Crypto Market Forecast: Top Trends That Will Affect Crypto in 2024

Regulation and oversight

Cryptocurrencies have been operating in a gray area since their inception, not quite meeting the definition of a security, but not qualifying as a commodity either. Lack of oversight enabled malicious actors to take advantage of market participants, leading to billion-dollar losses over the years and prompting the US Securities and Exchange Commission (SEC) to up the ante, cracking down hard on digital asset exchanges and providers.

Nevertheless, crypto is an innovative industry that has continued to inspire interest, and the SEC’s involvement in regulation has indeed resulted in more widespread, institutional adoption of certain tokens and has attracted more investors to the space. Analysts see this trend continuing into 2024.

The recent settlement between the US Department of Justice and Binance, a cryptocurrency exchange accused by the SEC of listing unregistered securities, has given sector participants reassurance, according to Matteo Greco, a research analyst at Fineqia International.

And the growing interest in cryptocurrency is not limited to just Bitcoin and Ethereum anymore. Other cryptocurrencies, referred to as altcoins, are gaining more traction in the market as investors and traders explore the potential of a diverse range of digital assets.

While Bitcoin and Ethereum will more than likely remain the dominant two, Ripple’s XRP, along with Solana and Pi Coin, are attracting interest from institutions and individual investors alike. Pi Coin is designed so that anyone can mine or distribute tokens on a smartphone, and Solana is becoming popular among developers due to its rapid transaction speeds and low fees. There are even some analysts predicting that Ether could be the top performer in 2024 following the Protodanksharding upgrade happening sometime in the first quarter.

“Another noteworthy trend (in 2023) was the burgeoning collaboration between prominent traditional finance entities and the digital asset space,” said Greco. “Traditional finance businesses are actively exploring the capabilities and advantages offered by blockchain technology, endeavoring to formulate business strategies around its application. This trend is poised to remain a pivotal factor in the years to come.”

HSBC’s (NYSE:HSBC) collaboration with Metaco, a Swiss-based blockchain company acquired by Ripple in May, is one example of this. On November 8, HSBC issued a press release announcing that it will be using Harmonize, an institutional platform provided by Metaco, as a digital custody service for clients who wish to invest in tokenized securities. According to CoinDesk, this news signaled to many XRP supporters that financial institutions could one day adopt the XRP token.

Spot Bitcoin ETFs

The introduction of physically backed spot Bitcoin ETFs in the US could be a major catalyst in driving the growth and development of the cryptocurrency ecosystem, by bringing greater liquidity, transparency, and accessibility to the market for investors and traders of all levels.

After initially resisting the idea, the SEC appears to be warming up to the possibility of approving spot Bitcoin ETFs, with many industry experts predicting that multiple applications will be approved by the January 10 deadline for 21Shares’ and ARK Investment’s ETF proposals.

“Certainly, within the initial 10 days of the year, the approval or rejection of the ETFs Spot BTC filings will already mark a significant milestone for 2024,” said Greco.

Greg Taylor, chief investment officer at Purpose Investments, also hopes for approval and believes like many do, that it is likely. “The best thing that has to happen with (crypto) is just building up the ecosystem. So getting more custodians up in place, getting more providers and exchanges trading, I think is going to go a long way. Having Fidelity involved, and having different players like Blackrock getting involved — it just can’t be understated just how important that is, because then we’re getting more seriously regulated companies involved. Building up the ecosystem to fit within that environment is a huge win and should help everything,” he said.

Increased use of blockchain technology

Precedence Research discovered that the market for blockchain technology will be worth an estimated US$2,334.46 billion by 2032, achieving a compound annual growth rate of 85.7 percent between 2023 and 2032. As blockchain technology continues to evolve and mature, we can expect to see even more industries embracing its potential in 2024, from streamlining supply chain management to enhancing cybersecurity and enabling new forms of asset ownership and exchange.

Blockchain technology is paving the way for new possibilities, particularly in the tokenization of real-world assets (RWAs). Through tokenization, blockchain technology and RWAs have the potential to increase the safety and security of assets by providing a more secure infrastructure for asset management.

“However, with central banks expected to lower interest rates (in 2024), this narrative may lose its momentum. I anticipate a shift toward tokenizing other assets like stocks, bonds, real estate, cars and more gaining substantial momentum.”

Bitcoin halving

The Bitcoin halving event is a scheduled reduction in the amount of newly created bitcoins rewarded to miners that takes place every four years. This event is highly anticipated, and many are speculating about the impact that the 2024 halving will have, especially in light of the cryptocurrency’s recent rally.

“The Bitcoin halving has always been a significant event for the market. However, with approximately 93 percent of the BTC supply already in circulation, the event’s impact has evolved,” said Greco.

“In the past, when mining rewards were high, the halving strongly influenced token inflation, driving prices higher through the dynamics of supply and demand. Now, with lower rewards and most of the supply already generated, the halving’s impact is more closely tied to miners and, consequently, the protocol’s security.”

Miners will need to upgrade their hardware and improve energy efficiency to optimize their operations with a reduced reward rate. Historically, the halving event has been marked by boom and bust cycles leading up to and preceding the event. The 2024 halving likely won’t be any different.

Investor takeaway

The crypto industry has come a long way since its inception, with increased regulation and oversight leading to a more stable and trustworthy landscape. The potential for increased use of blockchain technology and the likely implementation of spot Bitcoin ETFs are significant developments that could further accelerate the growth and legitimacy of the crypto market.

Looking ahead, Taylor said, “2023 has been a year that I think has surprised people across the board with the strength in the technology stocks and the NASDAQ. And I think the crypto market has a lot of parallels to that. A lot of people had written off a lot of the risk in technology sectors in 2022. I think 2023 is going to be a good year as we’ve kind of gotten through that. It seems like it’s been a good, positive outcome to advance prices higher, and 2024 should be something we can build off of that, then take it higher.”

As we head into 2024, it’s clear that the interest in cryptocurrencies and blockchain technology is not limited to just Bitcoin and Ethereum anymore, and the growing collaboration between traditional finance entities and the digital asset space is poised to remain a pivotal factor in the years to come.