The U.S. economy will finally fall into recession in the first half of 2024. Economic growth momentum has been slowing for months, and inflation has cooled, making the economy more vulnerable to shocks. The U.S. leading indicators are now in a recession phase after 19 consecutive months of decline, near record lows. Stock prices are struggling, commodities are weak, employment is weak, corporate bankruptcy filings are back to early Covid levels, and the yield curve is inverted but steepened in recent weeks – all of these are signs of an end-of-cycle period. **Frequent references to soft landings , which usually occur before a recession is officially declared. Bitcoin has only experienced one officially declared recession in the United States, between January and April 2020, during which time Bitcoin **grew by 60% from its peak** and then sharply** after the Federal Reserve provided ample liquidity. It also tends to be in the early stages of a recession: 12% in the two weeks of March 2020. However, the recent breakthrough confirms the strong demand for hard currency that the US authorities cannot avoid, a feature that is the same as that of bitcoin. With debt levels more worrisome at the national level than at the corporate or household level, we expect more than $2.4 billion to flow into the newly approved US spot Bitcoin ETF in Q1 2024 and drive Bitcoin*** Despite the potential for significant volatility, Bitcoin** is unlikely to fall below $30,000 in Q1 2024.
We estimate the inflow of Bitcoin ETFs by referring to the SPDR Gold Shares (GLD) ETF. The GLD ETF was launched on November 18, 2004, with an inflow of about $1 billion in the first few days of its launch, and by the end of the first quarter of 2005, the GLD had an inflow of about $22$600 million. At that time, the total amount of physical *** was about 1520,000 tons, each worth about $15.6 million, which translates to a total market capitalization of $2$36 trillion. In the first few days after the launch of GLD, USD inflows into GLD amounted to about 004%。About a quarter later, on March 31, 2005, the GLD inflow reached 22$600 million, taking into account the growth and changes in the gold price, GLD already accounts for 01%。If we apply this data to the Bitcoin spot market, we speculate that the Bitcoin spot ETF has inflows of 3$100 million, with an inflow of about 7$500 million.
However, it was a time when interest rates were higher and the amount of money was much lower. In 2023, we are no longer in the dead ball era of finance, but are moving into the era of hgh steroids. According to the Federal Reserve Bank of New York, the amount of m2 ** in November 2004 was 6$4 trillion compared to $20 in October 2023$7 trillion. As a result, we believe to expand inflows into Bitcoin spot ETFs by 323x is reasonable. As a result, spot Bitcoin ETFs will see around $1 billion in inflows in the first few days and $2.4 billion in a quarter. Extending our logic further, the more mature state of a Bitcoin ETF could be around 1Around 7% (about $12.5 billion), which is the approximate proportion of the total amount held in ETFs. We assume that Bitcoin is taking away significant market share from ** and expect voters in 2024 to be more aware of the drawbacks of debt-driven money printing, so we apply M2's 3A 23x multiple, estimating an interim inflow of $40.4 billion in the first two years of Bitcoin ETF trading.
Finally, we note that Coinbase charges traders about 25% processing fee. We believe that spot Bitcoin ETFs could trade with spreads of around 10 basis points, with many brokerage firms having zero commissions. This means that spot ETFs can bring significant cost advantages to users.
The fourth Bitcoin halving will take place in April 2024 without a major fork. With the issuance of new coins halved, unprofitable miners will leave the market, ceding market share to those with low-cost electricity. Still, the open markets won't be much affected due to the significant improvement in the balance sheets of listed miners, who currently control a record percentage of global hash rate (around 25%). After a brief (days to weeks) consolidation after the halving, with the market digesting additional selling pressure from unprofitable miners, Bitcoin will rise to 4More than $80,000, this is the neckline position of the head and shoulders shape completed in April 2022. Overall, Bitcoin miners will perform lower than they did before the halving, but low-cost miners CLSK and Riot will come out on top. After the halving, we expect at least one publicly listed miner to achieve 10x growth by the end of 2024.
In the second half of 2024, Bitcoin will cross the wall of worry. By 2024, more than 45% of the world's population will vote in legislation and elections at an all-time high. Such a high level of important elections heralds a high degree of volatility and a significant change in the outlook. More specifically, there is growing evidence that voters and courts are rejecting the anti-growth agenda of the Green Lobby. So, after Donald Trump won 290 votes and was re-elected**, there is optimism that the SEC's hostile regulatory approach will be abolished, and we believe that Bitcoin** will reach an all-time high on November 9th, a full three years after the last all-time high. (Recall that Bitcoin's breakout in November 2020 was also a full three years from its peak in November 2017). If Bitcoin reaches $100,000 by December, we at Satoshi Nakamoto will be named Time magazine's Person of the Year.
