Some altcoins will most likely follow suit, even outperforming BTC and ETH.
It’s felt like an eternity since Bitcoin (BTC), Ethereum (ETH) and other digital assets hit their all-time highs.
Hats off to any XRP believers who have been waiting since 2017…talk about a long time.
Two events will be major catalysts for the next market-wide bull run. These will smash the ATHs and various records set in 2021 when the entire crypto market hit $2.8 trillion in circulating market cap.
However, nothing is guaranteed, and macroeconomic events will still significantly influence prices for BTC and ETH, which will, in turn, have repercussions for other cryptocurrencies.
Here are the two significant events to watch in this space:
1) Bitcoin and Ethereum Spot ETFs
If there’s one concept that has been the main talking point of Bitcoin and crypto in 2023, it would have to be exchange-traded funds, specifically spot ETFs.
Before continuing, what is a spot ETF? How does it compare to a futures ETF?
A Bitcoin Spot ETF permits retail and institutional clients to gain exposure to BTC in real time without directly holding the asset in a Bitcoin wallet.
In contrast, a Bitcoin Futures ETF contract would involve buying the asset at a set price at a pre-determined date. The latter’s set of contracts expires monthly and usually occurs on the last Friday of each month.
The real excitement about the spot ETF is that any company approved to offer this investment must hold BTC in their wallet.
I.e., they must own BTC directly on their clients’ behalf if they offer a Bitcoin Spot ETF.
Just imagine the hundreds of billions, perhaps trillions, of dollars that could readily flow into the crypto market once these ETFs get approved in the USA.
Yes, it is a matter of time, particularly as other countries and regions worldwide have already approved such products for people within their jurisdictions.
Even though I don’t find it necessary in 2023 to rely on a Bitcoin Spot ETF to get BTC to hit $100,000 (we already have plenty of reputable exchanges and reliable non-custodial wallets for that), I welcome any measures that encourage more people – particularly every day (retail) investors – to get their foot in the door.
There is a growing list of companies that collectively have tens of trillions of dollars in assets under management, namely BlackRock, Fidelity, JPMorgan Chase & Co., etc.
1/ last week's @BlackRock spot Bitcoin ETF filing was big news!
but, it's not the only story. many of the largest financial institutions in the US are actively working to provide access to Bitcoin and more.
a quick glance – $27 trillion of client assets here! pic.twitter.com/azmHZmUL2a
— Meltem Demirors (@Melt_Dem) June 26, 2023
Decrypt provides a comprehensive rundown of the different companies that intend to offer an Ether Spot ETF.
2) Bitcoin Block Reward Halving
Here we go again about this Bitcoin halving that’s still months away.
I know it’s repetitive, but there’s a reason why people keep on going on about it.
Based on the past three BTC price cycles, it is definitely one of, if not the most, bullish indicators for Bitcoin’s price, propelling the rest of the market.
This involves halving the amount of new Bitcoin entering circulation approximately every four years, thus reducing its inflation rate.
The 2024 Bitcoin Block Reward Halving is scheduled for 26 April at the time of writing. However, this could be ± 2-3 days.
Visit the official Bitcoin Block Halving website for the latest information about this event, including relevant metrics.
One of many bitcoin scenarios … pic.twitter.com/7qOOqoEWzO
— PlanB (@100trillionUSD) August 13, 2023
In the coming months and years, two other things to watch are the growing uptake of layer-2 scaling solutions (L2s) and, specifically for Ethereum, sharding and rollups.
L2s are additional layers built on top of a layer-1 (i.e., a base chain, such as Bitcoin, Ethereum, Cardano, and so on) that help these L1s make significant scaling improvements to consistently hit >5,000 transactions per second.
This benchmark is important for any blockchain to compete with Visa or Mastercard.
Sharding (a.k.a. Danksharding) and (zero-knowledge and optimistic) rollups for Ethereum will further enhance scalability and address one of the biggest issues plaguing its blockchain for several years: high gas fees for processing transactions on Ethereum.
As computation is the slow, expensive part of using Ethereum, optimistic rollups can offer up to 10-100x improvements in scalability. Optimistic rollups also write transactions to Ethereum as calldata, reducing gas costs for users.
This is just one (albeit huge) network, so what’s the big deal?
Well, the thing is, these fees don’t just impact Ethereum – there are thousands of tokens built on its blockchain, notably ERC-20 tokens.
One of your favourite projects or tokens likely falls into this category.
Remember when transaction fees cost dozens if not hundreds of dollars (no joke, this was common for a while) in 2021 on decentralised exchanges such as Uniswap?
Well, a lack of Ethereum scalability was a major contributor to this.
Fortunately, ongoing improvements to L2s, rollups and sharding will solve this issue once and for all…but it will still take at least a few years.
As per altcoins, I expect a mixed bag of results: Whilst I am confident about the prospects of several mid-to-high cap alts (e.g., ADA, XRP, MATIC, possibly BNB), many others will underperform compared to BTC and ETH.
If global economic conditions worsen going into 2024 and economies/societies become even more destabilised – which, unfortunately, seems to be the case – this could reduce the amount of disposable income being assigned to crypto in the short term.
However, the silver lining is that the collapse of multiple fiat currencies in the coming years – with their inflation rates in recent years leaving much to be desired – could gradually lead to people converting large amounts of their local money into BTC, ETH or other digital assets. Turkey is a recent example of this.
As a reminder, just because your favourite asset hit an ATH in the last bull market, it doesn’t mean it will surpass that figure, let alone emulate that performance back in 2021.
What other important Bitcoin and Ethereum events are you looking forward to, going into 2024?
Altcoin Daily produced this video yesterday with another crypto expert, Benjamin Cowen. He shared his thoughts about parallels between the dot-com bubble and multiple altcoins. He also gave outlooks for BTC, ETH, XRP and BNB. Check out the video here.
N.B. None of this is financial advice; I am not a financial advisor. You are ultimately responsible for crypto investments, let alone in any asset class.
- The opinions expressed within this piece are my own and might not reflect those behind any news outlet, person, organisation, or otherwise listed here.
- Please do your research before investing in any crypto assets, staking, NFTs and other products affiliated with this space.
- For transparency, Bitcoin (BTC) and Ethereum (ETH) combined represent about half of my crypto portfolio.