3 Cryptocurrency Trends That Investors Probably Ignored

As the excitement around the approval and launch of 11 Bitcoin ETFs settles, and the raft of legal proceedings involving the SEC continues, analysts and investors alike have a lot to digest heading into 2024. In addition to the market-influencing headlines, the US presidential election is weighing in. The impending decline also affects market sentiment and appetite towards crypto assets. With former President (and current candidate) Donald Trump suspending his opposition to central bank digital currencies (CBDCs), and other politicians also decrying the development of such tools, it looks like the topic of cryptocurrencies will play a role in the upcoming campaigns. On the other hand, congressional leaders continue to highlight the role that cryptocurrencies can play in financing terrorism and criminal activities, although these totals remain small compared to the funding provided by the US dollar.

While these headlines are important to the long-term sustainability of both Bitcoin and the overall crypto asset market, there are several other headlines and trends that investors should keep an eye on. One important trend to note is that even as political uncertainty continues to dominate politics in the US, institutional buyers have snapped up billions in Bitcoin so far in 2024. To that end, politicians and sound bites can wax and wane over time, But there are many bigger-picture issues that are driving political and business conversations in tangible ways, versus just adding more fuel to social media discussions.

Let's take a look at a few of them.

FTX plans to make investors integrated

In what many have pointed to as an unexpected development in the ongoing saga surrounding the collapse and bankruptcy of FTX, a recent plan was announced indicating that the entity plans to fully consolidate investors. This is very good news and should be celebrated for a number of reasons. First, investors who have suffered losses due to Bankman Fried's criminal activities through no fault of their own will be compensated. Second, this is also an indication that the bankruptcy process and associated laws are capable of handling complex, large, multinational cryptocurrency filings like FTX. Finally, it should serve as a further example to cryptocurrency investors and advocates that, despite the differences between crypto assets and fiat assets, investors should treat cryptocurrencies as financial instruments.

It is important to note that these repayments will be made at the market value of the cryptocurrency at the time of FTX's bankruptcy filing. For context, the price of Bitcoin at that point was around $20,000 per token, which is well below current market levels. Regardless of this disappointment for some investors, the fact that FTX will repay investors is news worth celebrating.

Cryptocurrency mining will be investigated

It should come as no surprise to experienced cryptocurrency investors and market participants that the energy consumption and environmental impact associated with cryptocurrencies is once again under scrutiny. This time, the scrutiny went beyond sound bites and took the form of a government investigation. Specifically, the US Energy Information Administration will begin closely tracking the electricity consumed by cryptocurrency mining companies operating within the United States. To do this, the EIA will launch a survey in February 2024, focusing on a select number of Bitcoin miners, who will be asked to respond with details of energy use among other operating statistics.

This request was approved and approved as part of the emergency data collection process requested by the Office of Management and Budget. This formal application and additional inquiry comes after a turbulent year for cryptocurrency miners from a profitability as well as a regulatory perspective. Even as the second-largest cryptocurrency on the market, ether, continues to reduce power consumption as a result of the shift to a proof-of-stake consensus model, policymakers continue to focus on obtaining more information. Reports continue to fuel this interest, such as a recent report by the Rocky Mountain Institute, which estimates that Bitcoin globally consumes 127 terawatt-hours (TWh), more than the entire country of Norway uses.

Coding is expanding

TradFi's movement into blockchain and crypto assets continues to accelerate heading into 2024. Regardless of the Bitcoin ETF headlines that have, justifiably, dominated most of these conversations, the trend toward developing and investing in more premium products continues to grow. Specifically, the movement toward tokenization of real-world assets — not just financial instruments — appears to accelerate going forward.

Specifically, Boston Consulting Group estimates that the market for tokenized liquid assets will reach $16 trillion, but this is only part of the story. A Celent and BNY Mellon survey found that 91% of institutional investors are interested in putting money into tokenized assets, with 97% agreeing that tokenization will fundamentally change the world of wealth management. The trend is clear. Tokens are coming into mainstream financial services, and investors of all sizes are well advised to prepare for this paradigm shift.

Cryptocurrencies and token assets continue to make inroads across financial markets, and investors should take note.

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