2024 Bull Market Revealed: Decoding 'Eight New Narratives' from …

2024 Bull Market Revealed: Decoding 'Eight New Narratives' from Crypto Reports by SoSo Value

January 9th, 2024

In 2023, the total market capitalization of the cryptocurrency market showed significant recovery, indicating that the market is gradually emerging from the "crypto winter." Despite the downward pressure on the global macroeconomy and the emergence of regional conflicts, with the cultural and consumer sectors showing flat performance, various segments of the crypto industry have demonstrated bright spots. Notably, the acceleration of BTC spot ETFs, enhanced crypto regulation in the United States, and the commercial application of AI technologies like ChatGPT have all contributed to the industry's development.

Investment institutions and markets are creating new narratives, which investors are questioning and seeking to understand. Looking ahead to 2024, annual reports from several top crypto institutions are generally optimistic about the crypto market. SoSo Value, through interpreting these reports, has summarized eight key narratives to help investors navigate the uncertainties and reflexivity of the market and prepare for the anticipated "open bull market." The report covers views from renowned institutions such as a16z, Coinbase, Messari, and others.

（Comparison of total market capitalization of Crypto and S&P 500｜Data from: https://alpha.sosovalue.xyz/）

Bitcoin's return to dominance and the wave of its ecosystem evolution

One of the key narratives for 2024 in the cryptocurrency field focuses on Bitcoin's return to dominance and the wave of its ecosystem evolution. Institutions like Coinbase, Messari, Gemini, Hashed, Matrixport, and Spartan have contributed to this narrative. The general tone suggests that under supportive policies and regulations, Bitcoin is increasingly favored by both retail and institutional investors. It's expected to lead the market recovery and regain its dominant position. The approval of Bitcoin ETFs and the Bitcoin halving cycle are anticipated to drive price increases, while innovative waves like Ordinals and BRC-20 are set to reshape the Bitcoin ecosystem.

Here are some key viewpoints from these institutions:

Bitcoin Spot ETFs: In 2023, several financial giants applied for Bitcoin spot ETFs in the U.S. Coinbase believes their participation validates and enhances the potential of cryptocurrencies as an emerging asset class.
Macro Environment Impact on Bitcoin: Demand for liquidity in a risk-averse environment could affect Bitcoin. However, it's believed that Bitcoin can perform well even under challenging macroeconomic conditions.
Bitcoin Halving: The Bitcoin halving event in April 2024 is expected to lead to a price surge. Historical data shows significant price increases following the previous three halving events.
U.S. SEC's Approval of ETFs: Matrixport predicts that the SEC will approve Bitcoin ETFs in January 2024, with trading likely to start in February or March. This event, combined with the Bitcoin halving cycle, is expected to provide positive momentum for the coming year.
Bitcoin Price and Market Share: Messari predicts that while it's challenging to forecast Bitcoin's trading position in the short term, its long-term appeal is undeniable. The institution anticipates that Bitcoin could regain a dominant market share of 60%, either in rallies driven by ETFs or under macroeconomic pressures.
BRC-20 Ecological Wave: Binance points out that the advent of Ordinals and inscriptions has brought innovation to the Bitcoin ecosystem. Hashed forecasts that the Bitcoin ecosystem might undergo a development similar to Ethereum's decentralized finance (DeFi) in 2020, involving lending markets, decentralized exchanges, and other infrastructures.
Bitcoin vs. Ethereum: Messari holds an optimistic view of Bitcoin but is pessimistic about Ethereum. It believes that Bitcoin's price will outperform Ethereum in 2024.

（Comparison of the total market capitalization of Crypto and Bitcoin｜Data from: https://alpha.sosovalue.xyz/）

Continuous Integration and Collision of AI with Web3 Ecosystem

In the crypto field of 2024, the combination of AI and blockchain emerges as a key trend. a16z predicts that this combination will democratize AI innovation and enhance user security. In gaming, AI will be responsible for content creation, with cryptocurrencies providing support when AI faces challenges. Spartan Group is optimistic about the application of AI in enhancing the user experience and efficiency of Web3, as well as the role of blockchain in AI protection.

