With Bitcoin ETFs a reality, what’s next for crypto in 2024?
IT'S only February tomorrow, yet it seems like the big cryptocurrency news of the year may have already happened. The approval of Bitcoin exchange-traded funds (ETFs) was undoubtedly a landmark moment for the entire industry, but in some ways, it has also turned out to be somewhat of a damp squib so far.
Crypto can be a febrile world – people get excited and the price of individual tokens can make massive moves upwards. Equally, however, a bit of fear, uncertainty, and doubt (FUD) can send markets spiralling – even where it is purely speculative.
Before Christmas, I set out a few themes that would likely shape 2024. We all know about forthcoming events like the Bitcoin ‘halving’ on April 20, when the rewards given to miners will be reduced by 50%. I also talked about the prospects for more central bank digital currencies (CBDCs) and the likelihood of greater regulation.
Does the introduction of Bitcoin ETFs change any of that? Perhaps not. But, it does open up new possibilities and themes that may come to pass:
1) ETFs launch should encourage reflection – First, a word on the much-vaunted arrival of Bitcoin ETFs. There was great excitement all round, but the reality has been far from what many predicted. Hopefully that will make a lot of people think long and hard, as the juvenile excitement from so-called influencers and others is, frankly, embarrassing. Despite all the blaring that $10 billion has been traded, actual trading has been about $800 million since it began. That represents a fraction of Bitcoin trading and has no effect on anything. The reason, of course, is that, Grayscale and its peers have shifted from existing Bitcoin funds into their ETFs.
2) Layer 2 projects to the fore – The launch of ETFs might just be the point where real people realise that crypto, as it stands, is not that useful; nor does it have a specific purpose – whatever that purpose is supposed to be. For that reason, layer 2 projects will only grow in importance and may provide the most interesting use cases for crypto. Over time, they may even push layer 1 projects – the infrastructure on which they are built – into the background.
3) More institutional interest – One of the potential positive consequences of Bitcoin being on traditional financial markets is that this usually entails greater regulatory oversight and clarity. And, where there are rules and protections in place, more institutional interest and investment tends to follow – with sustainability another key point. In fact, the ESG credentials of any crypto project may become the first question to be addressed.
4) The digitalisation of assets will gather pace – More digitalisation and tokenisation will happen as these concepts become familiar to an increasing number of people. This will include, but not be limited to, the aforementioned CBDCs. The UK authorities have already told us about how secure and safe individuals’ data will be in relation to ‘Britcoin’. Using blockchains to record ownership and the division of assets feels sensible, and the fact that it is immutable only strengthens the case for doing so.
5) The growth of digital payments will continue – While Bitcoin ETFs may only underline some of the shortcomings of crypto in its current form, it still retains some distinct advantages over fiat too. Just two of them are the lower costs and higher speed associated with crypto transactions. As such, we could find crypto embedded into more payment systems over the course of 2024 and into next year.
6) A billion crypto users – Finally, I’ll happily go out on a limb here, by the end of 2024, I expect there to be more than one billion crypto users. That would mean more than double the last count of 425 million from October 2023. That may seem farfetched, but provided all of the above predictions happen, crypto will only become more accessible and mainstream.
