Surely 2023 will be remembered as one of the most interesting years in recent times for the cryptocurrency ecosystem, since throughout this period we have seen notable events for the sector, which include macroeconomic aspects, the end of the bear market and new perspectives for the future of cryptocurrencies.
Given that some of these events could have an impact in 2024, it would be advisable to closely monitor what will happen to them next year.
1. US Spot Bitcoin ETF
The event on which expectations seem to be set is the possible arrival of a spot Bitcoin ETF in the US, an investment product that has historically been rejected by the Securities and Exchange Commission (SEC), but which seems to have every chance of success in this opportunity.
Next January 10 is the final deadline for the SEC to give an official verdict on more than 12 applications for Bitcoin ETFs submitted to its office. Among the applicants, entities such as BlackRock, Fidelity, Invesco, WisdomTree, Grayscale, Ark Invest, Valkyrie and many others stand out, which aspire to launch this product for the US stock market, thus opening a negotiation window aimed at interested institutional and high-net-worth investors. in digital currency, all through a regulated product that addresses fears associated with self-custody and legal dilemmas.
The growing interest in Bitcoin would basically make an ETF based on the digital currency become a window for a huge amount of capital to enter the said market. Administrators would begin to buy BTC by shortening the supply available in the market, driving its price up organically amid the shortages that this event would generate.
Therefore, many believe that this could be one of the most important events for the adoption and pricing of the digital currency. It remains to be seen what the outcome will be, and what this will mean for the price of Bitcoin in the short term.
2. Bitcoin Halving
Hand in hand with the possible arrival of a Bitcoin ETF, the next halving for the digital currency is also in the spotlight, which involves a cut in half in the amount of new BTC that is issued to remunerate those who support the operation of the Bitcoin ETF. your network.
As such, the next halving will take place sometime in April 2024 and rewards will go from 6.25 BTC to around 3.125 BTC for each block mined.
Halving expectations point to a significant cut in the supply of the leading digital currency in the face of growing demand, especially if a spot Bitcoin ETF is approved in the US. This could translate into an organic increase in the price of the main cryptocurrency as it becomes an increasingly scarce asset.
3. US and interest rates
One of the most discussed points throughout 2023 was the measures implemented by the US Federal Reserve (FED) in its fight against inflation, for which during this year it has decreed increases in bank interest rates.
Currently, interest rates oscillate in a range of 5.25% – 5.5%, but in September 2023 the FED chose to suspend the increases it had been making. Already on December 13, the organization decided to keep said indicator unchanged for the third consecutive period, which for many analysts is a very good sign, since certain economic indicators have evolved favorably and point to a financial recovery.
If the conditions are right, the FED may gradually begin to reduce interest rates to adjust the local economy, which would benefit many markets (including crypto) as there would be more liquidity to allocate to investments and other areas.
Let us keep in mind that the FED maintains the goal of reducing inflation to 2% in the long term, warning that the last stretch before reaching said mark could probably be the most complicated.
4. Dencun: next update for Ethereum
Known under the name Dencun, the new update for the Ethereum network is considered by many to be one of the most important for the future of said network, since it incorporates a series of operational changes that will directly impact the scalability of its Blockchain.
The upcoming update strives to increase the scalability of Ethereum, surpassing the existing capabilities of Layer 2 solutions. But, possibly the most anticipated feature of the well-known “proto-danksharding” improvement, which will allow the temporary storage and recovery of data outside the network by the nodes, further streamlining transaction processing.
This latter property comes under EIP-4844, which is also expected to reduce transaction costs on Layer 2 rollups, such as Optimism and Arbitrum, compared to their current rates.
Dencun was originally scheduled for late 2023, but the core developers postponed its release until 2024 to better optimize certain details and ensure the good performance of the new update. Its implementation on the Goerli testnet will take place in January next year.
5. Ethereum Spot ETF
Already anticipating the possible arrival of a spot Bitcoin ETF to the US market, several investment fund managers are already thinking about the next step and filed their respective applications with the SEC for another based on Ethereum, the second digital currency with a greater capitalization of the sector.
To this end, applicants took note of the modifications made to the applications for a spot Bitcoin ETF and submitted similar submissions now for an Ethereum-based fund. The first to take this step was Cathie Wood’s Ark Invest, and entities such as BlackRock, Fidelity, Hashdex, Grayscale and other entities quickly followed.
While it already seems very likely that Bitcoin will see its own spot ETF, the case of Ethereum may pose important considerations, especially since the SEC has struggled to classify the digital currency in any way following the change made to its operating model, which is now based on staking (guaranteed funds) that derive dividends for participants.
