Crypto Market Forecast: Top Trends That Will Affect Crypto in 2024

Regulation and oversight to keep increasing

Cryptocurrencies have been operating in a gray area since their inception. Lack of oversight enabled malicious actors to take advantage of market participants, leading to billion-dollar losses over the years and prompting the US Securities and Exchange Commission (SEC) to up the ante, cracking down hard on digital asset exchanges and providers.

Nevertheless, the crypto industry continues to inspire interest, and the SEC’s involvement in regulation has resulted in more widespread and institutional adoption of certain tokens; it's also attracted more investors to the space.

Analysts see this trend continuing into 2024. The recent settlement between the US Department of Justice and Binance, a cryptocurrency exchange accused by the SEC of listing unregistered securities, has given sector participants reassurance, according to Matteo Greco, a research analyst at Fineqia International.

“The resolution of uncertainties surrounding the exchange, particularly given Binance's significant market dominance, has broader implications for the entire digital asset market," he told INN via email.

"For the first time since its inception, the digital asset market appears to be aligning with regulators, fostering a more cooperative relationship. This alignment is expected to facilitate a stronger connection between digital assets and traditional finance, attracting capital from new investor cohorts," Greco added.

Bitcoin and Ethereum are the largest cryptocurrencies by market cap, but interest isn't just limited to these popular coins anymore. Other cryptocurrencies, referred to as altcoins, are gaining more traction in the market as investors and traders explore the potential of a diverse range of digital assets.

While Bitcoin and Ethereum will more than likely remain the dominant options, Ripple’s XRP, along with Pi Coin and Solana, are attracting interest from institutions and individual investors alike. Pi Coin is designed so that anyone can mine or distribute tokens on a smartphone, and Solana is becoming popular among developers due to its rapid transaction speeds and low fees. There are even some analysts who predict that Ethereum could outperform Bitcoin in 2024 following the Proto-Danksharding upgrade happening sometime in the first quarter.

“Another noteworthy trend (in 2023) was the burgeoning collaboration between prominent traditional finance entities and the digital asset space,” said Greco. “Traditional finance businesses are actively exploring the capabilities and advantages offered by blockchain technology, endeavoring to formulate business strategies around its application. This trend is poised to remain a pivotal factor in the years to come.”

HSBC's (NYSE:HSBC) collaboration with Metaco, a Swiss blockchain company acquired by Ripple in May, is one example of this. On November 8, HSBC issued a press release announcing that it will be using Harmonize, an institutional platform provided by Metaco, as a digital custody service for clients who wish to invest in tokenized securities. According to CoinDesk, this news signaled to many XRP supporters that financial institutions could one day adopt the XRP token.

Investors waiting for US spot Bitcoin ETFs

The introduction of spot Bitcoin ETFs in the US is attracting widespread attention, and could be a major catalyst for the cryptocurrency ecosystem in 2024. By providing greater liquidity, transparency and accessibility, these vehicles are expected to bring new investors into the market, boosting the Bitcoin price along the way.

After initially resisting the idea, the SEC appears to be warming up to the possibility of approving spot Bitcoin ETFs, with many industry experts predicting that multiple applications will be approved by January 10. That's the deadline by which the government body will either have to accept or deny a proposal from ARK Investment and 21Shares.

“Certainly, within the initial 10 days of the year, the approval or rejection of the (spot Bitcoin ETF) filings will already mark a significant milestone for 2024,” Greco commented to INN.

Greg Taylor, chief investment officer at Purpose Investments, also believes the SEC is likely to approve spot Bitcoin ETFs in short order. “The best thing that has to happen with (crypto) is just building up the ecosystem. So getting more custodians up in place, getting more providers and exchanges trading, I think is going to go a long way. Having Fidelity involved, and having different players like Blackrock (NYSE:BLK) getting involved — it just can't be understated just how important that is, because then we're getting more seriously regulated companies involved. Building up the ecosystem to fit within that environment is a huge win and should help everything,” he said.

Blockchain technology to keep gaining traction

Cryptocurrencies are built on blockchain technology, and Precedence Research estimates that this market will be worth an estimated US$2,334.46 billion by 2032, achieving a compound annual growth rate of 85.7 percent between 2023 and 2032. As blockchain technology continues to evolve and mature, more industries are expected to embrace its potential, using it to streamline supply chain management, enhance cybersecurity defenses and more.

Among the possibilities that blockchain technology presents is the tokenization of real-world assets (RWAs). Through tokenization, blockchain technology and RWAs have the potential to increase the safety and security of assets by providing more secure infrastructure for asset management.

Greco said the tokenization of RWAs, as well as on-chain identity verification, captured his attention in 2023.

“The RWA trend gained significant traction in 2023, primarily driven by the tokenization of T-bills due to high interest rates," he explained in correspondence with INN. “However, with central banks expected to lower interest rates (in 2024), this narrative may lose its momentum. I anticipate a shift toward tokenizing other assets like stocks, bonds, real estate, cars and more gaining substantial momentum.”

Investor takeaway

The crypto industry has come a long way, with increased regulation and oversight leading to a more stable and trustworthy landscape. The likely implementation of spot Bitcoin ETFs in the US and the potential for increased use of blockchain technology are developments that could further accelerate the market's growth and legitimacy.

Summing up the past year and looking at what's to come, Taylor said, “2023 has been a year that I think has surprised people across the board with the strength in the technology stocks and the NASDAQ Composite (INDEXNASDAQ:.IXIC). And I think the crypto market has a lot of parallels to that. A lot of people had written off a lot of the risk in technology sectors in 2022. I think 2023 is going to be a good year as we've kind of gotten through that. It seems like it's been a good, positive outcome to advance prices higher, and 2024 should be something we can build off of that, then take it higher.”

Heading into 2024, it's clear that the interest in cryptocurrencies and blockchain technology is not limited to just Bitcoin and Ethereum anymore, and the growing collaboration between traditional finance entities and the digital asset space is poised to remain a pivotal factor in the years to come.