ETF, euphoria and new highs: what to expect from Bitcoin and Ethereum in 2024
For analysts, the future of the two main cryptocurrencies is linked to a series of macroeconomic and technological events
The year 2024 promises to be a turning point for Bitcoin (BTC) from Ethereum (ETH).
With the advancement of regulated cryptocurrency products in the United States, the two assets must move away from their “anti-system” past, linked to nerds and anarcho-capitalists, to finally fall into the lap of Wall Street, which could attract capital and raise stock prices. currencies above their historic highs, according to analysts.
Also playing in favor of the two cryptoactives is the possible end of the monetary tightening cycle in the US from 2024 onwards, which normally increases risk appetite, and the technological updates to the BTC and Ether blockchains , which promise to generate more scarcity and attract new users.
On the macroeconomic side, perhaps the main “character” of the year is the long-awaited ETF (index fund) with direct exposure to US Bitcoin. For months, managers such as BlackRock, Ark Invest and VanEck have been trying to convince the country's Securities and Exchange Commission, the SEC, to release the product, without success. Fear of fraud and market manipulation were some of the arguments used so far by the regulator.
But things could change at the beginning of 2024. Analysts believe that the capital market sheriff could finally give the go-ahead for the first batch of BTC ETFs in January. It is estimated that investment vehicles can serve as a lure for institutional and retail capital, attracting up to US$100 billion in a short period of time, according to a survey by Bloomberg Intelligence.
“The approval of an ETF by the SEC can be a crucial point for market developments. The entry of institutional investors through this product will provide greater legitimacy to Bitcoin as an asset class. This would result in a significant entry of capital into the market, positively impacting prices,” said Theodoro Fleury, manager at QR Asset Management.
In addition to the Bitcoin ETF, some managers also sent requests for index funds with direct exposure to Ethereum to the regulator. The product, according to Fleury, also has the strength to attract institutional capital and increase the price of the cryptocurrency.
Fees
Another point that should guide the crypto market is US monetary policy. Amid advances in the fight against inflation, members of the Federal Reserve (Fed, the country's central bank) signaled an interest rate cut of 75 basis points in 2024 – today, the level is 5.25% to 5.50% per year . Goldman Sachs estimates that the reduction should begin in the third quarter.
In theory, higher interest rates tend to lead investors to US government bonds – the famous Treasuries –, which become more attractive. On the other hand, falls increase appetite for risk and draw attention to cryptoassets , shares and other variable income financial products.
“With lower interest cuts you start to have a greater appetite from both retail and institutional investors, and the tendency is for them to seek more risk to bring better profitability to the portfolio, and this benefits the entire cryptoactive market”, said Luiz Pedro, partner and cryptoasset analyst at Nord Research.
Halving and updates
On the technology side, the big highlight of BTC will be the halving , an event that takes place every four years and cuts the issuance of BTC units paid to miners in half. Scheduled for April 2024, the event will reduce the issuance of new BTC from the current 6.25 tokens per block to 3,125 coins issued, making the asset even more scarce.
“The reduction in emission is very relevant, since the majority of Bitcoin sales come from miners, who need to sell BTC to cover their operating costs; with the selling pressure of miners being reduced by half, the net supply of the asset available on the market should be affected”, said Alter Yuri, research analyst at Hashdex.
This will be BTC's four halving. Historically, the 12 to 18 months prior to the upgrade are marked by positive price performance. If these previous cycles are a good predictor for the next event, said Alter, it is possible that BTC could surpass its all-time high of US$69,000, recorded in November 2021, just as it has been in all previous cycles.
In the case of Ethereum, from a technological point of view, the market expects that 2024 will be marked by updates that reduce the cost of transactions on the network and facilitate the development of more crypto projects within the ecosystem.
“There is great expectation for a new update that will facilitate second-layer technologies , which are accessory blockchains to Ethereum that can make it more scalable – that is, process more transactions per second in a cheaper and faster way,” said Luiz Pedro, from Nord Research.
Target Price
This scenario of ETFs on Wall Street, low foreign interest rates, halving and updates has been generating very optimistic predictions about the price of Bitcoin in 2024. Technical analyst and founder of Enfoque Fausto Botelho, for example, believes that Bitcoin has it all to hit US$200,000 by April, an increase of 375% compared to the US$42,000 recorded by the currency at the end of the year.
According to Botelho, Bitcoin is in an ascending channel and, more recently, made the famous Shoulder-Head-Shoulder movement, a pattern that indicates a reversal of the main trend. “Bitcoin, when it broke US$30 thousand (recently), reaffirmed the upward trend, by definition, therefore, we are in a bull market ”, he said.
Similar predictions – including from Botelho – have been made in recent years with this same target price for 2022. The market strategy and research company FSInsight, for example, pointed out that BTC could reach US$200,000 last year. The prediction, however, did not come true and prices fell due to the fall of important projects such as Voyager, Terra , Celsius and FTX.
In the case of Ethereum, according to the analyst, the expectation for 2024 is that the price will reach close to US$5,000 – double the value of ETH at the end of 2023 -, but this is if the macro scenario predicted by the market really comes to life.