Analysts forecast renewed institutional activity in the crypto market in 2024

In 2024, institutional investors will begin to show greater interest in the digital assets market thanks to the potential approval of the Bitcoin-ETF, a decline in U.S. interest rates, and regulatory clarity.

Stock-market surge

The main catalyst for the involvement of traditional financial companies, according to Bitfinex analysts, will be the approval of a spot exchange-traded fund based on the first cryptocurrency.

The launch of the financial instrument will provide institutional investors with a convenient way to trade digital gold, experts say.

«The potential approval of the Bitcoin ETF from ARK Invest in January [2024] could be an important driver of the asset’s price, as it would provide a regulated and more accessible investment product for both retail and institutional participants», they said.

According to many researchers, who also align with Bitfinex, approval of the product is expected by 10 January. The wave of updated documents and the deadline for amendments set by the SEC may indicate their impending launch.

According to Deribit’s Chief Commercial Officer Luke Straiers, the trend toward institutional adoption has been noticeable since autumn. Data from the trading platform show rising interest from large players in crypto products since late October, “largely driven by expectations of potential ETF news.”

In a recent BitMEX study it is stated that worldwide there are about 150 crypto-linked exchange-traded products. Their combined market capitalisation is $50.3 billion.

The top three instruments included Bitcoin Trust GBTC from Grayscale ($27 million), the BITO fund from ProShares ($1.64 million) and the ETP BTCE from HANetf ($1.19 million).

«Given the seemingly inevitable approval of spot ETFs in the US for Bitcoin, this dataset and the analysis derived from it could be interesting. For example, it could be useful in determining the extent to which a new product cannibalises existing exchange-traded instruments or attracts new capital to the crypto market», BitMEX said.

Fed policy easing

Bitfinex analysts suggested that a potential cut in the Federal Reserve’s policy rate in 2024 would embolden risk-tolerant institutional investors.

Ultimately this trend will drive up digital gold, the experts noted. 

«The rate-cut scenario could make risk assets like Bitcoin more attractive to institutional investors seeking higher yields», they added.

Analysts say market factors also signal a softer Fed policy. On 13 December the regulator held the key rate at 5.25–5.5% per annum, giving the market reason to expect a slower downward trend.

«The expectation of such a pause has already affected bond yields and traders’ forecasts: a rate cut is expected around May 2024», emphasised the researchers.

YouHodler risk manager Sergey Gorev noted that the market expects a softer rhetoric from the Fed, and the futures sector has already priced this event into positions.

Regulatory clarity

Bitfinex believes that in the new year investors will be buoyed by greater regulatory clarity. Foremost among this will be the approval of a spot Bitcoin ETF. 

The CEO of Bittrex Global Oliver Linch said that 2024 will be the year when global jurisdictions begin to codify the main rules for the digital-asset space. 

He mentioned MiCA, which will take effect next summer, and highlighted significant regulatory progress in Singapore, Hong Kong and Japan.

«Governments are finally realising that being a crypto hub means attracting institutional players. But they will not be able to act on fine words and political ambitions, and only on concrete, reliable and fit-for-purpose rules», Linch emphasised.

However, the factors that could spur institutional activity in the crypto sector also depend on unpredictable macroeconomic conditions, Bitfinex warned. Some industry participants still anticipate a prolonged recession and a tightening of the Fed’s policy.

Earlier, Matrixport analysts predicted Bitcoin to reach $50,000 by the end of January thanks to ETF approval.

Industry veteran and Blockstream CEO Adam Back is confident that the $100,000 level will be breached even before halving.

Co-founder and former BitMEX CEO Arthur Hayes also believes that the emergence of spot Bitcoin ETFs will push up the price of cryptocurrencies, but is not sure about the usefulness of these products for the crypto market.