As we approach the end of the year, the anticipation surrounding the approval of spot Bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC) has generated considerable excitement among analysts and traders. While many believe that these index funds hold the key to a significant price surge for Bitcoin and the broader crypto market, Matrixport, a digital assets financial services platform, presents a distinct perspective in their latest report. According to Matrixport, Bitcoin and crypto prices are destined to soar in 2024, regardless of the SEC’s decision on ETF approval.
One influential factor identified by Matrixport is the recent declaration of victory by Jerome Powell, the Chairman of the US Federal Reserve (Fed), in the institution’s fight against inflation. Powell’s mention of possible rate cuts has caught the attention of the digital asset platform. In their report, Matrixport highlights that Bitcoin prices jumped nearly 300% in 2019 when the Fed ended its hiking cycle and kept rates on hold for an extended period. Drawing parallels to the present scenario, where the Fed projects three cuts, equivalent to 75 basis points, in 2024, Matrixport suggests that this could be a catalyst for Bitcoin’s price surge.
Matrixport’s analysis incorporates a proprietary inflation model that was presented a year ago. This model projected a sharp decline in inflation from 8% to 3-4% by the end of 2023. The platform has great confidence in this model, suggesting that risk assets, including stocks and cryptocurrencies, would witness a substantial rally in 2023. Additionally, Matrixport’s proprietary inflation model predicts the possibility of the US Consumer Price Index (CPI) dipping below 2% by the end of 2024.
A dip below 2% in the CPI holds significant implications for Bitcoin’s price and its role as a potential hedge against inflation. The CPI serves as a key measure of inflation, reflecting changes in the average prices of a basket of goods and services over time. A deceleration in the rate of price increases suggests a more subdued inflationary environment. In such a scenario, investors might turn to alternative assets such as Bitcoin to preserve their purchasing power and shield themselves from the erosion of value caused by inflation.
Even if the SEC maintains its disapproval of Bitcoin Spot ETFs in January 2024, Matrixport emphasizes that higher crypto prices are still expected throughout the year. This assertion is based on the substantial growth of assets in US money market funds since the onset of the COVID-19 pandemic. These funds have doubled, reaching a staggering $6.1 trillion. This growth implies an additional $320 billion in interest rate payments per year, potentially creating an influx of $370 billion annually or roughly $1 billion daily into risk assets such as stocks and cryptocurrencies.
Matrixport’s bullish outlook for 2024 considers several future events that could further drive the growth of Bitcoin and cryptocurrencies. Firstly, it marks a Bitcoin halving cycle, historically associated with substantial price increases averaging 192%. Additionally, 2024 is an election year, and the possibility of former President Donald Trump being reelected is considered high. Matrixport suggests that his policies could potentially bolster the US economy, thereby driving up stock prices and cryptocurrencies.
While the approval of Bitcoin ETFs by the SEC is eagerly awaited by many, Matrixport’s report offers an alternative perspective on the future of Bitcoin and cryptocurrencies. Their firm belief in a significant price surge in 2024 is grounded in factors such as the Fed’s potential rate cuts, projected inflation levels, and other significant events on the horizon. Whether or not their predictions come to fruition, the crypto market will undoubtedly continue to be an area of intense speculation and potential growth.