Crypto Analysts Predict Increased Appeal for Bitcoin in 2024
A recent annual report by CoinShares, a European asset manager, explores the state of the crypto industry and potential scenarios for 2024. The report suggests that Bitcoin could become more appealing to investors as the U.S. Federal Reserve considers cutting interest rates and individuals seek safer investment options in digital assets.
The Impact of Interest Rate Cuts
The report concludes that if the Federal Reserve cuts interest rates in the first half of 2024, Bitcoin, along with gold, may experience increased appeal. This shift in investor focus towards fixed supply assets could benefit cryptocurrencies.
A Pragmatic View
Market analyst Craig Erlam from Oanda takes a more cautious stance, acknowledging that it’s been a while since a significant rate-cutting cycle occurred. He believes that monetary easing has historically benefitted risk assets and that the current strong performance of the U.S. economy may further support this trend.
Bitcoin’s Correlation with the US Dollar
The CoinShares report also examines Bitcoin’s correlation with the US Dollar and other assets. It notes that Bitcoin typically exhibits a negative correlation with the dollar but suggests that this correlation may temporarily increase due to monetary policy shifts and market stress.
Doubts About Bitcoin as a Fixed-Supply Asset
Erlam expresses skepticism about Bitcoin’s potential as a fixed-supply asset or an inflation hedge. However, he also acknowledges that these characteristics are not necessary for Bitcoin to perform well.
The Importance of the US Market
According to CoinShares, the US market plays a crucial role in legitimizing Bitcoin ETFs globally. While spot-based Bitcoin ETPs have gained popularity in Europe, the approval of Bitcoin ETFs in the US market is seen as a significant indicator of legitimacy. However, it remains uncertain whether this will sustain a long-term bull run.
Ethereum’s Underappreciation
The report highlights that investors have not given Ethereum much attention, despite the Ethereum Foundation’s successful management of major network upgrades. The authors speculate about the possibility of an Ethereum ETF, especially considering recent statements by Cynthia Lummis regarding the SEC’s handling of Bitcoin ETFs.
Hot Take: Increased Appeal for Bitcoin in 2024
Although not predicting a rapid rise, crypto analysts believe that Bitcoin could become more appealing to investors in 2024. Factors such as potential interest rate cuts by the U.S. Federal Reserve and a shift towards fixed supply assets may contribute to this increased appeal. However, some analysts remain skeptical about Bitcoin’s prospects as a fixed-supply asset or an inflation hedge. The report also emphasizes the importance of the U.S. market in legitimizing Bitcoin ETFs globally and suggests that Ethereum is currently underappreciated by investors. Overall, while uncertainties remain, the outlook for Bitcoin in 2024 appears positive.
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