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Crypto prices have risen on speculation about new ways to invest in the market. Here’s how these and other factors influence our outlook for crypto in 2024.
ETFs are on the way?
Some Bitcoin (BTC) investors are pinning their hopes on U.S. financial regulators approving a long-debated Bitcoin spot exchange-traded fund (ETF). This would mean that investors could gain exposure to Bitcoin in the US stock market and watch their investment grow when the price of Bitcoin rises and shrink when the price falls.
Glen Goodman, author of The Crypto Trader, believes ETFs will play a big role in the coming months: “This is a big deal because many traditional investors are understandably nervous about buying Bitcoin on unregulated crypto exchanges.” If they do Being able to buy it on a trusted, regulated exchange would encourage many more ordinary people and large fund managers to invest in Bitcoin.
“Blackrock, the world’s largest asset manager, is one of the companies hoping to launch a Bitcoin ETF. “So this is a really big deal, and the price of Bitcoin has been rising in anticipation of a boom in demand.”
While the amount of BTC earned by mining Bitcoin hit a new record in November, the countdown to the next “halving” has now been in its final months.
Bitcoin rewards reached around £34 million this month, surpassing the previous record of £33 million set in May.
But in April 2024, there will be a quadrennial event that will effectively halve the cryptocurrency’s supply rate as the reward miners receive for adding a block to the Bitcoin blockchain will be halved.
From this point on, the current reward will drop from 6.25 BTC to 3.125 BTC, massively reducing the rate at which new coins are minted.
In the 12 months before the last halving in 2020, Bitcoin’s price rose 83%, from around £3,000 to around £5,500, as speculators bet that tightening supply would drive the asset’s value into a kind of self-fulfilling prophecy.
And in the three months following the halving in 2020, the price of Bitcoin rose from £5,052 to £7,411, a 46% increase.
In April of this year, 2023, Bitcoin was trading for around £22,000. At the time of writing (November 2023), one Bitcoin is worth around £29,500.
If current prices were to continue and we saw the same type of rally in 2024 post-halving as we did in 2020, prices could reach £43,000 – a level we have not seen since November 2021.
As crypto assets continue to warm widely beyond Bitcoin, HSBC has partnered with Swiss crypto custody firm Metaco to offer a digital asset custody service.
The service’s focus is on tokenized securities for institutional investors. Tokenized securities are when ownership of a security (e.g. a stock or bond) is realized through the issuance of a token registered on a blockchain.
Once launched in 2024, the service will complement HSBC Orion, the bank’s digital asset issuance platform, as well as its recently launched tokenized physical gold offering.
Increasing regulation and oversight of crypto markets could also be a boon next year, adding more legitimacy to an industry not known for its security.
For example, the UK government recently announced an agreement with 48 countries to address the problem of people using cryptocurrencies to avoid taxes.
As part of the Crypto-Asset Reporting Framework (CARF), crypto platforms must begin sharing taxpayer information with tax authorities. Work to prepare CARF for launch in 2027 will begin in 2024.
Victoria Atkins, UK Treasury Secretary, said: “We will not allow criminals to use crypto to avoid paying their fair share.”
Investors are warming up, inflation is cooling down
The increasing credibility that companies like Blackrock, major banks and regulators are giving to crypto markets appears to be improving investor sentiment. If this continues, crypto could go from strength to strength in 2024.
Fear and greed indices are sometimes used to measure investor sentiment and appetite. Such indices can give us an idea of how investors are likely to trade and what impact this might have on the markets.
The widely cited crypto fear and greed index at alternative.me currently has a value of 69, indicating greed. This is an increase from last month’s Fear Indicator value of 45 and an extended period of fear.
While this is far from an exact science, it could herald a surge in demand that could lead to upward pressure on prices.
The slowing inflation in the US and its impact on interest rates will certainly continue to impact cryptocurrencies in the new year.
On November 14, the Federal Reserve announced that inflation fell to 3.2% in October, compared to 3.7% in September. The value was slightly below expectations and led to a rise in the prices of US stocks and bonds.
With inflation largely contained in the U.S. and interest rates unlikely to rise as a result, the squeeze that characterized much of 2023 may be over, meaning prices could rise.
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