Key Points

• The SEC and other global regulators continue to crack down on crypto.
• Interest rates will likely serve as a catalyst for crypto and other risk assets in 2024.
• Bitcoin bulls are anticipating approval of the first bitcoin spot ETF.

While cryptocurrency investors await further developments on the regulatory front, most major cryptos have enjoyed positive momentum in 2023. Bitcoin (BTC) prices have rallied more than 70% year to date, while ethereum (ETH) prices are up more than 30%.

Crypto enthusiasts are optimistic that the Federal Reserve is approaching its terminal interest rate in the current cycle. The central bank could pivot to rate cuts by mid-2024, potentially relieving pressure on crypto and other risk assets.

The Securities and Exchange Commission has continued its regulatory crackdown on the crypto market. Still, more regulatory clarity could open the door for institutional crypto investment in 2024 and beyond. 

Ripple and crypto asset manager Grayscale recently scored landmark victories in court battles against the SEC that could pave the way for cryptocurrency to become more of a mainstream investment moving forward.

Republicans in Congress have pressured the SEC to approve the first bitcoin (BTC) spot exchange-traded funds. Still, the SEC has delayed its decision on ETF proposals from BlackRock, Fidelity and others until January 2024. 

A look back at the history of the volatile, cyclical cryptocurrency market suggests that 2024 could be a strong year for cryptocurrency investors.

Related: Best online brokers.

Cryptocurrency outlook for 2024

Following a long list of cryptocurrency scandals and bankruptcies over the past two years, the SEC and other U.S. regulators have ramped up their crypto regulatory crackdown heading into 2024. 

At the core of the SEC’s arguments is whether cryptocurrencies should be classified as securities, commodities or something else. In July 2023, Ripple’s XRP scored a partial legal victory when a court ruled that XRP should not be classified as a security when sold to retail investors on an exchange. 

The SEC was dealt a legal blow in August 2023 when a court ruled that the SEC’s denial of Grayscale’s proposal to convert its popular Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF was “arbitrary and capricious.” The court said the SEC failed to explain its acceptance of Bitcoin futures ETFs but repeated denials of bitcoin spot ETFs. The SEC has denied all applications for a bitcoin spot ETF to trade on a major U.S. exchange, citing concerns over investor safety and cryptocurrency market manipulation.

Following the Grayscale court ruling, Reps. Tom Emmer, Ritchie Torres, Mike Flood and Rep. Wiley Nickel penned a Sept. 26 letter to SEC Chair Gary Gensler urging the regulator to begin approving bitcoin spot ETFs immediately. In late September, the SEC announced it had delayed rulings on several proposed bitcoin spot ETF proposals from BlackRock, Bitwise, Invesco Galaxy Digital and Valkyrie until Jan. 10, 2024. 

Outside of developments within the digital assets industry, cryptocurrency prices will likely continue to react to macroeconomic developments in 2024. 

The Federal Reserve has raised its fed funds interest rate target by 5.25% since March 2022 to combat a surge in inflation. Rising interest rates increase consumer and corporate borrowing costs and typically slow economic growth. In addition, rising interest rates discourage investors from buying riskier assets, such as cryptocurrencies and stocks.

While the Fed has made significant progress in bringing down inflation, its latest economic projections call for another interest rate hike by the end of 2023. The faster U.S. inflation falls, the sooner the Federal Reserve will begin cutting interest rates. If inflation remains sticky and interest rates stay higher for longer than expected, crypto prices may have limited upside in 2024.

Bitcoin forecast for 2024

There are several unique reasons for investors to be bullish on bitcoin heading into 2023, potentially starting with the next bitcoin halving event.

Bitcoin halvings occur once every 210,000 blocks on the blockchain, cutting the reward for mining new blocks in half. Miners receive 50% fewer bitcoins for verifying a single block of transactions. The next bitcoin halving is set to take place in April 2024 at block 740,000 in the blockchain. Following the upcoming halving, each block reward will drop from 6.25 BTC to 3.125 BTC.

Kadan Stadelmann, chief technology officer at KomodoPlatform, said bitcoin halvings have historically been bullish catalysts.

“Typically, bitcoin prices increase after each halving event, which occurs every four years,” Stadelmann said. “Although it’s certainly not a guarantee, historical data shows that BTC prices are likely to go up, later followed by ETH and various altcoins.”

Bitcoin has a history of volatile trading, but the cryptocurrency tends to go on multiyear winning streaks following severe downturns like it experienced in 2022. Bitcoin prices dropped 61% in 2014, followed by three consecutive annual gains of 35% or higher from 2015 through 2017. The pattern repeated with a 73% decline in 2018, followed by three consecutive annual gains between 60% and 302% through 2021. 

There are no guarantees that the pattern will continue. But past performance suggests that larger gains could be around the corner for bitcoin in 2024 and 2025.

