Crypto prices have been rallying on speculation about new ways to invest in the market. Here’s how that and other factors shape our outlook for crypto as we approach 2024.
ETFs are go?
Some Bitcoin (BTC) investors are pinning their hopes on US financial regulators approving a long-mooted Bitcoin spot Exchange Traded Fund (ETF). This would mean investors could buy exposure to Bitcoin on the US stock market, watching their investment grow when the Bitcoin price rises and shrink when the price falls.
Glen Goodman, author of The Crypto Trader, thinks ETFs will play a significant role in the coming months: “This is a huge deal because many traditional investors are understandably nervous about buying Bitcoin on unregulated crypto exchanges. If they could buy it on a trusted, regulated stock exchange, it would encourage many ordinary people and prominent fund managers to invest in Bitcoin.
BlackRock is among the companies aiming to introduce a Bitcoin Exchange-Traded Fund (ETF). This represents a significant business opportunity, and the price of Bitcoin has been increasing in anticipation of a surge in demand.
Bitcoin halving
Meanwhile, as the amount of BTC earned from mining Bitcoin set a new record in November, the countdown to the next ‘halving’ is now in its final months.
Bitcoin rewards reached approximately £34 million this month, beating the previous record of £33 million in May.
But April 2024 will mark a once-every-four-year event that effectively halves the rate of the cryptocurrency’s supply as the reward miners earn for adding a block to the Bitcoin blockchain is halved.
From that point, the current reward of 6.25BTC will fall to 3.125BTC, massively reducing the rate at which new coins are minted.
In the 12 months before the last halving in 2020, the price of Bitcoin rose 83% from around £3,000 to roughly £5,500 as speculators bet on the supply squeeze, pushing up the asset’s value in a self-fulfilling prophecy.
And three months after the 2020 halving, the price of Bitcoin went up from £5,052 to £7,411, representing a 46% increase.
In April this year, 2023, Bitcoin traded for around £22,000. As of the time of writing (November 2023), one Bitcoin is valued at approximately £29,500.
If current prices were to hold and we saw the same kind of post-halving rally in 2024 as in 2020, prices could hit £43,000 – levels we haven’t seen since November of 2021.
Token gestures
Reflecting further widespread warming to crypto assets beyond Bitcoin, HSBC has partnered with Swiss crypto safekeeping company Metaco to offer a digital assets custody service.
The service will focus on tokenized securities for institutional investors. Tokenized guards are when ownership of a security (such as an equity or a bond) is materialized through issuing a token registered on a blockchain.
Once launched in 2024, the service will complement HSBC Orion, the bank’s platform for issuing digital assets, and its recently launched offering for tokenized physical gold.
Crime crackdown
The increasing regulation and policing of crypto markets could also be a boon next year, adding more legitimacy to an industry not renowned for safeguarding.
As an illustration, the UK government recently disclosed a pact with 48 nations to address the issue of individuals utilizing cryptocurrencies to evade taxes. In accordance with the Crypto-Asset Reporting Framework (CARF), crypto platforms will be obligated to initiate the sharing of taxpayer information with tax authorities. Work on getting CARF ready for its 2027 launch will begin in 2024.
Victoria Atkins, financial secretary to the UK Treasury, said: “We will not allow criminals to use crypto to avoid paying their fair share.”
Investors are warming up, and inflation is cooling down.
The increasing credibility being lent to crypto markets by Blackrock, significant banks, and regulators boost investor sentiment. Crypto could go from strength to strength in 2024 if this continues.
Fear and greed indices are sometimes used to gauge investor sentiment and appetite. Such an index can give us a sense of how investors are likely to act and the impact that might have on markets.
The widely cited crypto fear and greed index at alternative. I currently have a 69 score, indicating greed. This is up from last month’s fear-indicative score of 45 and a prolonged period of fear.
While far from an exact science, it could foreshadow a surge in demand that might put upward pressure on prices.
The cooling-off of inflation in the US and its implications for interest rates will also affect crypto into the New Year.
On 14 November, the US Federal Reserve announced inflation had fallen to 3.2% in October, down from 3.7% in September. The figure was slightly lower than expected and saw the prices of US stocks and bonds jump.
With inflation tamed mainly in the US and interest rates unlikely to rise. As a result, the squeeze that characterized much of 2023 may be over, which means prices could rise.
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