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Crypto has had a surprisingly good year. It still faces threats in 2024.
A year ago, the crypto world was in shambles. Now he’s back, with a new rally that his supporters say goes even further in 2024.
The price of bitcoin (BTC-USD), the world’s largest cryptocurrency, is up more than 160% this year after surpassing $44,000 for the first time since early 2022. The stock of cryptocurrency exchange Coinbase (PIECE OF MONEY) has more than tripled, while the total market value of all crypto assets has almost doubled.
“I think what people are responding to this year is that crypto is here to stay,” Brian Armstrong, CEO of Coinbase. told Yahoo Finance.
The industry’s comeback has been one of the most surprising market stories of 2023, following an epic collapse in 2022 that burned many investors and brought down some of the industry’s biggest names.
The bullish case for 2024 is that many of crypto’s biggest problems are now officially in the post-crime rearview mirror. conviction the founder of FTX, Sam Bankman-Fried, and a guilty plea from Binance CEO Changpeng Zhao.
This year, a jury convicted FTX founder Sam Bankman-Fried of defrauding customers, investors and lenders. (Amanda Perobelli/REUTERS/File photo) (REUTERS / Reuters)
Investors are optimistic that the sector is poised to benefit from greater acceptance and regulatory clarity from Washington. They expect regulators to approve a series of spot Bitcoin ETFs in January that would allow everyday people to gain exposure to the cryptocurrency without having to own it.
Investors are also excited about bitcoin’s April “halving,” an event every four years that halves the cryptocurrency’s daily issuance — and usually leads to further upside.
“There really is this perfect storm of tailwinds heading into next year,” Sean Farrell, vice president of digital asset strategy at Fundstrat Global Advisors, told Yahoo Finance.
The crypto market “has been positioned for perfection over the next six months,” added Rich Rosenblum, founder and CEO of crypto market maker GSR.
However, the sector still faces many risks. One worry is that U.S. regulators could make it much harder for digital asset companies to thrive like they did during the last boom. Another reason is that the industry’s extreme risk-takers might go too far, as they did heading into 2022.
“If prices go back up, I think we could see a very similar landscape to what’s happened before,” crypto researcher and critic Molly White told Yahoo Finance.
A third potential problem is that Congress will not clarify how the industry is regulated, making it more difficult for the industry to gain acceptance by the general public. Democrats and Republicans in Washington currently disagree on whether cryptocurrencies pose a threat to the financial system or a source of innovation.
The story continues
JPMorgan Chase (JPM) CEO Jamie Dimon told US lawmakers earlier this month that he would end crypto if he had the power.
The CEO of JPMorgan Chase testified on Capitol Hill earlier this month. (Evelyn Hockstein/REUTERS) (REUTERS / Reuters)
“If I were the government, I would shut it down,” he said in response to a question from Sen. Elizabeth Warren (D-Mass.), who is championing a new bill that would force crypto providers to comply with anti-money laundering safeguards standards.
‘Here to stay’
If there’s one company that has the most to gain or lose from the industry’s next steps, it’s Coinbase, the largest crypto exchange in the United States. Its stock has surged 375% so far this year.
It took advantage of the fall of FTX and the humiliation of Binance, its two biggest rivals, while introducing a series of new products ranging from a regulated futures exchange in the United States to a regulated futures market in the United States. -United. Layer 2 Blockchain Scaling Solution. It is also expected to become the custodian for many spot bitcoin ETFs that hope to launch early next year.
Brian Armstrong, CEO of Coinbase. (PATRICK T. FALLON/AFP via Getty Images) (PATRICK T. FALLON via Getty Images)
Coinbase did it post its seventh consecutive quarterly loss in the third quarterbut it is the closest to a positive result since the fourth quarter of 2021, when the last crypto boom was still raging.
Its future profits remain threatened by a legal battle with the Securities and Exchange Commission, which sued the exchange in June for allegedly operating an unlicensed crypto securities exchange, broker-dealer and clearing agency.
The company chooses to defend itself in court and its CEO, Brian Armstrong, has expressed his disagreements with the SEC.
“There are a lot of bumps and twists and turns and short-term episodes,” Coinbase CFO Alesia Haas told Yahoo Finance earlier this month. “The longer you stay in crypto, the more you have to realize that you have to see through the noise,” she added.
The SEC remains the biggest threat to much of the industry. It took more than 32 actions against crypto-related players in 2023, a 28% increase from 25 in 2022. These charges, which targeted many of the industry’s biggest players, still represented just one small part of the more than 300 overall actions taken by the regulator against various companies.
His main argument is that many crypto assets should be considered securities, thus requiring more rigorous oversight from the SEC.
Justices have issued divergent opinions on this topic in 2023 in cases brought by the SEC, adding to the confusion. One ruled that a digital coin called XRP was only a security when sold to institutional investors, but not when sold on a public exchange to retail customers.
Another judge in a separate case involving the Terra USD token said that digital currencies can be considered securities when sold to the general publiccontradicting the previous decision.
Coinbase separately asked the SEC to propose a new framework to oversee crypto, but the agency rejected the request this month.
In doing so, SEC Chairman Gary Gensler cited the SEC’s limited resources and a quote from the SEC’s chief enforcement officer stating that “you can’t just ignore the rules because you don’t like them not or because you prefer different ones. Coinbase is appealing the decision.
Gary Gensler, Chairman of the Securities and Exchange Commission. (Jonathan Ernst/REUTERS) (REUTERS / Reuters)
While waging war against the SEC, Coinbase is also actively lobbying Washington for more clarity on how the crypto world is regulated.
To that end, Coinbase and other crypto supporters announced this month that three super PACs had raised $78 million to support 2024 candidates favoring crypto-friendly policies.
“There are going to be ups and downs, but this movement is here to stay and we need to send that message to Washington,” Armstrong added.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto and other areas of finance.
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