Crypto in 2024: Key insights and projections
Key takeaways
- The macro landscape has improved, with a recovery in US stocks and a cooling of inflation and the job market.
- We expect two or three interest rate cuts in H2 2024 and the S&P 500 at $4,450–$5,500 throughout the year.
- ETF optimism, Grayscale’s legal victory, Binance’s settlement, and the SBF trial contributed to positive crypto sentiment in 2023. Other factors included the launch of PayPal USD and Coinbase’s blockchain.
- In 2024, spot Bitcoin ETFs may appear in the US and China.
- The next Bitcoin halving in April 2024 should act as a bullish catalyst.
- Ethereum’s EIP-4844 will boost speed and convenience while slashing gas fees.
- New FASB standards will ensure more transparent crypto accounting and disclosure.
- BTC is likely to trade at $32K–$85K, with $55K–$60K in Q1.
- ETH is projected to move between $1,850 and $7,000.
Macroeconomics: 2023 and beyond
Over a year ago, on October 13, 2022, the bear market reached its bottom. Since then, we have seen a robust bullish phase. The S&P 500 has grown by over 30%. The NASDAQ, thanks to the AI boom, has gained over 50%. Given the high inflation, these results are quite remarkable.
The MegaCap-8 stocks, the critical driver of growth in 2023, may well continue rising. This category includes Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Netflix, NVIDIA, and Tesla.
Meanwhile, the Federal Reserve has made significant progress in taming inflation. The PCE price index, which peaked at 6.8% in July 2022, fell to 2.6% in December 2023.
The Fed’s second primary goal is job market cooling. In terms of unemployment, we have seen stable dynamics at under 4% (3.4–3.9%) since March 2022.
The changes in inflation and unemployment confirm that the soft landing policy is working. Concerns about a looming recession, which spread in early 2023, are now alleviated.
The same approach should persist in 2024. The fed funds rate rose through the first half of 2023, reaching 5.25–5.5%, and the pause shows that the Fed is nearing its 2% inflation target. Furthermore, reductions are highly likely. The market expects six rate cuts throughout the year.
Our team is more conservative in its estimates, expecting two or three cuts in the second half of 2024. This means the S&P 500 should be confined to the $4,450–5,500 range this year.
Crypto market sentiment in 2023: Growth drivers
After a crushing 2022, when a wave of collapses triggered the harshest crypto winter, 2023 brought many positive developments.
Bitcoin ETF applications
In 2023, over a dozen firms — including BlackRock, WisdomTree, and Valkyrie — filed for spot Bitcoin ETFs. The expectations of approval have been a solid supporting factor for Bitcoin. According to Bloomberg Intelligence, the SEC may give the green light as early as January 10.
These exchange-traded funds unlock investment in the coin without direct ownership. Thus, they could impact the market structure through lower barriers to exposure. At present, US investors may only buy Bitcoin futures ETFs — agreements to buy or sell the coin later for an agreed-upon price.
The regulator has previously rejected all such products, citing market manipulation risks. By late December, the asset managers’ discussions with the SEC had progressed to technical details, which implies a positive future outcome.
Launch of PayPal USD (PYUSD)
In August, the global payments giant PayPal unveiled its stablecoin PayPal USD (PYUSD). The token, redeemable for USD at 1:1, is backed by US dollar deposits, short-term US treasuries, and cash equivalents. It aims to address the emerging “potential to transform payments in web3 and digital native environments through a fully backed, regulated stablecoin.”
In November, PayPal registered as a crypto services provider with the Financial Conduct Authority (FCA), the UK regulator. It may now advertize crypto services to local customers under the regulations that took effect on October 8. However, the company has also received a subpoena from the SEC related to PYUSD.
Coinbase’s Base blockchain
In August, Coinbase launched the public mainnet for its Layer-2 blockchain — Base. It offers faster and cheaper transactions than Ethereum, enhancing the decentralized applications (Dapps) built on it. Base is fully compatible with the Ethereum Virtual Machine (EVM) and integrated with Coinbase products and services.
Like other L2 rollups, Base relieves congestion on Ethereum. It also improves Dapp efficiency and supports more user-friendly experiences. The backing of Coinbase, the largest publicly traded US crypto exchange, gives it a significant advantage.
Grayscale vs. the SEC
In October, Grayscale secured a court victory over the SEC. The ruling orders the regulator to reconsider the company’s application to convert its Grayscale Bitcoin Trust (GBTC) to a spot ETF. Its rejection was characterized as “arbitrary and capricious.”
