Atka’s 2024 Crypto predictions
2023 proved transformative for the crypto industry, diverging significantly from the tumultuous trends of 2022. The year ended with a renewed sense of optimism, laying the foundations for a new Bull Run.
As we step into 2024, our passion for Crypto is intact, but we must say that we’re particularly excited about the upcoming developments.
From the approval of Spot ETF a few days ago (launched by Finance giants like BlackRock and Fidelity) to major industry developments (Ethereum upgrades, new scaling solutions like ZkSync, Scroll, Starknet and Berachain, new DeFi use-cases, rise of new narratives like AI, DePin, DeSo…), 2024 might be a good vintage for the Crypto ecosystem.
It won’t be an easy ride (it never has been), but we’ll get there ;)
Enjoy the read!
1. Crypto ETFs in 2024: A pivotal moment for the crypto markets
Since 2017, the crypto ecosystem at large (ourselves included) has been way too excited about the “institutionalization narrative”. Well, this time is the right one, as the approval of spot ETFs by the SEC on 10 January 2024 is a massive game-changer for crypto markets.
Speculation about Spot ETFs is not new: the first launch attempt in the US was 10 years ago, and 50+ applications have been rejected since then by the SEC, on the back of “fear of market manipulation”. But in the end, SEC’s rationale for consistently rejecting applications proved to be in violation of the US Federal administrative law…
With the approval of 11 Spot ETFs (out of the 15 outstanding applications), including from big guns like Blackrock, Fidelity and Ark, Bitcoin is entering a new era and will see a massive inflow from institutional pockets.
Unsurprisingly, we envision a very bullish trend on BTC, ultimately trickling down on the larger crypto markets:
On the short term, following an incredible rally over December and January, BTC price will drop in a “sell the news” type of event, and capital might shift towards ETH, that has been lagging behind BTC and that will be the next target for Spot ETF applications (alongside SOL)
On the medium term, we’ll witness a massive inflow from institutional investors, that might bring BTC price above the $100k landmark this year
And on the longer term, profits from BTC will trickle down to cryptos with lower market capitalizations, leading to a decrease in BTC dominance
As strong advocates of the “Digital Gold” thesis, a look at the impact of the launch of Gold Spot ETFs in 2024 on the demand in precious metals is quite charming :)
Source: http://www.goldchartsrus.com/
2. Bitcoin Halving in 2024: Navigating the landscape of diminished returns
Talks about the ETF have somehow “overwritten” the BTC halving narrative, which remains a key event for crypto markets, and a booster for BTC price:
The next halving should occur around 17 April 2024, a couple of days after Tax Day 2024 (day on which individual income tax returns are due to be submitted in the US, generally considered as a bullish event for markets, as individuals are required to sell off assets beforehand to pay taxes).
Post 2024 halving, the block reward will fall from 6.25 to 3.125 BTC. In order for the miners to remain profitable, BTC floor price will have to adjust accordingly. Combining the effects of Spot ETF approvals (“growth” narrative) and halvings (“defensive” narrative), BTC will surely surpass its all-time-high and reach uncharted territories this year.
However, as halvings go by, it is increasingly difficult to move the market by an order of magnitude (10x the price), as it requires an exponentially increasing money supply (known as the “Law of Diminishing Returns”).
By examining the performance after the last four halving events, a logarithmic curve emerges: while past halvings yielded substantial returns, the curve indicates a moderation in the potential for extraordinary returns with each successive cycle.
Our take is that BTC will drive the crypto markets on the way up in H1 2024, but BTC dominance will gradually decrease as other large assets (ETH, other L1s, DeFi blue-chips) outperform BTC. BTC price reaching $200k (bull case) would “only” mean a 4x performance compared to January 2024.
Evolution of BTC dominance since 2023:
3. The explosion of tradeable tokens
In the upcoming landscape of 2024, a highlight emerges as several major projects, built relentlessly during the harsh crypto-winter conditions of the bear market by outstanding teams, are about to unveil and eventually list their tokens. These projects have waited for a more stable market environment, strategically timing their token launches for optimal impact.
Back in 2021~Q1 2022, when the previous bull market overextended, some massive fundraising rounds occurred for disruptive Web3 projects, including new protocols or L2s. Starknet, LayerZero, ZkSync, Scroll or Morpho, to name a few, clearly had a token bias to boost adoption and create an ecosystem around what they are building.
However, 2022-2023 were two (very) bearish years for crypto markets. Even though those well-funded projects could survive the bear market even if it lasted decades, most of them chose to postpone their token plans and kept building in the shadows to benefit from a better general economic outlook when they launch their token.
