Topic: [List] Cryptocurrency 2023 year-end & 2024 prediction Reports (Read 126 times)

1. The long-awaited U.S. recession will finally arrive, but so will the first spot Bitcoin ETFs!

The U.S. economy will finally succumb to recession in the first half of the year. Economic momentum has been slowing for months, and inflation has cooled along, creating an economy more vulnerable to shocks. U.S. leading indicators are now in recessionary territory after 19 months of consecutive declines, close to a record. Shares of retailers are struggling, commodities are weak, employment is softening, corporate bankruptcy filings are back to early COVID levels, and the yield curve is inverted but steepening in recent weeks- all are very late-cycle dynamics. "Soft landing" mentions in the media have spiked, as they often do before an official recession is called. Bitcoin has only experienced one official US recession, from January to April 2020, during which it fell 60% peak-to-trough before rallying sharply once the Fed provided sufficient liquidity. Gold also tends to decline in the early periods of a recession - it fell 12% in two weeks in March 2020. Still, its recent breakout confirms strong demand for hard money that is not cancellable by U.S. authorities, a characteristic shared with Bitcoin. As debt levels are more concerning at the sovereign than corporate or household levels, we expect more than $2.4B will flow into newly approved US spot Bitcoin ETFs in Q1 2024 to keep the Bitcoin price elevated. Notwithstanding the possibility of significant volatility, the Bitcoin price is unlikely to fall below $30k in Q1 2024.

We approximate the inflows into Bitcoin ETFs by examining the relative ratios of the SPDR Gold Shares (GLD) ETF and adjusting it to 2023 dollars. The GLD ETF launched on November 18, 2004, and it saw inflows of around $1B in the first few days of launch, and by the end of Q1 2005, around $2.26B was in GLD. At that date, the total physical gold supply stood at around 152k metric tons, with each ton worth around $15.6M, which implies a total market value of $2.36T. The initial dollar inflows into GLD in those first few days post-launch were around 0.04% of the total gold market. Around one quarter later, on March 31, 2005, GLD reached inflows of $2.26B, and after accounting for supply growth and gold price changes, GLD had become 0.1% of the global gold supply. If we apply these figures to the Bitcoin spot market, we arrive at inflows of $310M in the first few days of BTC spot ETF and ~$750M within a quarter.

However, that was the era of higher interest rates and a far lower money supply. In 2023, we are no longer in the “Dead Ball” era of finance but are careening through the HGH/Steroid era. As measured by the New York Federal Reserve Bank, the supply of M2 in November 2004 was 6.4T dollars compared to $20.7T in October 2023. As such, we believe it is logical to apply that ratio, 3.23x, to possible inflows, bringing us to around $1B in the first few days of a spot Bitcoin ETF and $2.4B within a quarter. Extending our logic further, a more mature state of the BTC ETF may approximate around 1.7%, the approximate amount of gold’s total supply held in gold ETFs, of the total spot market for BTC. This initial sum stands at around $12.5B. As we assume that Bitcoin is taking significant market share from Gold among the hard money crowd and expect 2024 to be a peak year of voter understanding of debt-driven money printing, we apply our 3.23x multiple based on M2 outstanding, to arrive at a medium-term estimate of $40.4B inflows over the first two years of trading.

Lastly, we note that Coinbase charges retail traders all-in transaction fees of ~2.5%. We believe spot Bitcoin ETFs will likely trade at ~10bps spreads, with zero commission at many brokerages. When was the last time a 10x cost reduction didn't catalyze MUCH higher penetration for new tech?

2. The 4th Bitcoin halving will occur with minimal drama.

The four-year Bitcoin halving will proceed without a major fork or missed blocks in April 2024. As the new coin issuance gets cut in half, unprofitable miners will disconnect, ceding shares to those with low-cost power. Still, the public markets will see little distress thanks to much-improved balance sheets among listed miners, who currently control a record % global hash rate (~25%). After a brief (several days to several weeks) period of consolidation post-halving, as the market digests the additional selling pressure from unprofitable miners, Bitcoin will rise above $48k, the neckline of the head-and-shoulder pattern completed in April 2022. Bitcoin miners, in aggregate, will underperform the Bitcoin price before the halving, although the low-cost miners CLSK and RIOT will outperform the field. After the halving, we expect at least one publicly traded miner to be 10x by the end of the year.

3. Bitcoin will make an all-time high in Q4.

In the second half of 2024, Bitcoin will climb a Presidential-sized wall of worry. The percentage of the global population voting in legislative and presidential elections will hit an all-time high above 45% in 2024. This high level of important elections augurs high volatility and the prospect of significant changes. More specifically, we see mounting evidence that voters and courts are rejecting the anti-growth agenda of the Green lobby. Thus, after a combative election that saw Donald Trump win 290 electoral votes and regain the Presidency, raising optimism that the SEC's hostile regulatory approach will be dismantled, we think the Bitcoin price will reach an all-time high on November 9th, exactly 3 years to the day from its last all-time high. (Recall that Bitcoin’s breakout in November 2020 also came exactly three years to the day from its November 2017 top). If Bitcoin reaches $100k by December, we make a long-shot call that Satoshi Nakamoto will be named Time Magazine's "Man of the Year."

