If 2022 was not the best year to get into crypto given the market’s colossal downfall, going from an estimated value of $2.9 trillion in November 2021 to under $800 billion at the end of the year, 2023 was the exact opposite. While crypto giants like Bitcoin and Ethereum have yet to return to their former highs, as Binance data shows, almost all coins experienced major gains in 2023, with some assets increasing by as much as 16,000%. This resulted in considerable returns for some investors who were clever or perhaps lucky enough to make a move at the right moment.
Now that we’ve stepped into 2024, many are wondering what this new chapter in crypto’s book is going to bring. Will investing in crypto continue to be a profitable endeavor or is it best to look elsewhere for money-making opportunities? If you missed the crypto train last year, here’s what you can expect if you’re thinking about jumping onboard in 2024.
A new milestone for Bitcoin
The upcoming halving is going to be one of the biggest events of the year, not only for Bitcoin but for the entire crypto industry. This is when the reward for Bitcoin mining is cut in half in order to control the rate at which new coins are released into circulation and thus combat inflation and ensure scarcity.
The last Bitcoin halving happened in May 2020 and the next one is scheduled to take place in April 2024. But what makes this event so important price-wise? Historical data reveals that all of Bitcoin’s past halvings resulted in a price increase for the leading asset. If past performance is indicative of future results, we might see a bull run taking shape for Bitcoin in the second half of the year and potentially push the asset beyond previous highs.
And since Bitcoin is the pioneer of the cryptocurrency industry and also the largest crypto by market capitalization, it has immense influence over other digital assets and could drag the entire crypto market with it. This means that if the halving triggers a new bull run for Bitcoin, the altcoins will also go on a price hike.
Layer-2 solutions to the rescue
Scalability represents a major challenge for many crypto projects, including Bitcoin and Ethereum. Despite their undeniable resilience and growth over the years, both networks have been dealing with high transaction latency and high fees, limiting their capacity to handle large amounts of transactional data within a short time span.
This ongoing problem has led to the emergence of Layer-2 solutions, giving these networks the possibility to reduce congestion on the main blockchain during times of high demand. Layer-2 solutions are third-party protocols built on top of an existing blockchain (Layer 1) that process low-value transactions in order to extend its capabilities. So, they are basically extensions whose purpose is to reduce the burden on the main blockchain and thus ensure greater efficiency.
Zero-knowledge rollups and optimistic rollups are among the most common Layer-2 solutions at the moment. However, technology is advancing at a fast pace in the realm of digital assets and with more users crowding networks these days, we’ll likely see considerable improvements in Layer-2 solutions this year, with advanced rollups going even further in addressing scaling challenges.
Crypto regulations in the grey zone
The crypto market might not be the Wild West it once was, but it’s still far from enjoying the same level of legitimacy and acceptance as traditional markets. This is mainly because of the lack of clarity in crypto rules and regulations.
Despite the efforts that lawmakers and government bodies have put in over the past years, digital currencies have proven extremely difficult to regulate given their novelty and complex nature. Crypto assets don’t fit into any of the existing financial regulations and this leaves them in a legal grey area.
The EU has passed the MiCA regulation which is thought to be the most comprehensive legal framework for crypto to date, while the U.S. has put different government bodies in charge of overseeing digital assets, leading to a regulation-by-enforcement type of approach. Now it seems that crypto regulations have hit a roadblock, which leads experts to believe that little progress will be made in this area in 2024. This will obviously discourage institutional participation in crypto and make it harder for digital currencies to achieve mainstream adoption.
Greater focus on tokenization
The tokenization of real-world assets has been gaining ground recently, attracting considerable interest from financial institutions, and the trend is expected to continue and intensify in 2024. This involves linking physical assets like cash, bonds, commodities, artwork and so on to digital representation residing on a blockchain.
Tokenized real-world assets or RWAs offer another example of how fast blockchain use cases are evolving. It also indicates that the role of blockchain technology in the financial sphere and beyond continues to increase, as new applications emerge.
With real-world asset tokenization picking up pace, the lines between digital and physical assets are becoming increasingly blurred. This can be a game changer for the decentralized finance ecosystem and create new opportunities for retail and institutional investors alike.
Final note
All in all, 2024 is shaping up to be a pretty interesting year for the crypto industry. However, it’s important to keep in mind that cryptocurrency predictions are rarely accurate as market volatility and uncertainty leave room for a pretty large margin of error. Crypto analysts and market experts are no wizards. Their tools are not crystal balls that can help them predict the future, but can only assist them in making estimative forecasts about the most likely scenarios that could unfold in the market.
Therefore, if you plan to get into crypto in 2024, don’t let yourself be guided by expert opinions alone. Educate yourself on the ins and outs of the crypto market and make sure you do an honest assessment of your risk tolerance before taking the leap.
