Is 2024 going to be the year for crypto?

Cryptocurrencies are making a comeback, and hopefully for the right reasons. Bitcoin has climbed 170% from a record low of $17,500 in January 2023 to more than double in January 2024 of $46,800. This begs the question: what has happened in the previous year to drive the crypto market to expand so rapidly? What happened before 2023 that caused the crypto industry to collapse? Will the current price rise or decrease? What do traditional banks think of DeFi? 2022 was a terrible year for the crypto industry. Not one but two massive blowouts happened that impacted the whole ecosystem: the crash of the Luna coin and UST and the bankruptcy of the second biggest crypto platform FTX. Over four years, the Terra ecosystem was being built until Luna and UST crashed in May 2022, causing an instant $60 billion dollar wipeout. Da Kwon, the founder of both coins, introduced his own stablecoin, UST, but unlike USDT, which is backed by fiat-based currencies, its price was backed by its sister coin Luna; you need to burn Luna to produce UST. When Luna tokens were $85, you could trade one for 85 UST. To retain its peg, one UST may always be swapped for one Luna. However, UST dropped to 0.90 pence, which caused people to sell their Luna, resulting in an increase in the circulating supply of Luna. This crash impacted the wider crypto market, and the New York Times remarked that “their meltdowns had a domino effect on the rest of the cryptocurrency market, tanking the price of Bitcoin and accelerating the loss of $300 billion”. If this was not bad enough, the industry was impacted even further in November 2022 with the crash of Sam Bankman-Fried’s crypto platform FTX. In November 2022, his crypto empire fell from a shocking “$16bn to zero within days as it filed for bankruptcy protection in the US”. This crash occurred due to a document being leaked that remarked that Alameda (FTX hedge fund) was using FTT coins to fund risky loans. This caused over one million people to lose their money, and BTC went down to its all-time low since 2020 of $16,650 dollars. Nevertheless, 2023 was a good year for the crypto market as Forbes commented: “The market witnessed massive support due to several optimistic factors such as inflation-tackling methods and the weakening dollar index in the U.S., which boosted the overall sentiments.” Major financial sector giants such as Blackrock, Fidelity Investments, BNY Mellon, and Citigroup have expressed an increasing interest in de- centralised finance. This leap of confidence reflects a trend in which established financial institutions see the benefits of crypto-currency. 2023 witnessed a massive price rise in the crypto industry with the overall market value reaching $1.7 trillion dollars. It’s not just the overall value that has increased in early 2024, but also the number of users as Glassnode, a Swiss blockchain advisor, has suggested that there are over “51.6 million Bitcoin wallets holding more than no zero amounts”. This makes me overly excited for the future of the industry as Bitcoin’s current market capitalisation was valued at $436 billion dollars on January 8, which is only 7% short of its all-time high. Yet, I would argue that the main factor to consider for the exponential rise of blockchain technology is the launch of a US spot bitcoin exchange-traded fund (ETF). This would allow investors to watch the value of Bitcoin and trade on standard market exchanges rather than cryptocurrency platforms. Since ETFs relate to stocks, this is a huge step forward for the crypto market because it encourages investors to be more motivated to participate in crypto. The Coin Telegraph believes that this will revolutionise the crypto industry and it could result in “an approval that may generate $600 billion in new demand”, which if it happens could make 2024 one of the most significant years in crypto’s history.