Crypto To Watch In 2024

Last year was a landmark year for the cryptocurrency market, with a number significant events shaping the industry’s trajectory. 

One of the most notable developments was the collapse of Silicon Valley Bank (SVB), which had a ripple effect on the perception and value of cryptocurrencies, particularly Bitcoin. SVB’s downfall was catalysed by ongoing interest rate increases by the US Federal Reserve, which led to a consequential sell-off in US Treasuries, culminating in substantial unrealised losses on the bank’s balance sheet. 

Depositors withdrew an astonishing $US42 billion in a single day before the bank’s collapse, undermining confidence in regulated banks and highlighting the advantages of decentralised currencies like Bitcoin. At the time, the narrative surrounding Bitcoin’s decentralised nature and self-custody capabilities drove its price surge, with BTC pushing above $US30,000 in April 2023 and sustaining positive momentum throughout the year.

The collapse of Silicon Valley Bank (SVB) also significantly affected USD Coin (USDC), the second-largest stablecoin by market capitalisation, which was approximately $US43 billion at the time. Circle, the entity behind USDC, held a portion of its reserves with SVB, and the bank’s failure led to diminished confidence in Circle’s capacity to redeem USDC for underlying US dollars. This erosion of trust led to a temporary de-pegging of USDC from its intended 1:1 value with the USD, resulting in a notable decline in its market share within the stablecoin sector. At the time of writing, the market capitalisation of USDC stands at approximately $US34 billion.

The cryptocurrency market also faced significant headwinds, with the US Securities and Exchange Commission (SEC) launching lawsuits against major exchanges Binance and Coinbase. The SEC’s allegations that these platforms offered unregistered securities to the public cast a shadow over the industry, with many coins experiencing significant drops in value following the news. The situation was further compounded when Binance pleaded guilty to a criminal charge and agreed to a hefty $US4.3 billion fine to resolve an investigation by the Department of Justice, leading to the resignation of its CEO, Changpeng Zhao.

Despite these setbacks, there were positive moments, too, with BlackRock’s iShares unit filing for a spot Bitcoin ETF, signalling a potential paradigm shift in institutional engagement with cryptocurrency. BlackRock’s move was particularly significant given the SEC’s history of rejecting similar applications. The announcement of the iShares Bitcoin Trust gave the cryptocurrency market a much-needed boost, driving the BTC price up over $US40,000 in early December.

As investors anticipated that the pending BTC ETF applications would be approved in early January (which ended up being correct), the market surged into the new year and solidified 2023 as a bullish year for digital assets.

As we enter the second quarter 2024, the cryptocurrency market is riding a wave of optimism, buoyed by increased institutional adoption and the most positive economic outlook in three years. 

Most notably, significant positive regulatory developments have already made headlines in the first few weeks of the year. 

Armani Baktyary, Intel Research Analyst at Messari, tells Forbes Advisor: “Positive regulatory action worldwide towards cryptocurrencies, including the XRP and GBTC lawsuits and the historic approval of 11 spot Bitcoin ETFs in the US, has been a major tailwind for the market.”

A key monetary policy shift from the US Federal Reserve further bolsters the optimistic outlook for the cryptocurrency market in 2024, Baktyary says.

“The US Federal Reserve’s decision to stop hiking interest rates will likely produce good results for all markets, crypto included,” he says.

Indications suggest that the Fed plans to pause its practice of raising interest rates, and potentially even cut them later in the year. This move, effectively quantitative easing, is significant for financial markets, including cryptocurrencies. 

This change in policy by the Federal Reserve has a dual impact. Firstly, it leads to an increase in the amount of money circulating in the economy. More money in the system generally boosts investment and spending. Secondly, by halting interest rate hikes, the number of attractive, low-risk investment options (like bonds) decreases. This situation often nudges investors towards higher-risk assets, such as cryptocurrencies and stocks, in search of better returns. This shift in investment behaviour can inject more capital into the crypto market, potentially driving up the prices and overall market activity.

On top of this, Baktyary notes that 2024 is also a US election year, which is significant because “in US election years, incumbents are more likely to undertake positive acts towards markets to aid their election chances.”

Another crucial aspect shaping the 2024 crypto landscape is the fruition of investments made during the last bull run. 

“Teams behind many crypto projects have been working diligently for the past two to three years on upcoming launches, leveraging the huge inflow of capital investments received during the last bull run in 2021,” Baktyary says. 

This confluence of favourable monetary policy, election year dynamics, positive regulatory developments, and the maturation of crypto projects points to a robust year for cryptocurrencies in 2024. 

Will Bitcoin’s Price Rise in 2024?

The year 2024 has started on a high note for Bitcoin, fuelled by a series of positive developments that have significantly bolstered investor confidence in the cryptocurrency market. The approval of 11 spot Bitcoin ETFs, including one managed by BlackRock, the world’s largest asset manager, marks a watershed moment for Bitcoin, indicating a maturing market and increasing institutional acceptance.