Ethereum won't be able to disrupt Bitcoin in 2024, but it will outperform all big tech stocks. Bitcoin's more pronounced regulatory status and energy intensity will attract interest from entities in the Latin America, Middle East, and Asia regions. Argentina will join El Salvador, the United Arab Emirates, Oman, and Bhutan as the fifth country to sponsor Bitcoin mining, as Argentina's state-owned energy giant YPF may express interest in mining digital assets with excess methane and natural gas. As in past cycles, Bitcoin will lead the market, with the value flowing into smaller tokens by market cap after the halving. Ethereum is starting to outperform Bitcoin and may outperform Bitcoin overall in 2024, but it won't outperform it. Despite Ethereum's strong performance in 2024, its market share will still be lost to other smart contract platforms with more solid scalability roadmaps, such as Solana.
Ethereum will implement EIP-4844 (Proto-DanksHarding), which will reduce transaction fees and improve the scalability of L2 such as Polygon, Arbitrum, Optimism, etc. Within 1 year after the EIP-4844 upgrade, Ethereum L2 will have 2-3 leaders in terms of value and usage. This is because liquidity fragmentation will accelerate the dominance of head L2s. This is already happening in DEXs, with Uniswap, Pancake Swap, and Curve accounting for 78% of DEX trading volume in 2023. The same market consolidation will occur in the L2 space, with Arbitrum and Optimism expected to be the main contenders.
For the first time, L2 will achieve higher monthly DEX trading volume and TVL than Ethereum. This is because, L2 trading fees are lower, so the bid-ask spread is smaller. The smaller the bid-ask spread, the more arbitrage opportunities there are, resulting in more trading volume. In addition, faster block times (only 025 seconds) to achieve higher transaction throughput and provide more opportunities for arbitrage between CEX and DEX. As a result, DEXs and L2 should attract more trading volume due to the trading opportunities they offer. Overall, by Q4 2024, these chains could have 2x the DEX transaction volume of Ethereum (currently 0.).8 times), the number of transactions may reach 10 times.
As speculators return to crypto and flock to top NFT collections, improved crypto games, and new products in the Bitcoin ecosystem, monthly NFT trading volume is set to hit an all-time high. Although Ethereum has had a nearly 50:1 ratio of major NFT sales since its inception, Bitcoin's Ordinals protocol and the emerging L2 on Bitcoin will drive continued growth in Bitcoin network fees. The ratio of Ethereum-to-Bitcoin major NFT issuances will be close to 3:1 in 2024. Stacks (STX) is a Bitcoin-based smart contract platform that will be the top 30 tokens by market capitalization (currently ranked 54th).
After reaching a settlement of more than $4 billion with US regulators, Binance will lose its position as the number one centralized exchange by trading volume. OKX, Bybit, Coinbase, and Bitget will be well-funded competitors with the potential to grab the number one spot. The inclusion of a cryptocurrency exchange** in a regulated index (such as one managed by MarketVectors, a subsidiary of Vaneck) will be a key variable in determining whether a centralized exchange is eligible to provide liquidity to ETF-authorized participants and promoters. With Binance now facing a 3-year surveillance by the Department of Justice, Coinbase will grab share of the international** market, with daily trading volume exceeding $1 billion, up from about $200 million in November 2023.
The total value of stablecoins will reach an all-time high of more than $200 billion (currently $128 billion). With the entry into force of the MICA and the launch of regulated stablecoins in Europe, yield-generating stablecoins have proliferated and trading volumes have continued**. More controversially, USDC will replace USDT because institutions prefer USDC, which is already evident on the new L2 chain. After the U.S. Department of Justice (DOJ) took enforcement action against Sun and his company, Tether's loss of market share may finally become a reality.
As high-throughput blockchains like Solana improve users' on-chain trading experience, decentralized exchanges (DEXs) will rise to record market share in spot trading. At the same time, the integration of account abstraction wallets, the key feature of automatic payments is implemented, which will drive more users to on-chain activity and manage assets on their own. As the market dominance of Bitcoin and Ethereum is likely to decline after the Bitcoin halving, long-tail assets are likely to grow more significantly, and DEXs that are actively listing new tokens will have an advantage.
Remittances will be a killer feature of blockchain, as stablecoins are easier to withdraw and disburse, making them embracing in emerging markets. Given the use of Bitcoin and the Lightning Network (LN) in some remittance channels, Bitcoin staking is possible. This will become a mainstream narrative by 2024. As transaction costs on the Bitcoin blockchain rise, Bitcoin maximalists will start spreading the word that you can stake and earn yield on the Bitcoin network. Nowadays, staking to a Lightning node has happened, but there is a risk and a lower reward because your bitcoins are used for payment settlements on the Lightning Network. With the development of protocols such as AMBoss that abstract the technical details of managing lightning nodes, and federated self-custody solutions such as Fedi become widespread, users will be able to participate in the remittance market and earn some yield through cold wallets. In addition, as a security provider of proof-of-stake blockchains, Bitcoin holders will have access to new business opportunities in 2024. Utilizing projects like Cosmos-based babylon, Bitcoin holders will be able to earn yield through non-custodial staking.
