The past two years have been challenging since the end of the biggest crypto bull market at the end of 2021. As rising inflation prompted central banks to raise interest rates, Web3 funding, the price of NFTs, and the enthusiasm surrounding the metaverse all disappeared along with billions of investors' money. Fraud and cyberattacks involving platforms such as FTX and Luna have led to crypto crashes, custody bankruptcies, and a series of arrests by criminals. As a result, self-custody has become the only sensible choice for crypto enthusiasts in 2023.
However, despite these setbacks, crypto is gearing up for a possible new bull market in 2024 and 2025, which will be driven by various positives and trends. This time, it may not just be a momentary hype, but a turning point that can transform the global financial industry with the help of technologies such as artificial intelligence.
This optimistic view is not only the opinion of crypto enthusiasts, but there are also analysts who foresee a possible crypto bull market in the future. However, they have different views on the timing of the bull market, its potential outcome, and the catalysts that could trigger it.
In this article, we'll dive into some of the biggest events that have the potential to unleash the biggest wave of growth in cryptocurrency history. We will also look at the challenges that could pose a significant obstacle to a large-scale crypto recovery.
01
Bitcoin Halving (April 2023)
In the crypto space, despite the opinions of ETH and Solana fans, one thing is indisputable that Bitcoin is the leader. As a groundbreaking crypto asset, Bitcoin is about to usher in the new year with a series of positive news, the most important of which is the Bitcoin halving.
Bitcoin halving, in short, is a halving that occurs approximately every four years (about 210,000 blocks) in the Bitcoin network, at which point the rewards given to Bitcoin (BTC) block producers are also halved. This means that the amount of newly minted BTC will decrease, making Bitcoin more scarce, which in turn will increase its value. This event is significant for the crypto community, although there are mixed opinions about its impact on the cryptocurrency and financial industry as a whole. But the market tends to have its own judgment.
As you can see from the chart below, each halving in 2012, 2016, and 2020 profoundly affected the market in the following years, pushing the price of Bitcoin to astronomical levels.
After the halving next year, only 3.125 BTC will be awarded per block, and in 2028 and beyond, this number will be halved again. Another major supply shock is expected in 2024 when miners, institutional investors, and retail investors will start hoarding Bitcoin's SATS (minimum units).
In the crypto space, few things can be predicted simply and accurately. It's important not to just take the Bitcoin halving as a reason to invest in BTC. Financial markets often anticipate future events in advance, and with people eagerly anticipating the halving, surprises can happen around the time of the halving, especially given the renewed focus on crypto by major traditional financial investment firms.
Notably, two major cryptocurrency events in 2021, the Coinbase listing and El Salvador's official acceptance of BTC as legal tender, coincided with Bitcoin's price highs for each cycle, reaching the levels of 63,000 and 69,000, respectively, but then the price fell sharply.
However, the halving is not just a news event, it marks a fundamental change in the Bitcoin mining and issuance process. There are currently more than 19 million bitcoins in circulation, and less than 2 million are left before the last bitcoin (satoshi) was mined in 2140, so now is the time to accumulate bitcoins at a lower cost.
02
BlackRock ETF
BlackRock, an asset management giant with $9 trillion in assets under management, submitted an application for an exchange-traded fund (ETF) for Bitcoin, a spot Bitcoin ETF. Considering BlackRock's track record of success in the ETF space (576:1 success rate), this development is highly likely to be approved by the SEC (Securities and Exchange Commission) in the United States. If approved, the ETF is expected to significantly increase Bitcoin's visibility and promote its mainstream adoption by establishing it as a recognized and safe asset class that can be securely held and traded by regulated institutions, similar to common stocks.
Bitcoin spot ETFs have long been something Bitcoin enthusiasts look forward to, as they are considered extremely positive for several reasons:
1) It can attract new retail and institutional investors;
2) has the potential to drive widespread adoption of Bitcoin, increase liquidity, reduce volatility, and potentially provide more predictable price fluctuations;
3) Perhaps most importantly, its regulated nature has a strong appeal, as government oversight can directly prevent illicit financial activities orchestrated by malicious actors.
The managing director of Morgan Creek Digital believes that BlackRock will not be the only player in the Bitcoin ETF space. The SEC may also approve similar ETF proposals from other global asset managers, such as ARK Invest and Fidelity, in the near future.
03
Ethereum sharding upgrade
Cheaper and faster transactions are key factors driving the widespread adoption of decentralized platforms. As a dominant force in the industry, Ethereum recognizes the importance of achieving these goals to support the growing Web3 ecosystem, which requires faster and more affordable decentralized solutions. While Ethereum's current Layer 2 roll-up solutions demonstrate their ability to process data quickly and securely, they often come with high costs, which makes some of these advantages not obvious.
To solve this problem, Ethereum is actively working on a series of solutions. The first initiative is ProtoDanksharding (also known as EIP 4844), which aims to reduce the cost of roll-ups by introducing "data blocks". These blocks store on-chain data that is only valid for a limited period of time, typically lasting one to three months. Significant cost savings can be achieved by avoiding the need to store these packets permanently on Ethereum.
Currently, more than 90% of roll-up costs are spent maintaining this massive amount of data, whether it is actively utilized or not. Under the new approach, the responsibility for storing roll-up data falls on the entities that actually need it, such as indexing services and DEX/CEX.
