A recent study suggests that there are good prospects for the crypto markets in 2024.
The key should be the ETFs on Bitcoin spot, capable of attracting significant capital that was previously unable to access the crypto markets.
Summary
The research: the outlook of the crypto markets for 2024
The research was conducted by Todd Groth, who believes that we are currently in a transitional phase of the market, with the reaffirmation of institutional demand, the exit from the crypto winter, and expectations of interest rate cuts in the USA.
Groth’s analysis obviously focuses on 2023 to try to identify which trends could be significant in the crypto markets in 2024.
Regarding the just-ended year, Groth emphasizes that 2023 has been a true transitional year for the crypto markets, due to the burst of the bubble that had inflated in 2021.
However, with the end of the crypto winter, the market now has greater interoperability between protocols and projects, and developers can rely on regulated institutional investors to give their crypto projects greater utility in the real world.
It also underlines how there has been a change among the major market operators, with FTX disappearing, Binance losing market share, and Coinbase emerging. It also highlights how trading volumes of crypto derivative products on traditional exchanges, such as the CME in Chicago, are growing, to the point of surpassing those on Binance in terms of open interest on BTC futures.
Obviously, it also mentions the numerous requests for approval of ETFs on Bitcoin spot, including the one from BlackRock.
The crypto markets
According to Groth, the crypto market would have become a bit more mature compared to the past, to the point that there would be a transition towards a more institutional context.
In fact, 2023 has been very different from 2022, and the entry of real institutions like BlackRock in 2024 could greatly shift the balance towards a more mature and institutionalized form of the crypto markets.
On the contrary, according to Groth, the ongoing transition and the expansion of the ecosystem towards more traditional and regulated investors should constitute the core of the narrative for the next market cycle that will begin with the April halving.
In particular, it points out how in 2023 the trend of crypto markets has been quite uncorrelated with traditional stock exchanges. Even the volatility has been lower compared to the previous two years.
This leads to believe that indeed the crypto markets may have matured a little, with a particularity regarding Bitcoin that makes us understand the increasing role of financial institutions in this market.
In fact, ETH in 2023 had an overall level of volatility similar to BTC, while historically it had a higher return of 20% during post-bear market rebounds. Moreover, Bitcoin’s volatility has further decreased, becoming similar to that of some stocks, thus aligning more with traditional asset classes.
The change, in short, has been evident.
The year 2024
This trend is expected to continue throughout 2024, especially after the launch of Bitcoin spot ETFs on traditional markets.
Furthermore, in the coming months the Fed should start cutting rates, and the two things combined should be a good omen for the crypto markets.
The hypothesis reported by Groth is that the demand for BTC and ETH as liquid alternatives to traditional bonds could be growing, becoming an unprecedented source of price appreciation.
Moreover, the analyst believes it is unlikely that a strong sell the news will occur after the release of the final news of the approval of Bitcoin spot ETFs, stating that a similar event should be absorbed in the medium term.
The key point is precisely the access to crypto markets allowed by ETFs to new investors who have so far been effectively excluded, such as registered investment advisors (RIA), pension funds, and hedge funds.
The current AUM managed by RIAs is approximately 128,000 trillion dollars, so assuming an allocation of 1% or 2% on digital assets through ETFs on crypto markets, new capital could reach from 1,000 to 2,500 trillion dollars.
However, it must be remembered that these are funds that will be attracted first by BTC, and then by ETH, but hardly by other cryptocurrencies, for which it is not yet known if anyone has applied for the issuance of spot ETFs in the USA.
All of this is in addition to the hypothesis that, in case of economic problems in the second half of the year, central banks may once again be forced to inject liquidity into the markets, thus favoring investments and speculation in cryptocurrencies.
All of this leads Groth to affirm not only that the crypto winter is now over, but also that its ecosystem is now decidedly more robust compared to the previous cycle, and with a more favorable narrative.