4. Ethereum won’t flip Bitcoin in 2024

Ethereum will fail to flip Bitcoin in 2024, but it will outperform every mega-cap tech stock. Bitcoin’s more apparent regulatory status and energy intensity will attract interest from quasi-state entities in Latin America, the Middle East, and Asia. Argentina will join El Salvador, the UAE, Oman, and Bhutan as the fifth country to sponsor Bitcoin mining at the state level, as Argentina’s state-owned energy giant YPF may indicate interest in mining digital assets with stranded methane and gas. Like past cycles, Bitcoin will lead the market to rally, and the value will flow into smaller tokens just after the halving. ETH won’t begin outperforming Bitcoin until post-halving and may outperform for the year, but there will be no “flippening.” Despite a strong performance in 2024, ETH will lose market share to other smart contract platforms with less uncertainty surrounding their scalability roadmap, such as Solana.

6. NFT activity will rebound to an all-time high.

Monthly NFT volumes will approach a new all-time high as speculators return to crypto and gravitate toward top NFT collections on Ethereum, improved crypto games, and new Bitcoin-based offerings. Despite ETH's nearly 50-1 ratio vs. Bitcoin in primary NFT sales since inception, Bitcoin's Ordinals protocol and emerging layer 2 chains on Bitcoin will drive a continued rebirth in Bitcoin network fees. The ratio of ETH-to-BTC primary NFT issuance will end in 2024 closer to 3-1. Stacks (STX), a smart contract platform secured by Bitcoin, will become a top-30 coin by market cap (currently #54).

7. Binance will lose the #1 position for spot trading.

Binance will lose its throne as the #1 centralized exchange by volumes after the company's $4B settlement with US regulators. OKX, Bybit, Coinbase, and Bitget will emerge as well-funded competitors with the potential to grab the #1 spot. Crypto exchanges' pricing inclusion in regulated indices, such as those administered by VanEck subsidiary MarketVectors, will become a critical variable in determining whether certain centralized exchanges are eligible to provide liquidity for ETF-authorized participants and sponsors. With Binance now facing a 3-year DOJ colonoscopy, Coinbase's international futures market will gain share and surpass $1B/day volume, up from ~$200M/day in November 2023.

8. Stablecoin market cap will reach a new all-time high as USDC reverses share losses.

The total value of stablecoins on the chain will reach an all-time high above $200B (currently $128B) as Markets in Crypto Assets (MiCA) regulated stablecoins launch in Europe, yield-bearing stablecoins proliferate, and trading volumes continue to rebound. More controversially, USDC will flip USDT, as more institutional adoption will reveal a preference for USDC already evident on newer L2 chains. Tether’s market share losses may finally materialize after the U.S. U.S. Department of Justice (DOJ) takes enforcement against Justin Sun & Tron for Know Your Customer (KYC) infractions, terror financing, and/or market manipulation.

9. DEX market share of spot trading will reach new all-time highs.


Decentralized Exchange (DEX) market share of spot crypto trading will rise to an all-time high as high-throughput chains like Solana improve the on-chain trading experience for users. Meanwhile, much-improved wallets - incorporating "account abstraction," a critical feature in enabling automated payments -- will push more users on-chain and into self-custody solutions. As BTC and ETH dominance likely declines after the Bitcoin halving, the long tail of assets may grow faster, skewing trading activity towards decentralized exchanges that list coins earlier in their lifecycle.

10. Remittances and smart contract platforms will power a new Bitcoin yield opportunity

Remittances will emerge as a killer blockchain use case as easier off-ramping and spending of stablecoins make recipient payouts cheap and useful in emerging markets. Given the use of the Bitcoin and layer 2 Lightning (LN) network in some remittance corridors, "Bitcoin Staking" will become a narrative in 2024. With transaction costs rising on the Bitcoin blockchain, BTC maximalists will start spreading the news that you can stake on the BTC network and earn a yield. Staking to Lightning Nodes happens today but is risky and has low return as your BTC is used for payment settlements on the Lightning network. With the proliferation protocols that abstract the technical nuances of managing a Lightning node, such as Amboss, along with federated self-custody solutions like Fedi, users will be able to participate in the remittance market from cold wallets and earn some yield. In addition, Bitcoin holders will be given a new business opportunity in 2024 as a provider of security to Proof of Stake blockchains. Utilizing projects like Cosmos-based Babylon, which will enable BTC holders to earn yield by offering non-custodial staking of PoS chains, Bitcoin holders will be able to earn yield on their Bitcoin and potentially participate in an array of other productive use cases for their BTC.