2024 is the year when a lot of those 2021-2023 projects will release their tokens, leading to a Cambrian explosion in the # of tokens publicly tradable. Those highly anticipated token launches, combined with advanced tech stacks could drive the next bull market and completely reverse the general market sentiment towards crypto.
A good example of a project that didn't wait for 2024 to launch but profited immensely from the bullish market movement of late 2023 is Celestia, listing its $TIA token in November and showing performance over 7x from listing price.
On our end, a couple of projects we're watching closely are some L1 and L2 infrastructures like Berachain, Monad and Starkware, and some anticipated DeFi projects like Morpho.
4. The emergence of new token models
With so many projects launching their token, it will prove challenging to raise awareness and overcome the noise on Crypto Twitter. For this, token projects will have to be creative, differentiate themselves to attract buyers and spin the virtuous token price flywheel. Announcing a token launch or an airdrop will not be a significant event in 2024, the Web3 audience will need more than that to get excited.
2024 will see new tokens being launched with brand new and promising value capture mechanisms and redistribution models. The most successful models will be viral and will quickly be adopted by other token projects. One of the most important trends in this regard is that staking systems and incentives for dApps and L2s built on Ethereum will become obsolete due to the rising adoption of Eigenlayer (more on this below), and most DeFi-focused L2s may adopt Proof-of-Liquidity consensus mechanisms invented by Berachain.
5. The Great Staking War
Since 2017-2018, staking is the main utility for a token network. Most projects have enabled staking, sometimes with a deep network logic, when staking is necessary to secure the network (we call it “regular staking” below), often in a very cosmetic manner, just to lock the staked tokens in a contract and reduce artificially the selling pressure (we call it “bullshit staking” below).
In 2024, we envision 4 dynamics taking place:
1- Bullshit staking will disappear. As users understand better the concept behind staking, locking tokens in a contract to get more tokens will become obviously sub-optimal and discredited by market influencers
2- Regular staking will be a massive value driver of ETH, through restaking and restaking derivatives. As a consequence, L2s and dApps on Ethereum will have to find other value proposition models for their native tokens, as their network security will be covered by ETH restaking
3- It is also likely that restaking will open the flood gates to riskier and riskier staking strategies, leading to better returns, but also higher risks. One thing is for sure, ETH staking will not be a commodity market anymore, it will be key to understand where the yields are coming from before depositing ETH to a (re)staking protocol, and serious slashing/hack events will occur
4- Liquid staking protocols will need to implement checks and balances to avoid centralization issues. More specifically, we expect Lido to undergo a “vampire attack” from Blast, attracting TVL by promising some Blast points to ETH depositors in exchange for managing their ETH on Lido. This should lead Blast to have enough votes on Lido governance to bend the rules at their own benefits. To avoid this, it is important for Lido, and other liquid staking protocols, to protect themselves from the cartelization risks, which affected many protocols in the past…
Finally, a new set of primitives may emerge and get more and more adoption in this context: the metric of validator reliability and reputation. For example, Rated.network provides a comprehensive analysis and rating framework for validators enabling market participants to make more informed decisions.
6. Account abstraction will dramatically improve Web3 User Experience
Account abstraction was already a major trend in 2023 (as well as 2022, 2021, 2020…) and will continue to evolve as the key enabler for broader crypto adoption in 2024. The crypto industry is indeed facing significant UX challenges. With the ever increasing complexity of the products and protocols being built, it is getting messier by the days.
Since the early days, even the wallet creation & private key storage methods in Web3 has always been widely different from usual Web2 credential management mechanisms, and remains today a significant adoption hurdle. Now, with the emergence of multiple chains, it is becoming increasingly difficult to have full visibility over your assets, and perform basic actions such as Sending & Trading within a single wallet interface. The most common wallet solutions, such as Metamask or Ledger, struggle to adapt their UX to this new multichain environment.
One part of the solution is Abstraction. Indeed, to improve UX, it is needed to conceal technological complexity from the end user (fees, signature, network, etc.). These abstraction levels contribute to a more adaptable and user-friendly blockchain experience, catering to diverse preferences and use cases. To achieve this, it is necessary to change the nature of crypto accounts, so that it is no longer needed for a human to “sign” any on-chain actions, and allow some transaction automations (~they need to become “Smart” accounts).
Solutions are already available, such as the new token standard ERC-4337, new network layers on top of Ethereum with native Smart Accounts implementation such as ZkSync era or Starknet, or network improvement proposals like RIP-7560.
