It’s good to stand still sometimes, so that you can run faster again later. That is true in life and was certainly the case in the wonderful world of cryptocurrencies. Last year was perhaps the most boring year ever. Prices remained constant and the media only wrote about lawsuits. But in the background, many people are preparing for 2024, which could be the most successful year for cryptocurrencies like Bitcoin. In this article I explain the trends on which I base this.

First let’s look back

For years, Frankwatching has allowed me to look into the crystal ball for topics such as cryptocurrencies and blockchain. Since 2015 I have been very active in the sector with my own companies, board positions, the organization of numerous events/meetups and a lot of writing, on which I always base my expected trends. In addition, for this article I asked 24 thought leaders in the Netherlands and worldwide about their favorite trend of the coming year.

Last year I wrote in my trend article that the crypto dream seemed to be over for many, because the market had completely collapsed. The total size of the cryptocurrency market dropped from $3 trillion to under $1 trillion and a lot of negativity emerged. This was caused by some of the largest companies in the industry who later turned out to be fraudulent.

But in my view, these types of pullbacks are healthy for a sector such as cryptocurrency. It is now the 3rd ‘bear market’ that I have experienced, and the same things happened again as last time. Many nonsense projects (and associated cryptos) have largely been filtered out of the market, cool solutions are being built hard in the background, and all the people who predominated and were clearly in it for short-term profit are no longer available. confess. You can also see this clearly in Glassnode’s analyses. The cryptocurrency owners who have been in it the longest (sometimes more than 5 years) still have their cryptos. The people who were in it for the shortest time have now sold their cryptos for euros.

All in all, it can be argued that extreme apathy and boredom best describe the prevailing sentiment. – Glassnode

The bear market

We are in the longest bear market ever. The ‘hopium in the bear den’ remained in vain, as I predicted. For a year now I have seen countless models that analysts use to substantiate their prediction that the market will pick up strongly again, but these have proven to be wrong every time. In my view, one of the main causes is and remains the global economy, which is not in good shape. Investments in all sectors will then fail. Especially in ‘high risk assets’ such as cryptocurrencies.

Most cryptocurrency owners focus only on their prices. Not the underlying blockchain technology. A lot happened in that area last year. As I predicted: we really went from ‘magic digital money for nerds’ to proven usefulness and necessity. Blockchain, not Bitcoin, is increasingly the adage here. Numerous companies and governments have started working successfully with the technology. More and more courses are being offered in this area at Dutch educational institutions and dozens of Dutch startups are building all kinds of new technological solutions.

From rockstar to prison client

To all actors in the Dutch cryptocurrency ecosystem, I notice that everyone is preparing for next year. The year in which most people expect the ‘bull to run again’, another so-called ‘bull run’ will occur in which cryptocurrency prices will rise to new record highs. That’s because 3 incredibly important developments are going to take place that could catalyze this.

A nice development, because the past year was mainly dominated by a lot that had to be achieved from the sector. The key word here: FTX. Until the summer of 2022, this was one of the largest companies in the global cryptocurrency industry. The founder was invited to sit with heads of state, received investments from the largest investors worldwide and was estimated to have a fortune of $26 billion due to the size of the company.

Until the stock market collapsed completely in two days and unprecedented abuses surfaced. It became the largest accounting scandal in the United States ever and lawsuits against the founder and close associates are ongoing at the time of writing. The collapse severely damaged investor confidence in cryptocurrencies. A global call for even more and stricter regulation and transparency.

There is hope on the horizon

Fortunately, it is now known that a lot of money (we are talking billions) has been recovered by the curators and that most users of the exchange, including many Dutch people, will simply get their crypto back. Even though it caused a lot of misery, I think it was secretly a good thing that it happened. It is becoming increasingly clear that all the misery revolves around a handful of main characters, with founder Sam Bankman-Fried at the center.

The fact that, on the one hand, they were able to act fraudulently on such a massive scale for years and, on the other, were held in high regard by major journalists and news outlets, receive investments from the most respected funds and that no alarm bells went off among regulators is perhaps the worst part.

The actions of a handful of individuals should not be the barometer for the entire cryptocurrency industry. Hundreds of thousands of professionals and enthusiasts work every day to grow, develop and professionalize the industry.