At least one blockchain game has more than 1 million daily active users, demonstrating the long-awaited potential. Among the candidates to achieve this milestone, IMX is most likely to become the top 25 tokens by market capitalization (currently ranked 42nd) due to the launch and well-designed tokens of Illuvium, Guild of Guardians, and other high-budget games in 2024. According to a recent report by Dappradar, the WAX blockchain is currently leading the way in gaming, with 4060,000 unique active wallets, of which about 100,000 are playing Alien Worlds, a metaverse with multiple simple games that can reward players with TrilIum tokens. However, due to the simplicity of the game, many of these players may be gold-striking robots. Immutable, on the other hand, has built multiple AAA games on its platform that implement a token model that can't rely on bots to hit gold, and are genuinely fun games. The games, which have been in development for years and have received over $100 million in funding, will be released in 2024. They can engage players just as much as traditional AAA games like Starfield, which was released earlier this year and attracted 10 million players within two weeks.
In addition, Immutable has been working to solve many of the technical difficulties that have hampered the success of Web3 games to date, such as wallet management. Immutable's Passport allows users to log in to games and manage blockchain-based in-game items through a familiar single sign-on process while abstracting blockchain interactions. Immutable offers simplicity for gamers, and combined with large publishing partners like the Epic Games Store and GameStop, it could finally make blockchain-based games mainstream.
Solana will be the top three blockchains by market capitalization, total value locked (TVL), and active users. Driven by this **, Solana will join the spot ETF war due to a large number of asset managers submitting documents. In line with the continued growth of Solana's market share, we believe it is possible for Solana-based oracle Pyth to surpass Chainlink in terms of Total Value Secured (TVS). For reference, Chainlink's current TVS is around $15 billion, while Pyth's TVS is less than $2 billion, a dominance largely driven by blue-chip DeFi protocols on the Ethereum mainnet. As TVL continues to grow in high-throughput chains such as Solana, and Chainlink continues to work toward institutional adoption of its Link token, we expect PYTH to gain meaningful market share supported by several real innovations, including its push architecture and confidence interval system.
Multiple decentralized physical infrastructure (DEPIN) networks will be meaningfully adopted to capture the public's attention.
Hivemapper, a decentralized mapping protocol designed to compete with Google StreetView, will map 10 million km, more than 15% of the world's road capacity. Hivemapper uses its native token, $honey, to incentivize thousands of drivers around the world to install dashboards into their cars and contribute to its growing database. This global network of permissionless contributors is likely to provide HiveMapper with meaningful progress and cost advantages over existing Google. With Google Maps expected to surpass $11 billion in revenue by 2023, this will be a meaningful opportunity for HiveMapper.
Helium is a decentralized wireless hotspot network that will increase the number of paid subscribers for its 5G plans across the U.S. from the current 5,000 to 100,000. Anyone can set up a hotspot, and the hotspot operator receives payments through the Helium native token. This powerful incentive system provides Helium with some key advantages over existing wireless network infrastructure:
It is capital-light (from a helium perspective).
It transforms hotspot providers into advocates and supporters (given that they stake tokens in the network).
It enables Helium to respond to real-time data to improve the network by adjusting incentives (i.e., increasing rewards for areas with poor coverage).
Wireless network infrastructure is a relatively mature $200 billion market. As end-users gravitate toward low-cost solutions with differentiated branding (user-owned), we will see significant scope for disintermediation by traditional providers. Helium claims that they can provide data at less than 50% of the cost of traditional networks. As cryptocurrency adoption becomes more mainstream, they could gain significant market share if this claim is true.
Coinbase will be the first publicly traded company to report Layer 2 blockchain revenue in a quarterly report, with BASE's annualized revenue surpassing $100 million. The adoption of the new FASB guidelines by businesses, which allows businesses to market capitalize on cryptocurrencies, may facilitate additional disclosures, which will push businesses to hold Bitcoin and other cryptocurrencies as inventory assets. Since these accounting changes will take effect in 2025, but businesses can adopt them earlier, major non-crypto financial entities (banks, exchanges) may announce the creation of L2-like public blockchains.
Walled garden apps that support KYC, such as those that use Ethereum proof-of-service or Uniswap hooks, will gain tremendous traction, approaching or even surpassing non-KYC apps in terms of user base and fees. Uniswap will lead the way, which will drive institutional liquidity and trading volume for the protocol. The additional trading volume brought about by KYC-gated hooks will significantly increase protocol fees, allowing new entrants to participate in DeFi without worrying about interacting with OFAC-sanctioned entities. The increase in the peg will help Uniswap strengthen its moat and competitiveness, which should drive the token appreciation, especially when the DAO finally votes to turn on the Uniswap protocol fee switch to allow the token to increase in value. If so, we don't expect this fee to be higher than 10 basis points.
by Matthew Sigel, Patrick Bush
Compilation: Luffy, Foresight News
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