In 2024, developers can now provide implementations of smart accounts and software development kits (SDKs) for dApps and wallet clients. They can offer modular stacks, allowing dApp developers to compose smart wallets for users while enabling users to add features to their wallets and create custody-free experiences by using tools such as connector SDKs to craft an end-to-end onboarding experience. These advancements are poised to significantly transform the user experience.
Source: 1k(x) - Wallet infrastructure empowering the next generation of dapps
Wallets will be seamlessly integrated directly into dApps, providing a smooth and automatic integration during the sign-up process. This allows users to onboard with an email address, socials, and other familiar login flows and create non-custodial embedded wallets for users by leveraging MPC or smart contract accounts (or both) to enhance transaction security.
7. Gaming evolution
Don’t believe the nay-sayers predicting the irrelevance of blockchain gaming in 2024… Gaming as a vertical always was and will continue to be one of the best gateways to onboard users in the crypto ecosystem.
We could go on and rant once again about how this market segment will gain traction but we’ve already done it in 2022 and here in 2023, check it out if you want a refresher of our crypto-gaming thesis.
So, yes… 2024 will be a big year for Gaming in crypto, like every year before and after that. We’ve seen this segment of the wider crypto space evolve and professionalize continuously. Obviously, it had its fair share of failures and successes, people tend to remember the failures more vividly but it wasn't necessarily worse than the percentage of projects going to 0 in DeFi, Infra, Data….
Many investors of this space realized significant losses pouring money in a vertical they didn’t understand the practices well enough, we have to admit we did it too. But this is the natural process to identify the real winners, and eventually, the best games, projects and teams will only shine brighter!
We remain very excited about the AAA games planning to release in 2024 and the new innovation coming to this space!
8. Crypto x AI = <3
As an opinion leader said at the beginning of 2023 : “crypto companies should pivot to AI”
Certainly, this comment triggered reactions and was ridiculed; it also turned out to be a very good market bottom signal.
Indeed, the growth and impact of AI on the tech industry at large over the past couple of years has been tremendous. A real paradigm shift is operating in the tech environment and it’s affecting the crypto space, making it tempting to just pivot to the new hot topic getting all the funding from weather vane tech VCs unable to clearly formulate and follow a thesis on the long term, and fomo-ing into the next opportunity.
It seems though that Crypto and AI are much more compatible than what’s publicly being perceived by the public.
Blockchain and AI prove to be complementary technologies, setting the stage for the discovery of groundbreaking synergies in the years to come.
Indeed, Blockchains and tokens make an ideal foundational layer to ensure the functionality of AI incentive networks. The sheer size that the AI market will embody, and the tremendous amount of automated programs and agents running on a multitude of networks and machines, makes it virtually impossible to manage for humans.
Specific set of rules will need to be encoded at the lowest levels to ensure the proper functioning and distribution of the value funneled to these networks, and blockchains present a particularly fitting structure for that. If you have the courage to dig into some complexity, we encourage you to check out what Olas.network (managed by the AutonolasDAO) is.
On top of these pieces of infrastructure, many use cases are emerging, ranging from decentralized AI marketplaces and AI-enhanced smart contracts to on-chain data analysis, and decentralized GPU sharing. Particularly promising projects lie in the domains of transparency, ethics and data privacy. Regulatory frameworks will also wield significant influence in shaping the future landscape of AI and crypto.
9. RWAs will take longer time than expected to emerge
As predicted in our 2023 forecasts, the RWA (Real-World Assets) narrative has been somehow oversold, and has proven to be (so far) quite disappointing.
While tokenization of RWAs holds huge potential, the fragmented nature of the market, coupled with technological and regulatory challenges, have been hindering its development. We’ll have to wait a few years to see RWAs emerge as a real Crypto sub-segment.
In contrast, it is important to keep in mind that stablecoins are among the most capitalized crypto projects, and that this ecosystem continues to develop. Similarly, tokenized T-bill projects are becoming increasingly popular, such as Open Eden, Ondo, and Backed Finance. The market is growing, but we are still far, very far, from mass adoption.
10. The emerging gurus
During the previous Bull Run, figures like CZ, SBF, Do Kwon, Jesse Powell (former Kraken CEO) and many others took center stage in discussions. For different reasons, those people can no longer be considered as industry leaders in 2024.
But Nature abhors a vacuum and we expect new Web3 gurus to emerge this year, stepping into the spotlights and driving the market with new narratives such as restaking (e.g. Sreeram Kannan, CEO of EigenLayer), modular blockchains (e.g. Nick White from Celestia Labs) and Crypto institutionalization (e.g. Bitcoin ETF managers).