Three reasons why investors — and the financial system — should watch crypto in 2024

Andrey Sinenkiy/Angelov - stock.adobe.com

It's one thing when the crypto community predicts a positive future for cryptocurrencies over the coming year. But when one of the world's most influential banks makes that prediction, it's a sign that the recent excitement over crypto's rising fortunes is more than just hype. In April, Standard Chartered said that bitcoin could hit as high as $50,000 by the end of 2024 (as of Tuesday of this week, it was selling for more than $42,000). By the end of 2024, the cryptocurrency could be worth $100,000, the bank said, adding in a revised July prediction that "there was now a 20% 'upside' to that call." That $120,000 valuation would dwarf bitcoin's November 10, 2021, all-time high of $68,789.

The bank cited several reasons for its optimistic forecast, including "recent turmoil in the banking sector, a stabilization of risk assets as the U.S. Federal Reserve ends its rate-hiking cycle and improved profitability of crypto mining." As a professional in the crypto sector, I can point to three specific issues that are very likely to push up the value of bitcoin — as well as other cryptocurrencies — and, more than that, make them a mainstream alternative asset.

For one thing, spot exchange-traded funds demonstrate that institutional investors are embracing crypto.

Despite the SEC's continued resistance to the idea, industry experts are convinced that spot ETFs for crypto will happen — sooner than later. After denying the application for a spot ETF filed by BlackRock — and a court order demanding that it show cause why it did so — the SEC has reportedly decided that, even after the court-ordered review, it would continue to reject applications for that product. 

But the SEC can't hold out forever. After its foray into bitcoin ETFs failed (at least for now), Blackrock filed an application for an ETF based on ethereum — and it's one of perhaps nearly a dozen applications that the agency is being asked to consider. Given that many of these applications are being filed by some of the largest, most reputable investment houses out there, the pressure to approve ETFs is only growing — and that pressure is coming from Congress as well. And while it's true that the agency hasn't yet "caved," it is beginning to show signs that it, too, realizes that it needs to move forward on the issue, as it allegedly met with the heads of top crypto exchanges on this topic. 

Spot bitcoin ETF approvals could trigger a huge boom market in all forms of crypto, according to many analysts; the recent run-up in crypto prices is a sign of things to come, they argue. And while analysts could question the optimistic future predicted by Standard Chartered and others on the strength of spot ETFs alone, another development — the "halving" of bitcoin production — is likely to be a major contributor to the anticipated bull run.

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Bitcoins are created when miners validate blockchain transactions, and bitcoin "halving," scheduled for April 2024, essentially reduces the number of coins that can be produced from these transactions. As a result, there will be fewer coins available for sale. Add to that the increasing demand for bitcoins, as a result of its rising value and additional investment options. The resulting reduced supply, coupled with increasing demand, means that bitcoins are likely to get more expensive.

How much more? Industry experts estimate post-halving prices ranging from $50,000 to $300,000. Some of that increase could be factored into the price even earlier, as investors seek to get on board before prices rise too high — resulting in price increases that will further incentivize investors to buy bitcoin. If that indeed does happen, the currency could beat that Standard Chartered end-of-year 2024 $100,000 estimate.

The thriving of any investment asset class depends on a healthy amount of money circulating in the economy. Historically, investors buy assets when they have easy access to funds, and hold off buying when money is tight. High interest rates have made borrowing — and access to funds for investment — expensive, and at the same time incentivized investors to seek out other vehicles — like higher-interest bank deposits. 

But with inflation waning, and Western economies in the doldrums, it appears that central banks — led by the Fed — are backing away from increasing interest rates. Quantitative easing as an official policy, of course, probably won't be revived — but the recent bailouts of Silicon Valley and Signature banks are perhaps a sign of "stealth QE," where the Fed remains ready to intervene as needed. According to analysts, "mandatory spending is effectively already set in stone and tax bases have been squeezed dry. Foreigners hold about one-third of U.S. debt, with China still a major investor, but growing geopolitical tensions will probably reduce their appetite." With greater liquidity and easier access to credit, investors will do what they usually do — and with bitcoin already bullish, investors will be all the more attracted to that market.

The bottom line is that 2024 looks very good for bitcoin — and likely, by extension, other strong cryptocurrencies, like ethereum. Approval of spot bitcoin ETFs by the Fed makes it more likely that similar vehicles will be approved for ethereum, and perhaps other currencies — while investors who are more amenable to risk may decide to ride the crypto tide into other currencies that show market promise. 

Of course, the SEC could continue to hold out on ETF approvals; the Fed could reverse policy again, and begin increasing interest rates; and although halving is definitely going to happen (it's built into the bitcoin protocol), halving on its own is unlikely to power the bitcoin bull market in the absence of the other two factors. So, like with all predictions, it pays to hedge bets — at least a little. But bitcoin, and crypto in general, has historically been very resilient — and given the likelihood of the above-mentioned events, this could be a golden opportunity for crypto investors, and the increasing number of players in the financial system that embrace this asset class.