André Dragosch: The crypto outlook for 2024

André Dragosch: The crypto outlook for 2024

by André Dragosch, Head of Research at ETC Group

SO FAR, Bitcoin and crypto assets have been the best-performing assets this year, and 2024 also promises to be another very positive year.

The reason is that there is a confluence of positive macro and on-chain factors:

Firstly, approval of a Bitcoin spot ETF in the US has the potential to double Bitcoin’s price as the global Bitcoin ETP market is still relatively small compared to the potential amount of new capital that would flow into this asset class.

We estimate that an approval would unleash around $32bn of new capital which could result in a cumulative price effect of slightly above 90%. However, this capital won’t enter overnight but only gradually over time.

Secondly, past halving events have shown to be very positive for Bitcoin’s performance. We expect the resulting decrease in supply growth to be a major tailwind in 2024 again.

As a result, we expect Bitcoin to make new all-time highs during the course of 2024 and possibly reach 100k USD by the end of 2024 as well.

Lastly, we still expect a US recession to materialise in mid-2024. A recession will likely be a negative performance factor for Bitcoin in the short term with potentially large interim drawdowns.

However, the COVID-19 recession in 2020 has shown that Bitcoin and cryptoassets can have a very positive performance year (>200% in 2020) despite large interim drawdowns due to the recession.

We expect a similar scenario for 2024 as a potential US recession will likely lead to a reversal in US monetary policy, as well as rising inflation expectations and a weak US Dollar, which tend to be positive macro factors for Bitcoin.

The above-mentioned Bitcoin halving should provide an additional tailwind.

In fact, halving years usually show a dominance of Bitcoin-specific factors and a lesser importance of macro factors like global growth expectations. So, there is even a potential for Bitcoin and crypto assets to decouple from traditional financial markets in 2024, which could offer good opportunities to diversify.

Amid a potential bull market in 2024, we expect other crypto assets to also succeed. Although we think that Bitcoin (BTC) should be a core holding in a portfolio, digial assets like Ethereum (ETH), Solana (SOL), and Polygon (MATIC) can even enhance overall returns as these tokens tend to exhibit a higher beta to Bitcoin during bull markets and network fundamentals have significantly improved lately.

All in all, 2024 promises to be a successful year for Bitcoin and crypto assets again.

Cautionary Notes

It’s definitely tempting to get swept up in the excitement, but please heed these words of caution: Do your own research, only invest what you can afford, and make good decisions. The indicators contained in this article will hopefully help in this. Remember though, the content of this article is for information purposes only and is not investment advice or any form of recommendation or invitation. The Digital Commonwealth always advises you to obtain your own independent financial advice before investing or trading in cryptocurrency.