  1. The bridge to the big boys

By far the most important development next year? The possible approval of a so-called ‘Exchange Traded Fund’ (ETF). This suddenly makes it very easy for large investors to invest in cryptocurrencies such as Bitcoin. They no longer have to buy and store the cryptos themselves, but can easily invest in large quantities through a third party. In fact, for most major investors, an ETF is the only option to invest in cryptocurrency.

Not just any party, but the world’s largest asset manager, Blackrock, with $3 trillion in assets under management, applied in June last year to be allowed to issue such an ETF. Dozens of other parties have submitted applications in recent years, but they have always been rejected. In Blackrock’s 1,400 previous applications for other ETFs (on gold, for example), 99.8% were allocated. In addition, the American SEC, which supervises this, was recently dismissed by the judge in the event of such a disapproval. It ensures that the options they have to reject such an application quickly decrease.

Flight to quality

Blackrock CEO (Larry Fink) has described cryptocurrencies as a ‘flight to quality’ under current macroeconomic conditions. Something that is heard by major investors, who have already widely stated in the media that they are eager to use this ETF to also ‘expose’ themselves to cryptocurrencies such as Bitcoin.

An approval (I expect in January) will ensure that Blackrock will actually have to buy the Bitcoins for which it says it is investing against its major customers. This, combined with the fact that there are only a limited number of Bitcoins, means an unprecedented price increase. The catalytic effect of market psychology, which I already learned at university during my finance studies, creates even more craziness. Prices go up, which attracts even more (retail) investors, which drives the price up even further. It could easily set a record price for cryptocurrencies like Bitcoin after peaking at $69,000 two years ago.

But perhaps most importantly, the fact that these mega-sized, highly respected parties are so actively involved in the cryptocurrency industry brings an unprecedented level of legitimacy and trust.

  1. Half rewards create even more enthusiasm

Normally, most people are not happy when a reward for something is halved. However, within the world of cryptocurrencies, the halving of Bitcoin is seen as one of the most important moments in the further development of the currency. This is an event that takes place once every four years and where the reward for the so-called ‘miners’ (the parties that maintain the network of Bitcoins, for example) is halved.

From that moment on, they will therefore only receive half the number of Bitcoins for their work. For example, now it is 6.25 Bitcoin, the four years before 12.5 and from the next halving only 3,125.

Historically, you see the same pattern in the price with every halving. The halving comes after a period of sharp decline and a ‘bear market’, followed by a calmer period of consolidation and accumulation. A year after the halving we always see a new ‘All Time High’ (ATH, record price). The halving is now expected at the end of March 2024 and researchers at Delphi Digital expect that this ATH can be reached by the end of 2024.

Of course, this is never certain either. If we assume the ‘efficient market theory’ (you cannot make money with information that is publicly known), this should all already be priced in and the halving would therefore have no significant effect on the price movement of Bitcoin.

  1. Cowboys head towards the exit

There is a saying in the crypto industry that there are “two wolves” within the industry. A money-grubber and a technology-wolf. People who are big fans of regulation and people who try to avoid it as much as possible. The latter group is finding it increasingly difficult, mainly thanks to the European Union.

Because after years of hard work by dozens of thought leaders in the European Union, Europe-wide cryptocurrency legislation, the MiCA, is coming into effect. It is having an unprecedented effect on most industry players, from trade shows to professional advisors. Even though there are many critics who say it hinders innovation, most industry professionals I work with (including myself) are very happy with it.

It gives all players much more clarity about what is allowed and what is not. Not only startups that build, but also companies that want to work with it and investors who want to invest money in it. In recent years I have had the opportunity to work for four ‘family funds’ (management companies for very wealthy families) and large institutional parties (such as a pension fund) and they all indicated that they really wait to invest in the industry until the MiCA is in force. . I am now hearing from various major parties that they are now making preparations to become seriously active in the industry.

Not only does it provide much more clarity, but it also filters out many cowboys who are not so strict with rules, from the industry. For example, the MiCA has ‘transparency’ as one of its main points. Something that could have prevented many major problems in recent years, such as with FTX. For example, I have recently seen many questionable companies leave for tropical islands, where supervision is nil.

