As 2023 comes to a close on a positive note for the crypto market, investors are turning their attention to key factors for 2024. Central bank interest rates and a potential decision by the U.S. Securities and Exchange Commission (SEC) on new bitcoin products are in focus.
The crypto market rebounded in 2023 after a challenging 2022 marked by a market meltdown and various scandals, including the collapse of FTX and legal issues surrounding its CEO, Sam Bankman-Fried.
Bitcoin, the leading cryptocurrency, has shown significant growth this year, more than doubling in value and reaching a 20-month high of $42,000 in November. This marks 2023 as its best-performing year since 2020 in terms of percentage gains.
Expectations of easing inflation globally, leading to a halt in further rate hikes by central banks, have contributed to the positive market sentiment. Additionally, the anticipated approval of a spot bitcoin exchange-traded fund (ETF) by the SEC is seen as a significant boost.
Analysts predict that these themes, along with bitcoin’s expected “halving” in April (a process that reduces token supply), will continue to drive positive momentum in the market in 2024. However, some caution that reaching the record highs seen in 2021 might be challenging.
James Butterfill, Head of Research at CoinShares, highlighted the potential impact of the end of the rate cycle, stating that a reduction in interest rates could spur the next bitcoin rally.
The crypto industry faced challenges in 2023, including scandals involving Binance and its CEO, Changpeng Zhao, who pleaded guilty to breaching U.S. money laundering rules. Despite these challenges, the launch of a bitcoin ETF is seen as a step toward legitimizing the industry.
Several major financial firms, including BlackRock, have applied for SEC approval to launch a spot bitcoin ETF, which could attract institutional money into the cryptocurrency market.
The upcoming bitcoin “halving” in April is another event being closely monitored. This process, designed to slow the release of new bitcoins, has historically resulted in bitcoin rallies.
As talks with the SEC progress, traders remain optimistic about the potential approval of a bitcoin ETF before the January deadline. While a sell-off after approval is possible, analysts believe that spot bitcoin ETFs could bring in several hundred billion dollars a year to the bitcoin market.
However, uncertainties remain, and the impact of the next bitcoin “halving” is unclear given the current market conditions. The combination of a U.S. ETF’s high demand and reduced new supply could have an impact, but analysts are cautious about predicting significant outcomes.
This information is not legal advice. Do your own research before making any decisions. Only invest what you can afford to lose and seek independent financial advice if needed. Understand the risks involved before purchasing any cryptoassets.