Analysts and investors have had a lot to process since 2024 began as the craze surrounding the approval and introduction of 11 spot bitcoin ETFs fades and the numerous litigation battles the SEC is involved in continue to drag on. Apart from the headline-grabbing events in the market, the approaching U.S. Presidential election is also impacting the mood and interest in crypto assets. With other politicians opposing the creation of central bank digital currencies (CBDCs) and former President (and current contender) Donald Trump voicing his opposition to them, the subject of cryptocurrency is expected to be prominent in the upcoming elections. However, despite the fact that the amount of money supplied by the US dollar still pales in comparison, congressional leaders continue to draw attention to the part that cryptocurrency can play in supporting terrorism and illicit activity.
Even if these news are significant for the long-term viability of bitcoin and the crypto asset market as a whole, investors should also be keeping an eye on a number of other headlines and trends. One significant trend to be aware of is that institutional purchasers have already acquired billions of dollars’ worth of bitcoin in 2024, despite the fact that policy uncertainty continues to be the prevailing approach in the US. Therefore, while politicians and soundbites come and go over time, a number of larger concerns are actually influencing policy and corporate discussions rather than just fueling on social media arguments.
Let’s examine a handful of them.
FTX Plans To Make Investors Whole
A recent proposal that stated the company plans to make investors whole was announced, which many have indicated is an unexpected turn in the ongoing story concerning the fall and bankruptcy of FTX. I think there are several reasons to enjoy this excellent news. Initially, investors who lost money as a result of Bankman-criminal Fried’s actions without any fault of their own will be compensated. Second, it shows that a complicated, sizable, and international crypto file like FTX may be handled by the bankruptcy procedure and related regulations. Finally, it ought to provide further evidence to supporters and investors in the cryptocurrency space that, in spite of the distinctions between crypto assets and fiat asset assets, investors ought to approach cryptocurrencies as the financial instruments that they are.
It is noteworthy that the repayments should be done at the current market value of cryptocurrencies at the time of FTX’s declaration of bankruptcy. For comparison, the price of a bitcoin token at that time was roughly $20,000, which is much less than what the market is currently willing to pay. The announcement that FTX will be paying back investors is something to be happy about, even though some investors may be disappointed.
Cryptocurrency Mining Will Be Examined
Experienced cryptocurrency investors and industry players shouldn’t be surprised that the energy usage and related environmental effects of cryptocurrencies are once again being examined. This time, the probe is coming from the government and goes beyond soundbites. The U.S. Energy Information Administration will specifically start closely monitoring the amount of electricity used by cryptocurrency mining companies that are based in the country. In order to accomplish this, the EIA will conduct a survey in February 2024, concentrating on a small group of bitcoin miners who will be asked to provide information about their energy usage as well as other operational statistics.
The Office of Management and Budget allowed this request for emergency data gathering, which is why it was approved. After a turbulent year for cryptocurrency miners in terms of both profitability and regulations, this formal request and further investigation are made. Policymakers are still concentrating on gathering more data, even as Ether, the second-largest cryptocurrency in the market, is using less energy since switching to a proof of stake consensus style. Reports like the most recent one from the Rocky Mountain Institute, which estimated that bitcoin globally consumed 127 terawatt-hours (TWh), more than Norway as a whole, are feeding this curiosity.
As 2024 approaches, the pace at which TradFi institutions are entering the blockchain and cryptoasset area quickens. The trend toward the creation and investment of more tokenized products is still growing, even if one ignores the spot bitcoin ETF headlines that have, understandably, dominated much of these discussions. In particular, it appears that the trend toward tokenizing non-financial assets as well as real assets will only pick more speed in the future.
The market for tokenized liquid assets is expected to be valued at $16 trillion, according to estimates from the Boston Consulting Group, but that is just one aspect of the situation. 91% of institutional investors are interested in investing in tokenized assets, and 97% of them believe that tokenization would significantly alter the wealth management landscape, according to a Celent and BNY Mellon survey. Investors of all sizes would be well advised to get ready for this paradigm change as tokenonmics is clearly on its way to mainstream financial services.
Investors should pay notice as cryptocurrency and tokenized assets continue to gain traction in financial markets.