  1. Increasingly useful and above all: necessity

Nice, all those prices that may go through the roof, but what really matters to me is and remains the adoption of the technology. You really see a split in the crypto industry between the rich, prosperous countries and developing countries. In rich, prosperous countries, cryptos are mainly used as an investment, because we actually don’t need them anymore. The financial systems, which allow us to make a payment in a fraction of a second and virtually for free, are simply great. Why should we now exchange iDEAL and Tikkie for Bitcoin?

But as I often write here on Frankwatching: cryptocurrency makes the biggest impact in developing countries. There people use cryptos in their daily lives, because their own financial system has collapsed, or because they simply do not have access to them. Or because the government suddenly blocks your bank account. The latter happened, for example, in Nigeria, when the government of that country blocked the bank accounts of the demonstrators. But no one can block Bitcoin, so the protesters receive donations in Bitcoin, which allows them to earn a living again. Something that has caused the government of Nigeria to panic.

Global cryptocurrency adoption

You can also see this clearly reflected in the ‘adoption index’ of the authoritative company Chainslysis, which can provide a very good picture of the global adoption of cryptocurrencies because of all its analysis platforms. Which countries do we see at the top? India, Vietnam and Nigeria. Also in the top 5 is Ukraine, another great example of where crypto can really have an impact. Hundreds of millions of euros worth of crypto have already been donated to the Ukrainian government, which announced the address of its crypto wallet. Because crypto payments offer a lot of transparency, government services were able to block the crypto wallets of the terrorist organization Hamas.

Many residents in developing countries do not use crypto as an investment, which can fluctuate considerably, but as a stable way of payment. Something you also see in global transactions. More than 70% of all transactions are now not done in coins (such as Bitcoin and Ripple) that can fluctuate considerably in value, but so-called ‘stablecoins’. They always retain the same value (for example, 1 Tether is always worth 1 dollar), but do have the advantages of cryptos. The size of stablecoins is now larger than PayPal and Visa credit cards.

  1. But should we be happy with the big boys?

Big boys with a lot of money who make prices rise. In countless Telegram groups I see crypto fanatics with dollar signs in their eyes eagerly awaiting this moment. There are also large existing companies working on cryptocurrencies. For example, one of the largest banks worldwide, JP Morgan, processes $1 billion per day with its own JPM Coin. Because this works via its own blockchain and is not freely tradable, this has no effect on the prices of cryptocurrencies that we know.

X, the old Twitter, is also said to have big plans for the integration of cryptocurrency payments within its ‘super app’. In addition to sending Tweets, you can also easily order food or a taxi and pay with cryptocurrency. The company will make it possible to trade shares and cryptos very easily. According to Forbes, owner Elon Musk’s great love for cryptocurrencies could transform the app into an ‘updated version of Paypal’. As co-founder of Paypal, Musk obviously has all the experience with this.

But I also have concerns about the plans of the big boys. For example, Paypal already offers the option to buy or sell cryptos and now also wants to introduce its own ‘stablecoin’. But a sharp developer saw in the code that Paypal can easily delete and block things. This gives PayPal the ability to block transactions and even remove cryptos from wallets.

On to a sunny beach

We are really looking forward to a very interesting year. I am very curious whether the three major developments that I predicted earlier will actually have the predicted effect. Of course, we should not experience macro-economic developments. Cryptocurrencies, for example, have never experienced a recession. So what impact will that have on the market?

Although there are also plenty of experts who see this as a positive thing. Many crypto enthusiasts see that the current financial system with very high debt among all participants (companies, governments, consumers) is simply not sustainable. Something that can put not only consumers and companies, but even governments into bankruptcy. Bitcoin is often seen as a ‘hedge’ against this system and recently we have clearly seen that there is no longer a connection between the price development of traditional shares and bonds and cryptocurrencies.

Let’s hope I can submit the next trend article from a tropical beach! I will also keep an eye on developments for Frankwatching in the coming year with pleasure.

Disclaimer: As always, these are my personal opinions and do not in any way relate to the companies I am involved with. It is also not investment advice, but purely informative information.

Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.