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Crypto naysayers have had plenty of vindication over the last two years. The spectacle of Terra’s collapse in May 2022 was only superseded by the downfall of Sam Bankman-Fried and his empire six months later. His trial became one of the most hotly anticipated events of 2023. On the other hand, high-profile lawsuits against Coinbase and Binance by the SEC in June came as more of a surprise, as did the news that the latter had reached a $4.3 billion settlement with the Department of Justice in November.
And yet, despite all the setbacks, one struggles to find anything but the most bullish forecasts for the year ahead. Back in July, Standard Chartered predicted that mining profitability would result in a Bitcoin (BTC) price of $120,000 by the end of 2024, which included a target of $50,000 by the end of 2023. By November, even before Bitcoin’s impressive rally to a 20-month high, the firm doubled down on its $100,000 forecast, stating that “everything is working as expected.”
Analysts at Van Eck are similarly optimistic, predicting in December that Bitcoin will “climb a Presidential-sized wall of worry” to reach new all-time highs in the fourth quarter of 2024. The jury is out on their “long-shot call” that Satoshi Nakamoto will succeed Taylor Swift as Time’s Person of the Year if Bitcoin exceeds $100,000. However, Grayscale is also anticipating that the election will influence crypto prices, noting that growing mistrust in institutions combined with income inequality and financial awareness among younger demographics make conditions ripe for Bitcoin adoption.
Making accurate price predictions is always a tricky business. But it’s far from outlandish to assume that 2024 will be a good year for the crypto sector simply because it largely ebbs and flows with BTC prices. The two major factors set to affect prices this year are the halving event—anticipated in April—and the long-awaited ETF approval.
The former exerts supply-side pressure by reducing the amount of new BTC entering circulation and has consistently triggered a bullish phase in Bitcoin’s four-year price cycles. Meanwhile, the latter has no precedent in the US but is widely expected to drive institutional demand.
A Bitcoin ETF approval has been long coveted by the crypto sector, which has been lodging unsuccessful applications for over a decade now. Therefore, bullish pressure notwithstanding, many in the industry would always have seen approval as a win. However, it’s worth remembering that it’s still only months since crypto’s supporters and detractors alike were speculating that US regulators were on a mission to kill the industry dead. Therefore, approval would be taken as a significant boost to the industry’s future license to operate on US soil.
It would also reinforce the current trajectory of Binance, which is losing market share, and clear the path for consolidation among more regulated competitors that will be eager to seize the opportunity, particularly in a growth market. Being traded in a more regulated environment is already making Bitcoin less volatile, further underscoring the investment thesis. The decreasing influence of operators like Binance, which have played fast and loose with compliance laws, together with the increasingly regulated nature of digital assets, further detracts from the skeptic’s case.
It shouldn’t go unnoticed that the vast majority of the regulatory turmoil in 2023 has been concentrated in the US. In contrast, the EU’s MiCA regulation has already laid the foundations of regulatory certainty, and euro-denominated stablecoins backed by financial institutions have begun to emerge over recent weeks. Abu Dhabi, Hong Kong, and Switzerland are all hubs for digital asset investment and development, underscoring that the future of the crypto sector is not at the mercy of US regulators alone.
While the focus is understandably on Bitcoin as the market-leading asset, there’s a risk that Ethereum’s story becomes overshadowed. In May 2023, Van Eck forecasted an Ethereum (ETH) price of $11,800 by 2030—which may seem like a bold prediction, mainly since it’s one of the few traditional institutions to even offer any analysis of ETH prices.
However, there is a sound case for believing that ETH growth will outpace BTC. Ethereum is already moving from being an application layer to a security layer for the faster Layer-2 platforms that run on top of it. These Layer-2 platforms will support decentralized applications with lower fees and faster throughput. In some cases, they may be open development platforms such as Polygon or Arbitrum; in others, they could be application-specific blockchains such as gaming-focused Immutable X.
The impact of this shift on the demand for ETH shouldn’t be underestimated. Rather than relying on users to pay high gas fees for individual transactions via a relatively slow and clunky base layer, Ethereum will be taking payments from Layer-2s, potentially processing many thousands more transactions than Ethereum would be capable of handling. It creates a highly sustainable demand for ETH so these platforms can access Ethereum’s security for their batched transactions—a core feature on which they sell themselves.
However, this demand is predicated on the success of Layer-2 platforms. Increasing takeup of public blockchain technology among enterprises and financial institutions foreshadows a consolidation among Layer-1 and Layer-2 platforms and, thus, a potential shakeup in the altcoin markets. An unfortunate side effect would be the demise of many smaller smart contract platforms into “ghost-chain” status.
However, the corollary is that activity will be concentrated on fewer projects, which will benefit from increased adoption and network effects, driving more value. Therefore, even as a rising Bitcoin tide is likely to lift all token ships, it’s worth keeping an eye on meaningful indicators—confirmed announcements from brands and institutions backed up by on-chain metrics indicating real user activity.
The winds of change are blowing through the digital asset sector. Unlike the last two years, the crypto skeptics have a weak case to make in 2024, and those of us who have been waiting for the tide to turn have plenty of good reasons to feel optimistic.