Coinbase is taking root in the United States of America and trying international markets after CZ and Binance settled with the DOJ and now the CFTC. With the newly found market growth, Coinbase has released crypto market forecasts for 2024.
The crypto entity envisions that institutional flows will remain anchored on Bitcoin through the first half of 2024. This comes, in part, from pent-up demand from traditional investors seeking to enter this market.
Coinbase’s crypto outlook for 2024
The global crypto market worth more than doubled in 2023, indicating that the asset class has already passed through its “winter” and is now in the midst of a transition. Coinbase argues it would be premature to identify this or interpret the favorable performance as vindication for the cynics who reveled in crypto’s overly overstated collapse.
At the time of writing, CoinGecko’s data shows that the global crypto market cap is now $1.68 Trillion, a 5.22% increase over the last 24 hours and a 104.5% increase over a year ago. Bitcoin (BTC) has a market cap of $839 billion as of today, signifying a 49.89% crypto market. Meanwhile, the stablecoins market cap is at $131 billion, accounting for 7.78% of the total crypto market cap.
Here are 8 key takeaways from the 2024 market outlook:
1. The next crypto cycle
The market will surround trade on BTC hegemony. In 2023, the selection of digital assets shifted towards higher-quality names, causing Bitcoin dominance to progressively grow above 50% for the first time since April 2021.
This was mostly driven by several well-known and established financial heavyweights applying for spot bitcoin ETFs in the United States, as their presence in the industry has confirmed and strengthened crypto’s chances as a new asset class.
Although there may be some capital rotation into riskier assets next year, Coinbase predicts institutional flows will stay securely anchored on Bitcoin at least until the first half of 2024.
In addition, Coinbase anticipates that more market participants will focus on finding new web3 apps that may help crypto bridge the gap between early uptake and widespread use.
As market participants increasingly focus on apps, the crypto exchange anticipates that more alt L1s will rework their networks to better line with the altering narrative.
2. Resetting the macro framework
De-dollarization may remain a hot topic in 2024, especially given that it is an election year. However, the USD is unlikely to lose its global dominance (or “privilège exorbitant” as former French President Valery Giscard d’Estaing put it) very soon. What is obvious is that the USD has reached a tipping point.
Although de-dollarization will take some time, the global monetary regime has already begun to transition away from USD dominance – and for a good cause. The cost of servicing America’s debt burden is expected to rise to $1 trillion, or 3.1% of GDP, by 2028, according to the Congressional Budget Office (CBO).
Crypto supporters claim that Bitcoin and other digital stores of value play a vital part in the coming change from a unipolar to a multipolar world, citing the obvious value of having a transnational asset that is not owned or controlled by any single country.
According to Coinbase, the monetary regime shift that is taking place, and crypto’s role in it, will be significant in the long run, even if most crypto traders now may not live long enough to see the old system fall.
3. Connecting to the real world
Tokenization is an important use case for traditional financial institutions, and Coinbase anticipates that it will be a significant component of the new crypto market cycle, as it is a critical aspect of “updating the financial system.” This essentially entails automating procedures and removing intermediaries that are no longer required in the asset issuing trading and record-keeping processes.
Given client demand for higher-yielding products and the requirement for varied sources of income, the crypto exchange forecasts tokenization to grow to other market instruments such as equities, private market funds, insurance, and carbon credits by 2024.
4. The future of Blockchain
One of the major themes that has emerged from the recent negative market cycle is a focus on making crypto technology more user-friendly and accessible. Coinbase believes that with the Dencun upgrade expected to lower rollup transaction fees by 2-10x potentially, more decentralized applications (dapps) may take a “gasless transactions” path, thereby allowing users to focus solely on high-level interactions.
This may also allow for the development of new non-financial use cases. The crypto exchange believes that developments on the Ethereum blockchain will be worth monitoring once EigenLayer is completely operational to determine what proportion of staked ETH will be allocated to additional security provisions.
5. Stablecoins 2024 market
Stablecoins are currently worth approximately US$127 billion, down 9% from $137 billion at the start of 2023. At the same time, the whole crypto market cap has increased, resulting in stablecoin dominance falling from nearly 16% to 8-9% of total crypto market capitalization.
Coinbase sees that the reduction in stablecoin market size reflects the general drop in liquidity of the digital asset class, as many non-US centralized exchanges and DEXs price their assets in USD stablecoins.
Although big exogenous events such as the FTX collapse in November 2022 and the US regional financial crisis in March 2023 have brief outsized impacts on overall volume, stablecoin supply variations are also strongly tied with on-chain trade volumes.
Coinbase argues that the relative fall in stablecoin market value reflects various factors, including a general decline in global liquidity, an increase in regulatory crackdowns in the crypto business, and the high-yield environment in several countries, notably the United States.
6. Crypto regulation
The lack of well-developed legal frameworks for digital asset markets and their players, according to Coinbase, will cause issues over the next 12 to 18 months, particularly in jurisdictions that have not yet advanced regulatory measures, such as the United States.
Against this backdrop of uncertainty, however, there are some early signals that the possibilities for regulatory clarity are rising – signs that we regard as encouraging, if not decisive.
7. The future of Coinbase
Coinbase has expanded its products and services globally, including derivatives and layer 2 solutions, with 245,000 ecosystem partners in over 100 countries. The exchange gained new licenses, allowing us to enter new markets and offer new products:
Coinbase Financial Markets, Inc. (CFM) in the United States has received regulatory clearance from the National Futures Association (NFA), a CFTC-designated self-regulatory organization, to operate a Futures Commission Merchant (FCM) and provide eligible US consumers with access to crypto futures.
At the moment, savvy retail customers on Coinbase Advanced in the United States can trade leveraged crypto term futures via nano-sized contracts via CFM.
According to institutional participants, tokenization will be a prominent trend reflected within the Base ecosystem in 2024 and beyond.
8. Upgrades to expect in 2024
Ethereum takes center stage in market upgrades in 2024. Ethereum is still in development, with one or more annual updates scheduled in the next years to grow the network and handle potential centralization issues, among other things. As part of Ethereum Improvement Proposal (EIP) 4844, the Cancun/ Deneb (Dencun) Fork will focus mainly on Proto-Danksharding.
While an upgrade to address some concerns is unlikely to be implemented in 2024, a future upgrade incorporating a carefully designed ePBS implementation and maybe MEV-burn could ease some of these issues. Meanwhile, Flashbots is creating the Single Unifying Auctions for Value Expression (SUAVE) protocol to decentralize the block builder role in order to fight builder centralization.
SUAVE is an EVM chain that can be used as a plug-and-play mempool and decentralized block builder for any blockchain, and it is set to be released in 1H24.