December 28 Bitfinex Alpha| Bitcoin will rise in 2024, but it will not be in a straight line.
On Bitfinex Alpha
As we enter 2024, we remain very positive on our outlook for Bitcoin and crypto assets in general. If 2023 has proven anything, it is Bitcoin’s remarkable resilience despite reputational and regulatory challenges.
That doesn’t mean the road will always win. Based on past market behavior, a retracement is likely. With the total market capitalization of the cryptocurrency market being approximately $1.6 trillion, we believe that asset value fluctuations within this range could increase the total market capitalization up to $3.2 trillion.
It is constructive to look at various indicators, sentiment indicators and performance at similar points in the cycle. Regarding the Cryptocurrency Greed and Fear Index, we predict that 2024 will likely see an extended visit to the “extremely greedy” psychological zone, which is associated with new peaks for BTC during the bull market.
We predict that institutional investment will continue to heavily favor Bitcoin, although capital is likely to move into riskier crypto assets over the next year as the long-awaited Bitcoin ETF spot serves as a catalyst for institutional investors to increase their cryptocurrency asset portfolios. At least until the first half of 2024.
Bitcoin’s market value in the short term should be considered in relation to its real value, the MVRV indicator. Looking at current valuations, we can see that the market environment is similar to the initial price decline around June 2019 and July 2016, followed by a sustained recovery. This is another reason to expect a retracement after tagging the $44,000-$45,000 area, and why I expect the price to range further from this level or instead increase immediately.
It is also important to monitor Bitcoin mining activity. Especially since 2024 is the year of the halving and miners will step up their operations to make a profit by selling Bitcoin on the market. Faced with the prospect of earning only half a Bitcoin after the halving, miners must prove they can continue to run their operations efficiently and profitably.
Puell Multiple’s analysis shows that the market is currently in a healthy state and with limited expected sales from miners, there is plenty of room for Bitcoin prices to continue to rise.
Miner inflows to exchanges are expected to continue to decline throughout the year, with some spikes over the next two months as miners upgrade more machines and sell BTC to fund this investment. As prices rise, miners’ selling demand is limited.
The outlook for Bitcoin adoption in some major markets also looks promising.
In El Salvador, where Bitcoin was declared legal in 2022, adoption continued to expand. We believe that as 2024 begins, there will be an even stronger focus on strengthening the infrastructure to support Bitcoin transactions. This includes plans to raise awareness and educate the public about Bitcoin, especially among those excluded from the formal banking system.
Perhaps even more importantly, Argentina is increasingly embracing cryptocurrency assets as a means of accessing relatively stable assets without inflation. Although it is unlikely that Argentina will follow the same path as El Salvador, the Argentine government still wants to bring economic stability to its people and sees value in decentralized assets like Bitcoin. Given the history of economic volatility, especially with high inflation rates, it is reasonable to expect people to continue to turn to cryptocurrencies as a hedge against currency devaluation and inflation.
Looking ahead to 2024, we predict that the number of global cryptocurrency holders could increase to 850-950 million (starting from the current 575 million), depending on market conditions.
The broader macroeconomic outlook is also positive. Wage growth is likely to continue to slow in 2024. Workers are targeting a one-off wage adjustment to compensate for an unexpected spike in inflation in 2022, which could reduce real wages. However, this trend is expected to stabilize in 2024 as labor demand gradually decreases. In the short term, the unemployment rate is forecast to rise from 3.7% in November 2023 to an average of 4.3% in 2024 due to slower economic growth. However, this increase is relatively modest compared to previous U.S. recessions. .
The inflation rate is also expected to decline in 2024. A combination of factors such as a global economic slowdown and supply chain efficiency is expected to keep raw material prices stable. Identify and support manufacturing sectors. The increase in labor supply observed towards the end of 2023 is likely to moderate wage growth, helping keep inflation at manageable levels, but weakening its correlation with the labor market.
Core inflation, a key indicator the Fed tracks as food and energy prices fluctuate, could fall below expectations due to worsening credit conditions and a weak global economy. However, geopolitical tensions and possible cuts in crude oil production could increase the risk of inflation. Avoiding a recession until 2024 (still a significant possibility) does not guarantee a return to the ideal 2% inflation desired by the central bank. According to market forecasts, annual inflation will recover to 2.9% by the end of next year and is unlikely to fall further.
We are pleased to provide you with our perspective and analysis of the market. I hope you find this information helpful. We look forward to a hopeful 2024.
We wish you a warm holiday season and happy trading!