“New ETFs, including BlackRock’s, have already outperformed other ETF launches significantly, arguably being the second most successful ETF launch after Gold,” Baktyary says. In the months following the approval, BTC has surged past its previous all-time high price, reaching new heights of over $US73,000.

Another crucial factor likely to influence Bitcoin’s price trajectory in 2024 is the ‘halving’ event, which refers to the halving of the reward for mining Bitcoin transactions. The halving successfully occurred on April 20, effectively reduced the issuance of new Bitcoins from 6.25 per block down to 3.125. This event historically has had a bullish impact on Bitcoin’s price due to the reduced rate of new Bitcoin entering the market, making it more scarce.

Additionally, the general outlook for the US markets appears favourable, which traditionally has a positive correlation with Bitcoin’s price. A stable or bullish stock market often increases investors’ risk appetite, potentially driving more investment towards Bitcoin and other cryptocurrencies.

Is Crypto Going to Crash?

Since the digital asset market reached a total market cap of over $US3 trillion in late 2021, it fell over 70% in 2022 to $US850 billion. This percentage drop is in line with previous crypto market crashes. While history cannot foretell what will happen in the future, the past year has been positive for crypto markets, with many cryptocurrencies, such as Bitcoin and Ethereum, marking triple-digit gains.

Crypto’s performance over the past year aligns with the US economic data, which shows inflation levels falling to more manageable levels, suggesting the possibility of interest rate cuts in the US and Australia in the latter half of 2024. While the future is unpredictable, some factors point towards 2024 being a better year for digital assets than 2023, which was already a spectacular year compared to the bear market in the year prior.

As the cryptocurrency landscape evolves, certain projects stand out for their innovative approach and potential for substantial growth.

Here are some cryptocurrencies to keep an eye on for 2024:

Immutable X (IMX)  

Immutable X has rapidly gained prominence in the blockchain gaming sector, an area that Baktyary regards as “the most funded sector in the crypto space in both 2022 and 2023.” This significant funding underscores the sector’s vast potential and investor interest. Immutable X’s strategic partnership with Polygon, a former competitor, has been a game-changer. Together, they now dominate about 80% of the blockchain gaming market. 

“Previously competitors, Polygon and Immutable X now hold a dominant position with most crypto games being developed within their combined ecosystem,” Baktyary notes.

This partnership has transformed Immutable X into a central hub for blockchain gaming, not just focusing on a single game but facilitating the development of over 200 games. 

“They’re not just building one game; they’re becoming the hub for games built on the blockchain.” This broad approach increases the likelihood of significant success within the gaming sector,” Baktyary says.

Additionally, Immutable X has forged partnerships with major industry players like Amazon Web Services (AWS) and Ubisoft, and has games available on the Epic Games Store. These collaborations signify the project’s strong business development and potential for widespread adoption.

Another key feature of Immutable X is its focus on zk-rollup technology, which enhances scalability, security, and user experience. This positions Immutable X at the forefront of technological innovation in the crypto space. “They are one of the trailblazers in zk tech,” Baktyary adds, “which opens doors for much more than the market currently sees.”

Polygon (MATIC/POL)

Polygon, partnering with Immutable X in gaming, stands out for its broader contributions to blockchain technology. Its widespread adoption of the Chain Development Kit (CDK), more colloquially referred to as the Polygon stack, demonstrates the robustness and versatility of its technology. 

“Large Chain Development Kit adoption marks Polygon’s significant presence in the blockchain infrastructure,” Baktyary says.

Polygon’s introduction of Polygon 2.0 adds a multi-layered structure to its protocol, with a notable layer being the Staking Layer. This layer uses Polygon’s native token and enables validators to earn rewards, including transaction fees, from the chains they validate. 

“Polygon (Staking Layer) offers validators potential for additional revenue streams,” Baktyary says.

Moreover, Polygon is a leader in zero-knowledge technology, with its zkEVM already operational. This technology enhances privacy and scalability in blockchain transactions, making Polygon a forerunner in this area.

Polygon is also making strides in scalability by transitioning its PoS chain to become a Validium, including experiments in parallelising execution. This move further enhances network efficiency. 

“Polygon’s transition to becoming a Validium shows its commitment to advancing blockchain modularity and Ethereum alignment,” Baktyary says. Its advancements in technology and strategic direction highlight Polygon’s role as a pioneer in the blockchain ecosystem.

Optimism (OP)

Optimism (OP) stands out as a significant player in the blockchain space, with several key achievements underlining its importance in the evolving cryptocurrency landscape.

One of Optimism’s key accomplishments is its success in stack adoption, where it ranks second only to Polygon. In the world of blockchain, a “stack” refers to the layered structure of technology solutions and protocols that build upon each other to create a comprehensive system. In this context, the Optimism stack refers to its core codebase that is used to help bootstrap other layer-2 blockchains within the Optimism ecosystem. 

