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Beware of Cryptocurrency Bull Run Predictions in 2024
Aside from high-profile court cases, much of 2023 has been a rather lackluster year for cryptocurrencies. Market activity remained essentially unchanged compared to the historical average. Major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) have traded sideways throughout the year, and total locked volume (TVL) in decentralized financial ecosystems has moved within a tight range, well below of historical highs. This lack of dramatic volatility was far from the norm we usually associate with cryptocurrencies. The mild price pump in the fourth quarter ended the year on a positive note.
It wasn’t a money-making year. But the recent green light from the Securities and Exchange Commission for 11 spot applications of Bitcoin exchange-traded funds (ETFs), with major players such as Black rock, Ark Investments/21Shares, Fidelity, Invesco and VanEck led a notable recovery in the cryptocurrency market, expressing optimistic outlook. Speculation is rife that a sustained bull run will replace this latest crypto winter.
While I remain optimistic about digital assets and the cryptocurrency sector in general over the long-term horizon, there is reason to remain cautious going into 2024. Investors are facing mixed signals, and it is possible that there is good news regarding the he approval of the Bitcoin ETF, which has been making cryptocurrency headlines for a few months – has already been priced.
While markets didn’t skyrocket last year, they didn’t crash either. There was enough optimism to maintain price stability. This optimism is largely tied to two major events in 2024: the recent approval of Bitcoin spot ETFs and the potential approval of Ethereum Exchange Traded Funds (ETFs) in the United States, as well as the upcoming Bitcoin halving. ETF approvals are expected to improve trading volumes and liquidity in cryptocurrency markets overall, and the halving will prevent BTC deflation and thus support prices.
Many experts attributed the fourth quarter’s price pump to these factors, which was also coupled with bullish activity in the derivatives market. Investors overall seem to believe that central bank rate hikes are behind us and that these optimistic murmurings hold enough weight to expect a bull run into 2024.
Despite the undeniably positive impact of institutional endorsements and market sentiment reflected by the recent price recovery, I believe there is some truth to Wall Street’s saying “buy the rumor, sell the news.” The cryptocurrency market is forward-looking, and traders who have already believed the rumors may be waiting to sell, regardless of the news.
After the initial surge on the heels of the long-awaited news, markets could quickly par back those gains as broader adoption fails to keep pace. A subsequent correction could occur before a real bull run begins. ETFs are a big step forward, but not enough to declare that we have achieved mass adoption of cryptocurrencies. While the approval of Bitcoin spot ETFs is a big win, I won’t hold my breath for new all-time highs for cryptocurrency prices or total value locked (TVL) in the near term.
Regarding the BTC halving Q2, will support the markets but is unlikely to trigger a real bull run. This anti-inflationary measure makes it more difficult to mine new BTC, limiting supply. In the absence of significant cryptocurrency adoption, this alone is not enough to get us back to BTC’s peak of nearly $69,000, let alone surpass it.
On the other hand, an additional reason for optimism is the fact that 2024 will be an election year in the United States. We can expect U.S. regulators to tone down their securities research activities in this high-stakes year. Therefore, there should be less bad news on the horizon for cryptocurrencies, which could potentially dampen investor enthusiasm. This could possibly set the stage for the next uptrend.
All in all (and Black Swan events aside), 2024 is shaping up to be more of the same for cryptocurrency prices. My base case scenario is that the market will bottom and begin to recover more significantly by the fourth quarter of 2024. In the meantime, we can expect some minor volatility as investors move from heady anticipation to mild disappointment.
However, the relative overall lack of volatility indicates that the cryptocurrency market is maturing and therefore our investment and trading strategies must mature as well.
Rachele Lin is co-founder and CEO of SynFutures, a decentralized derivatives trading platform.
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