week OTC volume of over $2 billion.
In 2023 Wintermute offers OTC trading for 206 assets and 495 trading pairs. Below are the overall asset trading trends observed by Wintermute.
Payment-related assets are the most traded cryptocurrency category, behind BTC and ETH
Excluding BTC and ETH (consistently ranked first and second across all periods), payments-related assets have the highest trading volume and market share. The market share of payments-related assets will grow from 13% in the second half of 2022 to 20% in the second half of 2023.
XRP has fueled the growth of payments-related assets in part as a result of the SEC-Ripple ruling.
Other categories for the second half of 2023 include Meme, DeFi and other smart contract platforms. Market share in these categories has remained strong, accounting for 37% in H2 2022 and 38% in H2 2023
L1 and L2 trading volumes continue to grow, with ETH and MATIC leading the way
OTC volume for L1 assets follows the general trend of OTC volumes, falling by about half from the second half of 2022 to the first half of 2023, before surging 350% in the second half of 2023. The largest transaction volume is Ethereum with 68% market share.
It is worth noting that from the second half of 2022 to the second half of 2023, Ethereum’s market dominance is gradually declining.
In the second half of 2023, Solana, Avalanche, Cardano and Polkadot ranked among the top 5 by trading volume. Compared to Ethereum, most other L1 assets remained strong in the first half of 2023, with transaction volume growing, but Polkadot was an exception, with a slight decline in the first half of 2023.
Compared with L1, L2’s trading activity decreased by approximately 30 times, with the largest declines occurring in Polygon, Arbitrum, and Optimism. But overall L2s transaction activity continues to grow, increasing by approximately 160% from the second half of 2022 to the second half of 2023.
DeFi remains strong, with slight market share growth and significant growth in nominal trading volume
Although DeFi’s voluntary transaction volume increased approximately 7 times from the second half of 2022 to the second half of 2023, the market share fell from 16% to 11%. Within DeFi, Yield Farming has the largest trading volume, followed by oracles, lending, and DEX assets.
Yield Farming’s dominance remained strong throughout 2023, accounting for around 35% of overall DeFi trading volume, with nominal trading volume growing more than 9x over the same period.
From the second half of 2022 to the first half of 2023, the trading volume (down by about 30%) and market share (from 11% to 8%) of oracle-related assets declined slightly, but rebounded in the second half of 2023, accounting for 26% of the overall DeFi transaction volume. Mainly to seize DEX asset shares. Although the nominal trading volume of DEX assets increased by more than 3.4 times, its market share in DeFi dropped significantly during the same period (from 31% to 13.5%).
The market share of lending-related assets increased by 10 percentage points from the first half of 2023 to the second half of 2023 (from 13% to 23%).
Notional trading volumes in derivative assets initially surged tenfold from the second half of 2022 to the first half of 2023, with market share growing from 0.6% to 6.9%. But the market share of derivative assets fell to 0.5% in the second half of 2023.
TradFi is back on the scene and shifting to altcoin trading
In terms of the overall trading volume of Crypto Native and TradFi, the market share ratio in the second half of 2022 is 81%: 19%. In the second half of 2023, TradFi reappeared and the ratio adjusted to 72%:28%. This suggests that interest in TradFi is picking up again in the second half of 2023, with this interest expected to continue growing into 2024.
In each period, BTC and ETH dominated trading volume among both TradFi counterparties and Crypto Native counterparties.
But digging deeper can reveal some interesting phenomena. The dominance of BTC and ETH in both counterparty categories was evident in the second half of 2022, with Crypto Natives’ combined volume market share of 82.7% (BTC at 44.9% and ETH at 32.8%) and TradFi’s volume market share is 94% (62% for BTC and 32% for ETH).
This phenomenon changed in the second half of 2023, with BTC and ETH market share falling by more than 15% for both counterparty categories. Crypto Natives has a volume market share of 65.3% (49.9% for BTC and 15.4% for ETH), while TradFi has suffered an even greater decline at 72.1% (50.3% for BTC and 21.8% for ETH). Increasingly, non-Bitcoin, non-Ethereum transaction volumes are growing proportionately, indicating a growing interest in altcoin trading.
These trends indicate that interest in TradFi is not only resurgent, but that its interests are starting to become more diverse.
Outside of BTC and ETH, Solana and Crypto Native counterparties saw the largest volume growth among payment-related assets. In contrast, DeFi-related assets are growing the fastest for TradFi counterparties.
