Blockchain
What to Watch in Bitcoin and Cryptocurrency Markets in the Second Half of 2024
Key points
- Cryptocurrency bulls say bitcoin may still have room to grow, as demand for spot bitcoin ETFs and the effects of the halving may not have kicked in yet.
- Some industry observers say that while there is bound to be demand for a spot ether ETF when it launches, it is unlikely to have the same level of success as bitcoin versions.
- Regulatory clarity remains a key hurdle, with investors closely watching statements from presidential candidates and recent developments for clues.
Bitcoin has surged this year, rising more than 30%, as demand for ETFs that hold the leading cryptocurrency has helped its price soar. But bitcoin prices have cooled recently, retreating from record highs set earlier this year.
That trend continued on Friday, with bitcoin falling below $57,000 in late afternoon trading after rising above $73,000 in March. So what’s next for the rest of 2024? Bullish investors say further demand for cryptocurrency-focused exchange-traded funds could push prices higher. But more trouble looms on the horizon.
Demand for Bitcoin, Ether ETF Could Boost Cryptocurrencies
Question about bitcoin spot (BTC) exchange-traded funds that started trading in January has supported the cryptocurrency this year. Bulls say the effect has not yet manifested itself.
New ETFs have seen net inflows of more than $14.4 billion, according to Farside Investors. Most of the flows into bitcoin ETFs, which hold the currency, are currently coming from self-directed investors, and market observers believe further demand could come as Financial advisors become less cautious to recommend crypto products to customers, increasing bitcoin itself.
“We don’t see a lot of institutions like pensions or endowments getting involved in ETFs yet,” said Bloomberg Intelligence analyst James Seyffart. “To me that means there are definitely areas of potential growth in demand.”
Investors generally expect that ether-based ETFs (ETH) that will hit the market this year: The Securities and Exchange Commission is expected to approve individual ETF applications by end of the summerThis could increase demand for cryptocurrencies.
Bitwise CIO Matt Hougan estimates $15 billion inflows into ether ETFs in the first 18 months. Seyffart, meanwhile, expects them to capture 20% to 25% of what bitcoin funds attracted in the first few months.
“We don’t think Ethereum ETFs will create the same buzz as Bitcoin ETFs, which have broken multiple records in terms of flows, assets, and trading volume,” Seyffart told Investopedia.
Growing demand for ETFs and the underlying bitcoin could translate into higher prices, especially as the cryptocurrency’s supply approaches its 21 million cap.
Elections and other issues to watch
Other topics to watch in the cryptocurrency industry this year include:
The presidential electionsDonald Trump has declared himself more supportive of cryptocurrency than it was during his presidential administration. President Joe Biden’s administration has been seen as advocating for stricter regulation, although some industry observers have interpreted a recent decision not to file charges related to Ethereum 2.0 as a sign of an evolving perspective.
“I would say the chances of ‘clarity’ before the election are 0%, and I think if there is any legislative framework, it won’t be until next year,” said Sarah Brennan, general counsel at Delphi Ventures.
The consequences of the bitcoin halving: Bitcoin Halving—in which the amount of new bitcoin generated every 10 minutes or so is cut in half—have historically had a positive impact on its price, according to analytics firm CCData, for periods ranging from about 370 days to nearly 550.
The last halving occurred about six months ago, but differed from previous cases because bitcoin had recovered so much before it. Analysts at Deutsche Bank and JPMorgan said much of the expected the price increase was already expected before the last halving.
While recent volatility may support this theory, bitcoin proponents believe the downtrend is temporary.
“It’s normal for a price drop like this to happen after a halving (halvings are incredibly bullish, but bull markets don’t start for several months, for fundamental reasons), Caitlin Long, founder and CEO of CustodiaBank, said in an X post in late June.
Mt. Gox Distributions: Bitcoin Exchange Fails Mt. Gox this week began distributing billions of dollars in bitcoin to former customers this month. The net effect of that supply surge, which has begun to hits the markets on FridayIt is uncertain: some consider it bearish, while others say the issue is exaggerated.