A short while ago, I was reviewing the performance of the crypto market in 2023, and honestly, what happened was quite interesting. If you got into it in the second half of 2022, when everything looked bleak, you’re probably seeing returns you didn’t expect. Now the question everyone is asking is whether things will keep going like that in 2024 and beyond.

The first thing to understand is how this market really works. It’s not just buying and selling—there are many players involved at the same time. There are blockchain projects that create supply, then venture investors who fund from the beginning, whales who move enormous volumes, retail investors like most people, institutional funds that are just now entering, centralized and decentralized exchanges, traditional brokers that had to adapt, and, of course, regulators who are still defining the rules of the game. Each of these players influences how the price moves.

So why did the cryptocurrencies that rose in 2023 perform the way they did? Several factors converged. The first is the Bitcoin halving that was scheduled for April 2024. This isn’t something new, but each time it gets closer, the market starts positioning itself. Bitcoin’s algorithm cuts rewards in half approximately every 4 years, which makes the supply of new tokens scarcer. Historically, after each previous halving, Bitcoin has risen significantly in the months that follow. In the first halving, it climbed to nearly 10x in a year. In the second, around 300%. In the third, more than 500%. So buyers were anticipating that move.

Another important factor was expectations around spot Bitcoin ETFs. Major asset managers—like the largest in the world—were applying to get approval to launch these products. The difference is crucial: a spot ETF requires the managers to buy real Bitcoin, not just futures contracts. That means real demand for assets, not pure speculation.

The AI boom also played a big role. When ChatGPT took off and the stocks of AI companies surged, the crypto market rode that wave as well. There are cryptocurrencies focused on AI that aren’t just simple trading tokens, but utilities for using blockchain-based services. That attracted speculative capital.

But the most obvious factor was the money that flowed in. Crypto market capitalization grew nearly 100% during 2023—we’re talking about almost $750 billion in added value. That doesn’t happen without fresh money coming in that’s willing to pay increasingly higher prices. And if you look at trading volume, it was well above the average, confirming real buying pressure.

Another interesting indicator is open interest in Bitcoin and Ethereum futures. Starting in August 2023, it began to grow notably, which means new participants entered the market or existing ones increased their positions. When you see prices rising alongside higher open interest, it’s a sign of conviction in the move—not just short-term speculation.

So what could happen in 2024? That depends heavily on macroeconomics. If inflation continued to ease and the economy stayed stable, we would likely see central banks pause rate hikes. That would be positive for risk assets, including cryptocurrencies. But if inflation picked up again, monetary authorities could raise rates once more, which would trigger corrections in stocks—but might also make Bitcoin look like an inflation hedge, similar to gold.

As for whether it’s worth investing—well, Bitcoin returned nearly 80% in 2023 versus less than 13% for the S&P 500. Ethereum returned 40%. So yes, the cryptocurrencies that rose in 2023 did a lot better than traditional stock indexes. But you need a strategy, not just FOMO.

My recommendation is always to diversify. Put part of your capital into big cryptocurrencies like Bitcoin and Ethereum for relative stability, and another part into smaller projects with higher growth potential. Then decide whether you want to holdear for the long term, where historically the best returns are, or do short-term trading if you have experience and know how to manage risk.

What became clear in 2023 is that the crypto market has predictable cycles if you understand macro factors and specific events like halvings. It’s not blind speculation—there’s logic behind it. The challenge is identifying when sentiment changes before most people do.