In the previous two bitcoin bull market cycles from 2015 to 2017 and 2019 to 2021, bitcoin averaged a 213% annual gain in the second year of the bull market, making it the strongest year of the cycle each time. If you apply that huge return to the current price of bitcoin, the popular cryptocurrency could hit a new high by the end of 2024. 

Of course, there’s no guarantee the next bitcoin bull market will look anything like previous ones, and investors should perform their own research and analysis before buying any cryptocurrencies. While it can be difficult to predict bitcoin’s price movement year to year, industry experts remain bullish on bitcoin’s long-term trajectory. 

Ethereum forecast for 2024   

Ethereum completed its highly anticipated Shanghai hard fork in April 2023, a much-needed upgrade that transitioned ethereum from an energy-intensive proof-of-work consensus mechanism to a potentially much more scalable proof-of-stake mechanism.

Ethereum investors were likely disappointed by how much ethereum’s price performance lagged bitcoin in 2024. But ethereum remains the largest alternative to bitcoin in the crypto market. Ethereum’s functionality and support of smart contracts, decentralized applications and non-fungible tokens make it a unique alternative to bitcoin for developers, collectors and decentralized finance entrepreneurs.

Looking back at ethereum’s performance during the second year of the past two crypto bull markets, ethereum could be positioned for a big year in 2024. In 2016 and 2020, ethereum averaged a 613% annual gain. If you apply that gain to ethereum’s current price, the crypto could hit new highs by the end of 2024. However, past performance does not guarantee future returns, and the cryptocurrency market can be extremely volatile and unpredictable. 

Other cryptocurrencies to watch in 2024

Bitcoin and ethereum make up more than two-thirds of the global cryptocurrency market cap, but other leading altcoins have gained significant momentum heading into 2024.

The price of XRP surged following Ripple’s court victory over the SEC, and the Ripple network’s payment settlement system and currency exchange network could make XRP a valuable investment in years ahead. Ripple designed its network to be a faster, cheaper alternative to the legacy Society for Worldwide Interbank Financial Telecommunication money transfer network. XRP is the native token on the Ripple network.

Solana (SOL), launched in 2020 as a potential challenger to ethereum, has roughly quadrupled the returns of ethereum in 2023. Solana’s unique hybrid proof-of-history and delegated proof-of-stake consensus model allows it to process transactions much faster than ethereum and at a much lower transaction cost.

How could regulatory changes affect crypto trading in 2024?

Some crypto enthusiasts have criticized the global regulatory crackdown on cryptocurrency, claiming that it threatens the decentralized nature of the industry that attracted many users in the first place. However, many industry experts say regulatory clarity will reassure skeptical institutional investors that the cryptocurrency market is legitimate and safe.

Ben Weiss, co-founder and CEO at CoinFlip, said the U.S. must act quickly in establishing a clear set of regulations for digital assets or it risks losing its global leadership position in the market.

“An unclear regulatory framework and regulation by enforcement has the potential to cause the U.S. to lose its traditional reputation as a leader in technological innovation,” Weiss said.

He pointed out that the U.S. appears to be falling behind Europe, which implemented the Markets in Crypto-Assets Regulation in mid-2023. 

“Thankfully, it’s not too late for the U.S. to save its reputation as a leader in innovation, but it must course-correct quickly,” Weiss said.

Phillip Shoemaker, executive director of Identity.com, a nonprofit organization providing decentralized identity verification, said there is a lot of positive cryptocurrency regulation momentum in Europe, Hong Kong, Dubai and elsewhere headed into 2024.

“Crypto is a global asset class, so those positive developments on the regulatory front are poised to help serve as a catalyst for bitcoin, ethereum, solana and others,” Shoemaker said. “It does seem increasingly likely that these proposed spot bitcoin ETFs will get approved fairly soon, perhaps as early as next year (and) that would bring a lot of fresh capital to (the) space.”

Frequently asked questions (FAQs)

It’s challenging to predict investor sentiment year to year, and crypto prices have historically dropped sharply during periods in which they fall out of favor with investors. However, past cryptocurrency bull market cycles suggest that 2024 could be a good year for crypto prices if historical patterns hold. 

Cryptocurrency can be an appropriate investment for short-term traders looking to speculate on a volatile asset or long-term investors with extremely high tolerance for risk and volatility. However, it’s tough to predict how cryptocurrency investments will perform year to year. So you should only invest money in crypto in 2024 that you are willing to lose in a worst-case scenario.

Cryptocurrency has endured a meteoric rise in popularity in recent years, and global regulators are scrambling to determine the best way to provide investors access to cryptocurrency markets safely and transparently. Cryptocurrency regulation has been a top priority for the SEC and other global regulators in recent years, and regulators will likely provide additional clarity and regulatory frameworks for the crypto market in 2024.