According to analysts, an increase in the activities of financial institutions is expected in the cryptocurrency market in 2024. This prediction is based on the potential approval of a spot Bitcoin ETF, expected Fed rate cuts, and greater regulatory clarity.
Analysts from three crypto exchanges and a crypto lending platform have suggested that institutional investors will take a more active interest in the cryptocurrency sector in 2024. According to analysts, this trend has already begun, as data from derivatives exchange Deribit shows an increase in the activity of institutional investors since October 2023.
“There has been a noticeable increase in institutional activity since late October, largely driven by the anticipation surrounding potential ETF news expected in January and the strategic positioning of clients for this event,” said Luuk Strijers, Chief Commercial Officer at Deribit.
According to Bitfinex analysts, the primary trigger for increased participation by traditional financial institutions will be the approval of a spot Bitcoin ETF. Asset managers such as Blackrock, Fidelity, Valkyrie and ARK Invest are racing to get the first spot BTC ETF application approved by the US Securities and Exchange Commission.
They added that Spot BTC ETF approval could come as early as the first month of the new year. “Predictions are being made for a spot BTC ETF to be approved by January 10, 2024,” analysts said.
Bitfinex analysts also suggested that potential interest rate cuts in 2024 would encourage institutional investors with a sense of risk-taking. “An interest rate cut could make risky assets like BTC more attractive to institutional investors looking for higher returns in a lower interest rate environment,” they added.
Market indicators point to a rate pause at the next Federal Open Market Committee (FOMC) meeting on December 13 and a rate cut in spring 2024.
According to Bitfinex, investors will be encouraged by more regulatory clarity in the new year. Most important in terms of regulatory clarity would be the approval of a spot BTC ETF, which would “provide a regulated and more accessible investment vehicle for both retail and institutional investors,” Bitfinex analysts said.
Bittrex Global CEO Oliver Linch stated that 2024 is set to be the year when global judicial authorities begin the process of clarifying their regulations for the digital asset space. Linch talked about the EU's MiCA legislation, which is scheduled to come into full force by the end of the year. It also highlighted important regulatory developments in Singapore, Hong Kong and Japan.
*This is not investment advice.