The cryptocurrency environment is constantly changing and shifting, with the prices dropping and then recovering, meaning that many investors find it challenging to keep up. During the past couple of years, it became even more difficult to predict, given the massive losses of 2022, followed by the gains of 2023 Many investors, analysts and exchanges such as Binance believe 2024 is set to be the best year in the entire history of cryptocurrencies. So, what trends can users expect within the ecosystem this year, and how impactful will they be overall?
ETF approval
The official ETF approval that gave the green light to some of the Bitcoin spot exchange-traded funds has been a historic win in the history of cryptocurrencies, as no such asset has ever been approved before. There was a false alarm on January 9th after a misleading post appeared on the SEC’s official Twitter page. The Commission clarified that someone must have infiltrated the account clandestinely and that it was working with the authorities to determine who was to blame.
But only a day after these events, the Securities and Exchange Commission returned with an official announcement, approving several applications, including those of BlackRock, Invesco Galaxy, ARK 21 Shares, Grayscale, Bitwise, Valkyrie and Fidelity. The approval allows Bitcoin ETFs to be listed and traded differently, meaning that institutional investors who were initially wary of investing in cryptocurrencies can now add their names to the endeavors. ETFs allow users to interact with the assets without actually owning digital coins.
The approval of this asset class is expected to lead to more acceptance of cyber assets in traditional markets. The approval for Ethereum ETFs is now the subsequent step investors anticipate, but opinions are divided when it comes to the most probable date. While the more optimistic believe that an approval before May is likely, others think August is more realistic, considering that delays and postponements appear to be part of the approval process. It’s important to remember that the first application for a Bitcoin ETF was more than a decade ago.
Layer-1
The blockchain began as a fundamentally decentralized network and was meant to remain that way. While currently mainly associated with the buying, selling and trading of cryptocurrencies, analysts believe that it has the potential to evolve beyond that. Researchers estimate that it will soon be integrated into many other systems, where it can help manage large data loads, create more transparent processes, and diminish the risk of counterfeiting and fraud.
The blockchain has been facing an ongoing trend toward centralization that investors believe will compromise the core principles of the network. Layer-1 blockchains could be the solution, as they are community-focused and on-chain democracy is respected. This feature means that voting systems are built into the blockchain programming so that when developers propose changes, everyone has a say in whether the proposal is accepted or rejected.
This type of blockchain is a move to sturdier inclusivity, as it is based on the idea of broad participation and complete fairness. The community is also in full control of the treasury. This way, the resources can be used to fulfill the wishes of the entire user base, not just that of a select few.
Mining rights
The Virginia State Senate has recently introduced brand-new regulations for the transactions involving digital assets. The new legislation also includes the treatment of the assets under tax laws. Senator Saddam Azlan Salim, currently the youngest member of the Assembly’s upper house, proposed the bill on January 9th. If it is eventually signed into law, it will also exempt businesses from getting money transmitter licenses.
Miners will be protected from discrimination as industrial zones will be prohibited from placing bans on crypto mining. Restrictive ordinances will also be strictly prohibited. Issuers and sellers are exempt from additional securities registration requirements if they meet several conditions, including the asset now being legally viewed as an investment contract. Companies must file notices that allow them to qualify for immunity.
Hodlers
With the constant price oscillations over the past few years, most investors have shifted their strategies to focus solely on long-term asset holding. Lately, hodlers have begun derisking, a phenomenon that occurs when financial institutions choose to distance themselves from the crypto environment as regulatory pressures and demands from lawmakers become more intense and risk impacting the company’s image. Bitcoin benefited from the launch of the ETFs, but it seems that the excitement has fizzled out relatively quickly.
The fact that investors had waited for the announcement for so long may have contributed to the hype dying out much sooner than anticipated. So, what is in store next? There are potential catalysts for volatility waiting ahead. Most investors expect spring and summer to be busy for Bitcoin, especially since the next halving event is scheduled for April.
According to the latest data, Bitcoin is going through one of the most prolonged periods of profit-taking since its launch. Although the price point is still below the all-time highs of 2021, this trend continues. Just over the past three months, profit-taking actions have been considerable and appear set to remain solid in the near future.
However, it might not resist much longer unless Bitcoin begins seeing substantial growth soon. The market is still within the greed bracket despite dipping close to neutral territory not long before. However, the numbers are believed to be a direct result of the increased exposure that came with the ETF launch. Among whales, accumulation is thought to make a return very soon. Some accounts suggest that a single whale sale could have sped up the distribution trends and sparked the lower values in the days after the exchange traded-fund approval. This investor was a buyer during the 2021 market.
To sum up, cryptocurrencies are expected to have a busy year in 2024 as new trends emerge. It’s crucial that investors don’t rush into new transactions but instead take their time to analyze the marketplace movements and their impact on price actions.