Once implemented, the introduction of data blocks is expected to greatly enhance Ethereum's processing power and reduce transaction costs. The target launch of ProtoDanksharding is scheduled for the end of 2023, named after its developer. After this initial phase, Ethereum plans to advance the development of Danksharding, which aims to achieve millions of transactions per second.
If successful, these upgrades have the potential to attract a large number of new decentralized applications (dApps) to the Ethereum platform.
04
A new narrative dominated by crypto-AI and inscriptions
The popularity of artificial intelligence (AI) in 2023 has led to a significant increase in the price of blockchain platforms that integrate AI technology. Representative projects in the crypto AI track include SingularityNET, Phala Network, and Cortex. The integration of AI as a core feature is expected to increase the attractiveness of crypto-based platforms, triggering higher demand for their digital assets.
As blockchain and AI continue to converge in the Web3 ecosystem, and new metaverse narratives emerge, it is expected that digital asset technologies designed specifically for these use cases will once again be in the spotlight.
In addition, this year has witnessed the emergence of controversial new use cases for Bitcoin following its Taproot upgrade. The introduction of the BRC20 token standard and Bitcoin ordinal created new demand for block space on the Bitcoin network, led to higher transaction fees, and pushed the price of Bitcoin above $30,000 in Q1. While this development has sparked debate and controversy, it has also demonstrated the evolving dynamics and potential of Bitcoin as a versatile asset.
05
Macroeconomic recovery
A leading provider of credit ratings and financial analysis, according to S&P Global, there is a correlation between crypto and the macroeconomy. When central banks raise interest rates to combat inflation, it's not surprising that risky assets like Bitcoin and the like suffer losses.
The post-pandemic slump of 2020 has shown that when governments take economic stimulus and keep interest rates low to revive troubled markets, volatile assets such as cryptocurrencies and equities can surge in value due to the influx of new money.
With a recession looming, central banks and regulators are likely to release water in 2024 or 2025 after reaching their inflation targets. This initiative aims to create jobs and prevent the collapse of the economy (an unfortunate situation that, according to Arthur Hayes, may not happen until around 2026). The increased circulation of money means further investment in cryptocurrencies such as Bitcoin, both as a speculative investment and as a store of value against inflation.
S&P Global also provides another interesting point that government actions are not always the main drivers of cryptocurrency growth. When a recession is attributed to a government's imperfect fiscal policy, the public tends to turn to digital assets as a safe haven. This choice seems reasonable, as decentralized assets are independent of government control or influence. However, recent fluctuations in cryptoasset prices have shown that digital assets are far from a reliable safe-haven tool at the moment.
06
Supervision
- A high-profile crypto scandal
The FTX scandal and Celsius' bankruptcy have severely damaged the reputation of the crypto industry. As a result, the public is once again concerned about the safety and legitimacy of cryptocurrencies.
These incidents and other cases of hacking and scams involving cryptocurrencies have sparked a response from regulators, who are beginning to propose stricter regulatory measures for the booming industry.
If another high-profile crypto fraud case or prosecution emerges, it could lead to tougher legal action by regulators and other government agencies.
- The new President of the United States
With U.S. President Joe Biden and former U.S. President Donald Trump officially announcing their candidacy, they could have an impact on crypto anticipation bull runs, also known as "winnability."
In some ways, both candidates have shown support for cryptocurrency. For example, President Biden signed an executive order directing the exploration of a regulatory framework for decentralized assets. Similarly, former President Trump has also dabbled in NFTs, reportedly holding $2.8 million worth of ETH.
While these are positive signs for the future development of cryptocurrencies, it is important to note that their stance on cryptocurrencies may change in line with public sentiment.
Given their significant influence and competing positions, their negative remarks about cryptocurrencies in the future could also have a detrimental effect on the crypto bull market.
- SEC and Regulatory
Unfortunately, the FTX scandal has provided a potential reason for financial regulators such as the SEC to shut down or drastically restrict the operations of crypto and the entities behind it. Over the past year or two, the SEC and its chairman, Gary Gensler, have been aggressively cracking down on crypto projects that they consider securities (such as Ripple and Hex) and CEXs (such as BN and Coinbase) that they believe violate U.S. law.
However, during the U.S. election, Gensler and his team are likely to be less active because of the high stakes. It's also worth noting that Gensler acknowledges that Bitcoin is not a security and recognizes that Bitcoin plays an important role in the start and end of every bull run. In addition, regulation is expected to improve globally, from the EU to Asia, as well as the DeFi space.
07
conclusion
Based on the elements discussed in this article, as well as numerous others that we haven't covered, the crypto world has great potential in 2024. The digital asset class, represented by Bitcoin and Ethereum, has the potential to once again become the hottest commodity in the world. However, there is still a long way to go, and many holders often lose hope before things start to improve.
It takes a lot of determination and resilience to stick around until that point and make rational, non-emotional investment decisions. The market will undoubtedly be volatile again as market manipulators and institutions try to harvest weak retail investors and make a profit. At this point, the best course of action is to stay informed, be alert to bad behavior, protect our assets, and try to avoid irrational investments.
If you're planning to invest, do detailed research to identify trends and emerging narratives from past cycles. Additionally, it's important to only invest money that you can afford to lose, as this reduces the likelihood of emotionally driven decisions, and spreading out your buying time can also help achieve a more stable average price.
Note: This article is for informational purposes only and is not intended as any investment advice.