Category: Economía

Enforcing MiCA, halving and new ETFs: the outlook for cryptocurrencies in 2024

Enforcing MiCA, halving and new ETFs: the outlook for cryptocurrencies in 2024

Traders are optimistic that the implementation of the world’s first regulation, the European MiCA, will lead to a wider acceptance of cryptocurrencies among institutions and banks.

It has not been an easy year for the cryptocurrency industry, and yet the figures are very positive. The total market capitalisation of digital currencies has risen by more than 138%, representing an increase of more than $870 billion in capital over the previous year, and bitcoin has accumulated an annual increase of 152.53%. With exceptions, such as ether and Binance’s cryptocurrency, which are up 91.95% and 25.69% respectively, the rest of the digital currencies have appreciated by more than 150% in 2023. The ranking is topped by far by solana, which is up 937.55% year-on-year. 2023 has been the year of recovery: the FTX debacle in November 2022 was still felt in the first half of the year, especially with the collapse of Signature Bank. And 2024 is the year of consolidation. The industry is optimistic about the implementation of the world’s first regulation, the European MiCA, which will lead to greater acceptance among institutions and banks.

From left to right, from top to bottom: Almudena de la Mata, founder of Blockchain Intelligence; Javier García de la Torre, director of Binance Spain and Portugal; Víctor Ronco, cryptocurrency expert; Ángel Luis Quesada, CEO of Onyze; Manuel Villegas, Next Generation Research Analyst at Julius Baer; Selva Orejón, professor at EAE Business School; Leif Ferreira, co-founder and CEO of Bit2Me; Simon Peters, expert cryptoasset analyst at eToro; and Herminio Fernández, CEO of EurocoinPay.

Binance Spain and Portugal director Javier Garcia de la Torre sums up the general sentiment as follows: “Looking ahead to 2024, the outlook for cryptocurrencies is subject to a number of factors, such as regulatory developments, technological advances and market confidence.” Without a stable regulatory framework, it does not improve the reputation of assets that are still reeling from FTX and frauds that have gone around the world. The European Union took a giant step forward with MiCA, the first regulation to secure bitcoin and e-money token transfers, paving the way for regulation in the world’s major economies. “In Europe, the approval of the MiCA regulation has created an environment of greater legal certainty,” explains Almudena de la Mata, founder of Blockchain Intelligence, “traditional banks are working on models to offer custody and trading services to their customers. And with them, the use of cryptoassets is spreading and normalising.

It is precisely the banks that will have the future of cryptocurrencies in their hands. “It won’t be long before we see how anyone can open a bitcoin account at a bank and deposit their assets there, delegating the trust of the assets they have held until now to the bank,” says Ángel Luis Quesada, CEO of Onyze. It is a chain reaction of regulatory implementation in EU member states: if there is support from regulators, there will also be support from the banking industry, which will see a new business window in cryptocurrency accounts. “MiCA will be the starting pistol for banks, where little by little in the following years almost all banks in the world will offer bitcoin to their customers,” says Leif Ferreira, co-founder and CEO of Bit2Me. Thus, he adds, will come “mass retail adoption”.

The advent of ETFs

After establishing a regulatory framework, the next step is institutional acceptance. In recent months, the crypto environment has been reinvigorated by news of the possible creation of a bitcoin spot price ETF. The market has seen around 12 applications for bitcoin spot price ETFs, some from large asset managers such as BlackRock, Fidelity, Wisdom Tree and Invesco. Blackrock, for example, has acknowledged “strong demand for bitcoin” from its clients. “A spot bitcoin ETF offers investors the possibility of investing in bitcoin without these managers actually holding the currency, as it is held by investment funds, thus avoiding the challenges of storage and security,” says Herminio Fernández, CEO of EurocoinPay. It would be an attractive product both for institutional investors due to its low costs and regulatory advantages and for individual investors who have so far avoided including bitcoin in their portfolios due to the difficulty of working directly with blockchains.

10 January 2024 is the deadline for the US Securities and Exchange Commission (SEC) to decide whether to approve or reject the bitcoin exchange-traded fund application filed jointly by Ark Invest and 21 Shares, while deadlines for other applications expire around March. That said, if the first ETF is approved, “it will happen as a whole, as many of the products share the same characteristics, and the SEC should not favour any one,” says Manuel Villegas, next generation research analyst at Julius Baer. For the moment, the winds are blowing in our favour. According to Reuters, the SEC has reportedly been meeting frequently with BlackRock, Grayscale, Fidelity and Invesco on this issue and at least two of these managers were instructed by the regulator to file final changes to their form by 29 December.

It should be recalled that the SEC was notable this year for its tougher tone against cryptocurrencies and the actions taken against some of the best-known exchange platforms in the sector, such as Coinbase and Binance. In this regard, EAE Business School professor Selva Orejón stresses the need for companies in this industry to focus on “building a solid reputation, addressing public concerns and highlighting their efforts in security and regulatory compliance“, hence transparency and effective communication are “essential”.

Halving’, the formula to boost the price of bitcoin

The cryptoasset market faces 2024 with a special expectation: bitcoin halving. Every four years, bitcoin halves the reward for each block mined. This event, known as halving, stipulates that for every 210,000 blocks added to the blockchain (roughly every four years), the reward to miners and the amount of new bitcoins put into circulation is cut by 50%. “The token economics governing this blockchain is based on there being a total of 21 million bitcoins mined, with a decreasing supply or new issuance of assets,” explains Simon Peters, cryptoasset analyst at eToro.

The supply shock comes from halving, due in April 2024, which “will cause the reward per block to drop from 6.25 bitcoins to 3.125 bitcoins and bitcoin’s own annual inflation rate from around 1.7% to around 0.85%”. Traditionally, this decrease in supply, coupled with demand, usually translates into an increase in the price of the reigning cryptocurrency. “As bitcoin has about half the market capitalisation of the total market, this usually triggers a new bull cycle for the entire industry,” assumes cryptocurrency expert Victor Ronco.

Source: elPeriódicodeEspaña/activos

Disclaimer: The information set out herein should not be taken as financial advice or investment recommendations. All investments and trading involve risk and it is the responsibility of each individual to do their due diligence before making any investment decision.