Virtual Assets Solidify Foundation... Heading Toward the '60,000 Dollar' Milestone in 2024

2024 Stretch... Upward Outlook
Liquidity Rises on Fed March Rate Cut Expectations
Spot ETF Listing Anticipated... Institutional Funds Flow In

The cryptocurrency market, which bottomed out this year, is expected to stretch its legs in 2024. The U.S. Federal Reserve (Fed) has indicated a rate cut starting in March, which is expected to increase liquidity. With the first-ever Bitcoin spot exchange-traded fund (ETF) in the U.S. market anticipated as early as January next year, participation from global 'big players' such as sovereign wealth funds and pension funds is also expected.

Leading Coin Recovers to $40,000... Survived the Crypto Winter

Bitcoin, the leading cryptocurrency, is trading sideways in the range of 54 million to 56 million KRW as of the morning of the 28th. It has nearly tripled compared to the beginning of the year. Bitcoin has steadily risen since October, briefly surpassing 60 million KRW in December. Intraday, it even surged to a high of 60.86 million KRW. This means it has recovered to the pre-Luna incident price level of $40,000 (52 million KRW). Along with the strength of the leading coin, major altcoins (cryptocurrencies other than Bitcoin) such as Ethereum, Binance Coin, Ripple, and Solana also rose together.

The cryptocurrency industry endured the 'crypto winter'?a harsh cold period?in the first half of this year. The U.S. reduced liquidity for two consecutive years in 2022 and 2023, leading to a contraction in cryptocurrency investments. The benchmark interest rate, which was in the 0% range in March 2022, surged to 5.25?5.50% after 11 hikes. In the past, cryptocurrencies were generally perceived to have a low correlation of about -0.1 to 0.1 with traditional financial assets, but recently they have shown a strong tendency to move in tandem with risk assets. The Xangle research team explained in a report, "Bitcoin noticeably moves in close connection with risk assets such as real estate, high-yield bonds, and stock indices." The Luna-Terra incident, marked by CEO Do-hyung Kwon's fraudulent activities, and the bankruptcy of FTX, the world's third-largest cryptocurrency exchange, in 2022 led to market participants withdrawing.

The atmosphere changed in the second half of the year. News that BlackRock, the world's largest asset manager, was pushing for the listing of a Bitcoin spot ETF raised expectations for participation from 'big players' such as pension funds and institutional investors. A Bitcoin futures ETF based on Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME) has already been listed. However, the U.S. Securities and Exchange Commission (SEC) opposes the listing of spot cryptocurrency ETFs, citing the possibility of manipulation. In fact, Binance, the world's largest cryptocurrency exchange that accounted for 30?50% of global cryptocurrency trading volume, was fined for facilitating the circumvention of user verification procedures by a small number of VIP clients. Regarding this, a cryptocurrency industry insider said, "Just as Coinbase improved transparency by entering into surveillance-sharing agreements, this is an issue that can be sufficiently improved," adding, "Since Coinbase complies better with U.S. regulatory authorities than Binance and has built a positive image, this will be a plus factor for the listing of a Bitcoin spot ETF."

U.S. Tailwind and Bitcoin Spot ETF Listing Expectations for Next Year

The first major topic next year is the U.S. interest rate cut. Fed Chair Jerome Powell recently announced at the December Federal Open Market Committee (FOMC) meeting that the first rate cut would occur in March next year. The median federal funds rate forecast for 2024 was lowered to 4.6%, down from 5.1% presented in September. Kim Jaewon, head of the Xangle research team, said, "From a macroeconomic perspective, the U.S. economy will achieve a soft landing," and added, "The Fed is expected to start cutting rates in the second half of the year and re-inject liquidity into the market."

There is a prevailing analysis that the Bitcoin spot ETF, which was a driving force behind this year's stock market rise, is also entering the final countdown for listing. The U.S. SEC must provide a final response to BlackRock's Bitcoin spot ETF application by January next year. It is expected that final approval could be granted within the first quarter. In October, the U.S. Court of Appeals for the D.C. Circuit ordered the SEC to revoke its rejection of Grayscale's spot Bitcoin ETF application, weakening the SEC's grounds to reject ETF applications from other asset managers like BlackRock. This creates the possibility of active inflows of funds from institutional investors who had been cautious about Bitcoin investments due to accounting issues. The Korbit Research Center estimates that additional capital inflows could reach $20 billion (approximately 26 trillion KRW).

If a Bitcoin spot ETF is actually listed in the U.S. market, exchanges responsible for distribution are also expected to benefit. Kim Minseung, a research analyst at Korbit, said, "Institutional funds entering the cryptocurrency market due to Bitcoin spot ETF approval will prefer exchanges that comply with regulations," adding, "The cryptocurrency distribution market is likely to be reorganized mainly around the U.S. market, which complies with regulations." In fact, most of the 12 Bitcoin spot ETF applicants have reportedly chosen Coinbase as their custody partner.

The Bitcoin halving, which occurs every four years, is also expected to be a hot topic. Halving refers to the phenomenon where the reward for Bitcoin mining is cut in half. Since demand remains constant but issuance decreases, the value typically rises. The industry expects the Bitcoin halving to occur around the end of April 2024. The first halving occurred in 2012, followed by the second and third in 2016 and 2020, respectively.

The overall market sentiment for next year is positive. Lee Jongwon, a researcher at Sangsangin Securities, explained, "Only a portion of long-term holders are selling Bitcoin," and added, "There is a strong optimistic market sentiment toward Bitcoin through the first quarter of next year." Hong Seongwook, a researcher at NH Investment & Securities, said, "2024 will be the year Bitcoin officially becomes an asset class, with a high possibility of price increases," and suggested, "The next target is $60,000 (78 million KRW)."

This content was produced with the assistance of AI translation services.