The outcome of this case, closely watched by the industry, triggered a brief Bitcoin rise of nearly 7%. Now, Grayscale’s application is among the 12 ETFs to be approved or rejected by January 10. Some experts see approval as a political necessity enabling the SEC to cement its role as a crypto regulator.
SBF trial
In November, the former CEO of the FTX exchange was found guilty on seven criminal counts, including defrauding customers and investors. This involved conspiring to funnel over $8B from FTX to the Alameda Research trading firm.
The amount was then spent on real estate in the Bahamas, startup investments, and political donations. Sam Bankman-Fried now faces up to 120 years in prison, and the sentencing should come in March 2024.
The prosecutors have decided to forego the second trial, citing intense public interest in a prompt resolution. Some experts interpret the outcome positively, as crypto’s ugly chapter is now in the rearview mirror.
Binance deal and CZ’s departure
November 2023 also brought another high-profile case involving a CEX. Binance CEO Changpeng Zhao stepped down after pleading guilty to violating the Bank Secrecy Act. The exchange reached a $4.3B settlement with the SEC and agreed to pay another $2.7B to the CFTC.
That deal finalized a years-long investigation, eliminating the “potential systemic risk emanating from a hypothetical Binance collapse,” according to JPMorgan Chase.
Despite the exposure of Binance’s flaws as a CEX, the settlement could catalyze regulatory clarity for the industry. In the EU, it was interpreted as a strong case for implementing the MiCA legislation in 2024. The effects on the market were only fleeting — most of the top 100 quickly rebounded.
What to expect in 2024
#1 Bitcoin ETF listings in US and China
By January 10, the SEC is expected to decide on all 12 spot ETF applications. Find out more about the possible effects in our Santa Claus rally guide.
As of today, Goldman Sachs is negotiating with BlackRock and Grayscale to become an authorized participant (AP) for their Bitcoin ETFs. This role involves creating and redeeming ETF shares to guarantee that the products accurately track the underlying assets.
Another Wall Street giant, JPMorgan Chase, has already taken on the AP job for some of the companies seeking the SEC’s approval.
Meanwhile, the Hong Kong Securities and Futures Commission has approved two local models for spot Bitcoin ETFs. The first one — “in-kind” — allows the exchange of BTC for ETF shares and the redemption of shares for BTC. Meanwhile, “cash creates” is similar to the cash-based approach in the US. It allows buying and selling ETF shares for fiat.
Given the sheer volume of crypto traded in Asia, this dual approach is a big step forward. It confirms growing global acceptance and regulation, opening new investment avenues for institutions and retail investors.
#2 Bitcoin halving in April 2024
Bitcoin halving, an event that happens every four years, decreases the mining rewards by 50%. Thereby, the amount of new coins entering circulation decreases, and the shrinking supply pushes the price up.
Since 2020, Bitcoin miners have received 6.25 BTC for each block validated. The next halving will slash that reward to 3.125 BTC, acting as a solid bullish catalyst. As we wrote before,
“Over the 12-month periods after the 2012, 2016, and 2020 halvings, BTC soared 8,069%, 284%, and 559%, respectively.”
That said, there are reasons to doubt the “up only” narrative for Q1. The previous halving cycles included growth over the first 1.5 years before a plunge and a range-bound phase.
“With the extreme 2019–2020 scenario repeating, BTC could drop as low as $12.5K before April 2024.”
#3 EIP-4844 on Ethereum Layer-2
Proto-Danksharding, or EIP-4844, is one of the most crucial enhancements to Ethereum after its transition to Proof of stake. The upgrade will ensure more efficient scaling of Layer-2 rollups. It will introduce a new transaction type with a blob — an additional data field.
This change will bring Ethereum closer to sharding — an architecture that helps it process more data faster. It scales computation without reducing security or decentralization. Eventually, EIP-4844 will help Ethereum lower its notorious gas fees and accommodate the next million users.
#4 New FASB standards
On December 13, 2023, The Financial Accounting Standards Board (FASB), which establishes accounting and financial reporting standards for US companies and nonprofits, issued an Accounting Standards Update (ASU). It introduces new requirements for digital asset accounting and disclosure in fiscal years starting after December 15, 2024.
Entities are obliged to measure specific holdings at fair value each reporting period and reflect the changes in the net income. This amendment will provide more clarity for investors.
According to FASP Chair Richard R. Jones, they will receive “more relevant information that better reflects the underlying economics of certain crypto assets and an entity’s financial position while reducing cost and complexity associated with applying current accounting.”
BTC and ETH price predictions for 2024
EarnBIT’s predictions for the BTC price in 2024 involve a range of $32K — $85K. By the end of Q1, the coin may reach $55K-$60K. For ETH, the likely targets vary from $1,850 to $7,000.