Baktyary says: “Optimism has the second-largest public stack adoption amongst layer-2 stacks, following Polygon, including strong clients such as Coinbase, who are committed to maintaining the integrity of the stack.” 

This high level of adoption signals trust in Optimism’s technology and its potential for broad application and integration across different blockchain platforms.

Another significant stride for Optimism is its partnership with Coinbase, one of the largest cryptocurrency exchanges. This collaboration, with Coinbase using Optimism’s stack, is a testament to the project’s safety and technological robustness, Baktyary notes, and “is huge from a safety perspective”.  This relationship bolsters Optimism’s credibility and extends its reach to a wider audience, fostering further adoption.

In terms of governance and community engagement, Optimism has made notable progress and received applause from the crypto community. The success of Optimism’s governance model has even been highlighted in a Stanford article, indicating a mature and thoughtful approach to involving the community in decision-making processes.

Baktyary adds that the Optimism team appears to be strongly aligned with the Ethereum ecosystem, and this demonstrates its adherence to core blockchain values, which resonates with a significant portion of the market.

Like Polygon and Immutable X, Optimism is also at the forefront of technological innovation with its advancements in zero-knowledge (zk) technology. 

“Optimism’s Bedrock upgrade enables support for multiple execution layer clients and an abstraction of the proof system, allowing a rollup on the OP stack to use either a fault proof or validity proof system,” Baktyary says.

“This upgrade is Optimism’s first step to adoption of zk tech.”

EigenLayer

Another project attracting attention for its pioneering technology is EigenLayer.

The project is heightened by the prospect of a reward system for users, a move that Baktyary suggests is aimed at appreciating early adopters.

 “EigenLayer doesn’t yet have a token, but its point system and introduction of projects such as EigenDA have led the market to assume that there may be an airdrop in the future,” he says.

The cornerstone of EigenLayer’s innovation is its breakthrough Actively Validated Services (AVS) technology. 

This technology benefits a variety of applications, from data availability layers to oracle networks, by allowing them to benefit from external validator sets, thereby reducing the cost of securing and verifying their networks. 

“AVS is a huge new primitive that enables exporting a blockchain’s validator security to a brand new set of software and use cases,” Baktyary says.

EigenLayer’s ability to export validator security can also contribute to improving ecosystem interoperability. Networks and ecosystems that would have been previously siloed would need to bootstrap their own validator set, usually commit high token incentives to validators, and all the while run the risk of a somewhat centralised validator set. Now networks at their early stages could just pull their validator security from another network that already has those early-stage blockchain issues resolved.

Addressing critical issues within the Ethereum ecosystem, particularly around staking providers, EigenLayer proposes a solution to bring balance and enhanced security. 

“EigenLayer can help incentivise a limit system for staking providers with a majority share of validators such as Lido; a topic that has been a large topic of debate within the Ethereum ecosystem,”  Baktyary says.

Furthermore, EigenLayer’s advancements could promote scaling solutions like Validiums and potentially extend the use of Ethereum validators to secure other blockchains, including Solana and Cosmos. This development represents a leap in blockchain scalability and security, which Baktyary notes as a crucial step for the broader application of Ethereum’s technology.

“EigenLayer can help enable Validiums with projects such as EigenDA, and can theoretically have blockhains like Ethereum secure alternate layer 1 blockchains, such as Solana.” he says.

As we head further into 2024, the question of whether it is a good time to invest in cryptocurrencies is on many investors’ minds. This year’s positive developments, including the approval of multiple spot Bitcoin ETFs and the positive economic outlook, paint an optimistic picture for the cryptocurrency market.

The crypto market has shown resilience and growth potential, with many projects demonstrating innovation and strategic partnerships that could drive future growth. These factors collectively indicate a maturing market with expanding opportunities.

However, it is crucial to approach cryptocurrency investment with caution. This relatively new market is still evolving, with regulatory changes and technological advancements continuously shaping the market. The past volatility of cryptocurrencies also serves as a reminder that while the potential for high returns exists, so does the risk of significant losses. Potential investors should conduct thorough research, understand the risks involved, and consider their investment timeframe and risk tolerance.

For those considering a long-term investment strategy, the current market conditions, technological advancements and regulatory clarity emerging in the crypto space may present a compelling opportunity. As evidenced by major financial players entering the market, the growing institutional acceptance adds a layer of legitimacy to cryptocurrencies and could indicate a trend towards more stable growth.

While now is a promising time to consider investing in cryptocurrencies, it should be done with a level of prudence and a clear understanding of the market’s complexities and inherent risks. Diversifying investments and staying informed about ongoing developments in the crypto world are critical strategies for navigating this dynamic and potentially rewarding investment landscape.

This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class.  Cryptocurrency is unregulated in Australia and your capital is at risk. Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital. You should always consider whether you can afford to lose your money before deciding to trade in CFDs or cryptocurrency, and seek advice from an authorised financial advisor.