Once 2023 is complete, crypto investors will be monitoring the central bank’s interest rates and the U.S. regulatory decision on new bitcoin products.

Meanwhile, we recall how this year turned out for the main cryptocurrency and what to expect in 2024.

 

What happened?

This year, cryptocurrencies have begun a recovery from a stressful 2022, when a market crash and a string of scandals, including the FTX collapse and fraud allegations against its CEO, Sam Bankman-Freed, undermined confidence in the industry.

The price of bitcoin, the largest cryptocurrency and the market’s main barometer, has more than doubled this year, hitting a 20-month high of $42,000 per token in November. As of Friday, 2023 was the best year since 2020 in terms of percentage gains.

The market is supported by expectations that cooling inflation will allow central banks around the world to abandon further rate hikes and begin easing rates next year, making risky assets more attractive. The long-awaited move by the U.S. Securities and Exchange Commission (SEC) to approve a bitcoin spot exchange-traded fund (ETF) has also been a boost.

These topics, along with the expected April “two-fold cut” of bitcoin – a process that reduces the supply of tokens – will still be positive for the market next year, analysts say, although some warn that the market is unlikely to change its all-time highs of 2021.

The U.S. Federal Reserve kept the overnight benchmark interest rate stable in the 5.25% to 5.50% range at the end of its October 31-November forecast.

 

Interest Rates and Bitcoin

Bitcoin hit an all-time high of $69,000 in 2021 thanks to retail investors having free money amid the early days of the COVID-19 pandemic and historically low interest rates.

While stopping rate hikes is a positive for risky assets, analysts note that conditions in the cryptocurrency market are still far from what they were in 2021.

Fed officials have made it clear that rates will not be lowering anytime soon, while strong employment data on Friday indicate that market expectations for rate cuts early next year were likely premature.

 

The hype around ETFs

Several major financial firms, including BlackRock, have filed applications with the SEC to launch a spot bitcoin ETF that, if approved, could potentially raise several billion dollars of institutional money into the cryptocurrency.

For now, the crypto industry’s talks with the SEC have moved forward to a key deadline in January, when the SEC is expected to give the green light to some products. This keeps traders optimistic, albeit with caution.

“The price may be subject to a correction immediately after their approval as the market is already evaluating this event, but in the long run, spot bitcoin ETFs could bring several hundred billion dollars a year to the market.”

— said Yuya Hasegawa, analyst of the cryptocurrency market at bitbank.

Many cryptocurrency watchers are also expecting the next Bitcoin halving, which is expected in April. This process is designed to slow down the issuance of bitcoin, the supply of which is limited to 21 million tokens, of which 19 million have already been created.

 

2023 is a good year for Bitcoin

The king of cryptocurrencies has jumped 164% since January 1 and is trading above $40,000. It outperformed traditional assets, including gold.grew10%, andindex&P 500It’s up 20 percent.

Bitcoin has also increased its share of the overall cryptocurrency market from 38% to over 50%. The total capitalization of the cryptocurrency market rose to $1.7 trillion from $871 billion at the end of 2022, with the price of Ether jumping by 95%.

J.P. Morgan expects the cryptocurrency market’s recovery to continue thanks to the expected approval in early 2024, but remains skeptical about the scale of success in adoption that the wider market is counting on.

JPM also expects bitcoin ETFs to attract assets in the range of low to average unambiguous interest in the $1.7 trillion cryptocurrency market, compared to some optimistic forecasts of 10%.

If adoption fails to meet investors’ expectations by about 10%, cryptocurrency markets could reverse their recent gains, the report said.

Net realized earnings, expressed in dollars, recorded by bitcoin investors, reached $324 million per day, which remains an order of magnitude below the peaks observed in the later stages of the 2021 bull market.