2024: Will Cryptocurrencies Continue to Rise for Investment? Five Keys to the Digital Market

The year 2023 marked a turning point in the cryptocurrency market. Those investors who dared to enter during the turbulence of 2022 have seen their wealth multiply. Now, the question that keeps the entire crypto community on edge is whether this bullish movement will continue in 2024. To understand it, we have identified five fundamental forces that drove digital growth last year and three macroeconomic scenarios that will determine the future course.

The Market Driver: Five Forces Explaining 2023

Bitcoin Halving: The Most Anticipated Catalyst

In a few months, in April 2024, a crucial technical event will occur: the next Bitcoin halving. This scheduled mechanism cuts the rewards for miners in half every 210,000 blocks, ensuring that the supply of new tokens decreases progressively.

History shows the pattern: after the first halving, the price skyrocketed 950% in six months. In the second event, increases were more moderate (38% in six months), and in the third, an 83% semiannual increase was recorded. This anticipation of scarcity creates a powerful psychological effect on investors, who seek to position themselves before the event.

Bitcoin acts as the locomotive of the crypto ecosystem. Its bullish movement spreads optimism throughout the cryptocurrency market, especially to emerging projects seeking to capture this expanding wave.

Spot ETF Approval: Institutional Money Knocks on the Door

During 2023, the world’s largest asset managers submitted applications to the SEC to launch Bitcoin ETFs based on spot investment. BlackRock, managing $9.42 trillion, leads this list of contenders.

The difference is substantial. Current ETFs operate with futures, without the obligation to buy the actual asset. But new products would require these institutions to acquire physical Bitcoin to back each share of the fund. This means genuine and massive demand for cryptocurrencies to invest in, which has not yet materialized.

If regulation gives the green light in 2024, we would be at the threshold of professional money entering the crypto market.

The AI Fever

The explosion of ChatGPT and generative AI tools has transformed investors’ risk appetite. Tech stocks have experienced an unprecedented boom since September 2023, led by companies like Nvidia.

AI-based cryptocurrencies represent a unique category: their tokens function as utilities to access services, not just as means of exchange. These crypto projects capitalized on the enthusiasm for AI and attracted significant speculative capital.

The parallel between the tech rally and the growth of the digital market is no coincidence. Both capital flows share the same source: investors seeking exposure to future technologies.

Total Market Capitalization: A 99.2% Increase

Numbers speak for themselves. The total market capitalization of cryptocurrencies to invest increased by nearly $750 billion during 2023, a 99.2% rise. This growth required a massive influx of fresh liquidity willing to pay increasingly higher prices.

Transaction volume reached an average of $140 trillion, far exceeding the semiannual average of $79 trillion. A fundamental trading principle is that “there is no price movement without a significant increase in volume.” The evidence confirms exactly this.

Optimism dominated sentiment, eradicating the fear that characterized the previous “crypto winter.” This renewed confidence materialized in new purchases and strategic repositioning.

Open Interest in Futures: Indicator of Growing Participation

Bitcoin and Ethereum futures showed a notable increase in open interest since August 2023. Bitcoin currently has 17,321 pending contracts, while Ethereum has 6,114.

When open interest grows simultaneously with prices, it means new participants are entering the market or existing players are expanding their positions. This expansion of the derivatives market anticipates movements in the spot market.

Professional analysts watch these indicators closely: if there is expectation of future rises in contracts, the physical price tends to follow the same direction.

Three Macroeconomic Scenarios for 2024

Optimistic Scenario: Convergent Inflation and Stable Rates

If inflation continues to decline and economic activity remains stable or improves, the Federal Reserve and the ECB could start rate cuts. This would boost both the stock market and potentially cryptocurrencies for investment.

However, there is a risk: high-growth tech stocks could become more attractive alternatives than digital assets.

Challenging Scenario: Inflation Resurgence and Monetary Tightening

If inflation resurges, central banks would resume rate hikes. A simultaneous decline in stocks and bonds could catalyze a flow into Bitcoin, whose fixed supply theoretically provides inflation hedging similar to gold.

Cryptocurrencies with unlimited supply would suffer more under this scenario, while Bitcoin would position itself as a safe haven asset.

Stagflation Scenario: The Authorities’ Dilemma

If the economy slows down while inflation persists, central banks will face a dilemma: raise rates and cause a recession, or cut them and fuel rising prices.

A persistent inflation environment could push investors toward Bitcoin and the crypto market as a hedge, although rising costs would negatively pressure high-growth projects.

Is It Really Worth It in 2024?

The numbers from 2023 are conclusive:

• Bitcoin: 79.85% return, outperforming the S&P 500 by 6.3 times and the NASDAQ 100 by 2.5 times
• Ethereum: 40.45% return, 3.2 times higher than the S&P 500 and 1.3 times the NASDAQ 100

Lower-cap projects demonstrated triple-digit returns, confirming the potential of the digital market.

The answer is yes: investing in cryptocurrencies for 2024 remains attractive. However, it requires disciplined methodology. The recommended approach combines two strategies:

Structured Diversification: Allocate a portion to Bitcoin and Ethereum (high-cap assets with lower volatility) and another to emerging projects with higher explosive potential.

Holding and Trading Combination: Long-term investing has historically generated the best returns, following the same principle as the stock market. Trading offers speed but multiplies risks.

The key lies in adjusting the strategy to your investor profile, never forgetting that cryptocurrencies remain high-risk assets with extreme volatility.