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Beware of crypto bull run predictions in 2024
High-profile court cases aside, much of 2023 has been a pretty lackluster year for crypto. Market activity remained generally stable compared to the historical average. Major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) traded sideways throughout the year, and the total volume locked (TVL) in decentralized finance ecosystems drifted within a narrow range, although below historic highs. This lack of dramatic volatility was far from the norm we usually associate with crypto assets. The slight price increase in the fourth quarter closed the year on a positive note.
It was not a year to make money. But the Securities and Exchange Commission’s recent green light for 11 Bitcoin spot exchange-traded fund (ETF) applications, featuring heavyweight players such as black rock, Ark Investments/21Shares, Fidelity, Invesco and VanEck led a notable recovery in the crypto market, expressing optimistic outlooks. Speculation is rife that a sustained bull run will replace this past crypto winter.
While I remain bullish on digital assets and the crypto industry as a whole in the long term, there are reasons to remain cautious through 2024. Investors are facing mixed signals, and it is possible that the good news regarding the approval of the Bitcoin ETF – which has been making crypto headlines. for several months – is already integrated into the prices.
Even though the markets didn’t skyrocket last year, they also didn’t crater. There has been enough optimism to maintain price stability. This optimism is largely tied to two major events in 2024: the recent approval of the Bitcoin spot ETF and the potential approval of Ethereum exchange-traded funds (ETFs) in the United States, as well as the upcoming halving of Bitcoin. ETF approvals are expected to improve trading volumes and liquidity in crypto markets in general, and the halving will prevent BTC deflation and thus support prices.
Many experts attributed the fourth-quarter price rise to these factors, and it was also accompanied by bullish activity in the derivatives market. Overall, investors seem to believe that central bank rate hikes are mostly behind us and that these optimistic murmurs carry enough weight to expect a big hike in 2024.
Despite the undeniably positive impact of institutional support and the market sentiment reflected by the recent price rise, I believe there is some truth to Wall Street’s “buy the rumor, sell the information” narrative. The crypto market is forward-looking and traders who have already bought the rumor might be holding off on selling regardless of the news.
After the initial surge sparked by highly anticipated news, markets could quickly pare back those gains as broader adoption fails to keep pace. A further correction could take place before a real bull run begins. ETFs are a big step forward, but not enough to declare that we have reached mass adoption of crypto. While the approval of Bitcoin spot ETFs is a big win, I won’t hold my breath waiting for new all-time highs for crypto asset prices or total value locked (TVL) in the near term.
As for the BTC halving T2, this will support markets, but is unlikely to lead to a true bull run. This anti-inflationary measure makes it more difficult to mine new BTC, thereby limiting supply. Absent significant crypto adoption, this alone isn’t enough to get us back to BTC’s high of nearly $69,000, let alone surpass it.
On the other hand, an additional reason for optimism is that 2024 is an election year in the United States. We can expect U.S. regulators to tone down their headline-seeking activities during this high-stakes year. As such, there should be less bad news on the horizon for cryptocurrencies that could dampen investor enthusiasm. This can possibly set the stage for the next uptrend.
Overall (Black Swan events aside), 2024 is shaping up to be about the same for crypto asset prices. My base case scenario is that the market will bottom out and begin to recover more significantly by the fourth quarter of 2024. In the meantime, we can expect some mild volatility as investors move on from heady anticipation to a slight disappointment.
However, the overall relative lack of volatility indicates that the crypto finance market is maturing and therefore our investment and trading strategies must mature as well.
Rachel Lin is co-founder and CEO of SynFutures, a decentralized derivatives trading platform.
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