2023’s Remarkable Surge: The Crypto Market Doubles in Size and Sets the Stage for 2024 Trends
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 minutes to learn more
In a groundbreaking shift, 2023 witnessed the crypto market cap doubling, signaling a definitive end to its dormant phase. As we navigate the evolving landscape, this article delves into the anticipated trends of 2024 and offers comprehensive insights into prominent players like Bitcoin, Ethereum, stablecoins, and beyond.
In 2024’s first half, we expect significant institutional investment in bitcoin, driven by traditional investors’ pent-up interest and favorable macroeconomic conditions. As crypto regulations become clearer, long-term adoption will likely increase. Developers are progressing with real-world applications, and with enhanced user experiences, crypto is moving towards broader mainstream acceptance.
The Next Crypto Cycle
In 2023, our predictions in the Crypto Market Outlook came to fruition as bitcoin dominance surpassed 50% for the first time since April 2021, bolstered by the entry of major financial players and pending bitcoin ETFs. Despite potential 2024 capital shifts, institutional interest in bitcoin is expected to remain strong due to its outperformance of traditional assets. External factors, including US fiscal policies and commercial real estate vulnerabilities, could further bolster bitcoin adoption, especially following the projected April 2024 Bitcoin halving.
New Trading Game
The 2018–19 crypto winter spurred innovations like DeFi and alternative layer-1 networks due to a perceived blockspace shortage. However, by 2021, the anticipated blockspace demand didn’t materialize as expected. Developers shifted focus to web3 infrastructure, emphasizing layer-2 solutions, security, and advanced tech. As dapps rise, the crypto trading scene is changing, highlighting the need for Web3 applications. While some sectors, like payments, draw from Web2 models, unique crypto-native applications are emerging. Success in these areas hinges on leveraging network effects. Analogous to social media’s evolution, savvy investors are eyeing strategic crypto opportunities.
Expectations for the Layer-1 Chain in 2024
Ethereum remains the leading smart contract platform, with 57% of the crypto value and an 18% market cap, second only to BTC. This dominance limits other layer-1 networks, pushing them towards niche sectors like gaming, NFTs, and DeFi. The growth of modular blockchains is evident, as highlighted by Celestia’s 2023 launch, which enhanced on-chain transaction transparency. Additionally, Ethereum-compatible networks are increasingly adopting Ethereum L2 solutions for efficient smart contract execution.
The Possibility of De-Dollarization
Despite ongoing talks of de-dollarization and increasing U.S. debt costs, the USD’s global dominance remains strong. While the USD accounts for 85–90% of global transactions, geopolitical tensions, such as U.S. sanctions on Russia, have prompted nations like France and Brazil to consider settling trade in the Chinese renminbi. While bitcoin is seen as a hedge against volatility, displacing the USD in global finance remains a significant challenge.
2024 Economic Forecast
The likelihood of the US evading a 2024 recession has grown, though it’s not ruled out due to the notably inverted US Treasury yield curve. This resilience stems from robust government spending and domestic manufacturing initiatives, but these may wane by 1Q24, potentially softening the economy under stricter financial conditions. However, recession risks hinge on factors like US banking vulnerabilities or disinflation rates. We’ve observed a declining inflation trend since March 2023, partly due to increasing automation. Yet, demographic shifts, like the exit of baby boomers from employment, could offset this. This economic scenario suggests the Federal Reserve might cut rates by mid-2024. While the first quarter might pose challenges, with potential impacts on assets like crypto, a weaker USD forecast for 2024 could benefit cryptocurrencies, which often correlate with USD movements. Overall, our 2024 market perspective remains optimistic.
Revitalizing Tokenization Trends
Tokenization is reshaping traditional finance, streamlining processes, and enhancing capital efficiency, especially in high-yield environments. In 2023, onchain US Treasury token exposure surged 6x to $786 million, attracting users to non-traditional yield sources. By 2024, tokenization might encompass equities, insurance, and carbon credits, driven by demand for diversified returns. However, regulatory uncertainties and tech integration challenges have steered institutions towards private blockchains, potentially hindering tokenization’s full benefits. Notably, regulatory strides in Singapore, the EU, and the UK, like Singapore’s “Project Guardian” and the EU DLT Pilot regime, signal growing acceptance. Yet, achieving full-scale tokenization will require sustained regulatory alignment and infrastructural advancements.
Blueprint for a Decentralized Tomorrow
In 2024 and beyond, a key focus is the decentralization of tangible resources, particularly through Decentralized Physical Infrastructure Networks (DePIN) and Decentralized Compute (DeComp). Both leverage token incentives to foster resource creation and use. DePIN encourages participants to build infrastructure like energy grids and data storage outside of corporate influence, as exemplified by projects like Akash and Helium. Meanwhile, DeComp harnesses distributed computing for AI tasks, with emerging concepts like zero-knowledge machine learning (ZKML) aiming to enhance AI data privacy. While DePIN offers promising blockchain applications, challenges like initial costs and scalability remain. Investing in this space requires a long-term perspective.