Messari views the impact of AI on cryptocurrency very positively, emphasizing the importance of data and computational power in the development of AI. Gemini predicts that AI will completely transform the way smart contracts, data security, and misinformation are dealt with, foreseeing widespread application of AI in content creation, payments, and code audits.

Lastly, Hashed highlights the synergistic effects of the fusion of AI and blockchain, particularly in the field of content creation. Models like Midjourney and Stable Diffusion might become new protocols, enabling content creators to prove ownership and originality by staking assets, thus opening new market opportunities.

（Overview of tokens in the AI field｜Data from: https://alpha.sosovalue.xyz/）

Clearer and More Competitive Regional Regulations

Coinbase, a leading participant in U.S. regulation, has profound insights into the 2024 trends in cryptocurrency regulation. They predict that the foundation for cryptocurrency regulation will continue to be built, leading to a clearer regulatory environment and more significant institutional participation in the crypto field. However, regarding U.S. regulation, Coinbase sees both negatives and positives. The negative aspect is that the uncertainty of U.S. regulation could lead to missed opportunities. On the positive side, the U.S. approval of Bitcoin spot ETFs could open up cryptocurrency access to new categories of investors and reshape the market in novel ways.

Globally, the regulatory landscape will also be competitive. Crypto exchange Gemini points out that a significant trend in 2024 will be the competition among jurisdictions to become key hubs for digital assets and the future financial system. Countries and regions like the UK, EU, UAE, Japan, Hong Kong, and Singapore are all competing, aiming to attract business growth and innovation by establishing the most credible regulatory frameworks. For the U.S., Gemini believes that advancing positive cryptocurrency policy is more a matter of when than if.

However, regulation can also have negative impacts. Crypto investment institution Spartan is concerned that regional regulation could affect the overall crypto market liquidity, leading to capital partially flowing to regulated and local exchanges, making liquidity more fragmented. This fragmentation could impact the overall efficiency and stability of the market.

Huge Potential in the Development of DePIN

Paul Veradittakit, a partner at Pantera, emphasized the significant impact of DePIN on the blockchain ecosystem, especially as a consumer-facing application layer with the potential to drive demand for underlying chains or ecosystems. Coinbase predicts that with the increasingly central role of blockchain technology in managing and distributing real-world resources, 2024 will witness the decentralization of real-world resources. This includes the rise of Distributed Computing (DeComp) to meet the computational demands of generative AI.

Messari notes that while DePIN currently holds a tiny fraction of the $5 trillion cloud infrastructure market, even a modest increase in its share could lead to a surge in demand, particularly in the context of AI's growing needs for GPUs and computational resources. Spartan believes that projects utilizing crypto-economics to reduce costs will become formidable competitors to Web2 businesses, indicating the far-reaching impact of DePIN and related technologies across the entire internet and technology industry.

（Overview of tokens in the DePIN field｜Data from: https://alpha.sosovalue.xyz/）

Tokenization of RWA (Real World Assets) Will Be a Significant Part of the New Market Cycle

Hashed views RWA and equity tokens as key to shaping the next generation financial system. The market currently focuses on products related to U.S. Treasury bonds and the tokenization of underlying assets, but there are immense opportunities in the tokenization and securitization of derivatives. Hashed emphasizes the need to consider compliance, risk management, due diligence, and operational efficiency when evaluating these projects. Tokenizing RWA is crucial for bridging decentralized and traditional finance.

Coinbase, in its report, discusses the significance of tokenization, its expansion into different categories, and its integration with regulation, presenting the following key points:

Significance of Tokenization to Traditional Financial Institutions: Tokenization is expected to become an important part of the new crypto market cycle.
Category Expansion: It is anticipated that in 2024, tokenization will expand to include other market tools such as stocks, private market funds, insurance, and carbon credits, to meet client demands for high-yield products and diversified revenue sources.
Integration with Regulation: Coinbase specifically notes progress in regulation in Singapore, the EU, and the UK. For instance, the Monetary Authority of Singapore-sponsored "Project Guardian" has generated multiple tokenization project proofs of concept on public and private blockchains. The EU's Distributed Ledger Technology (DLT) pilot regime has already provided a framework for transaction execution and settlement using blockchain, and the UK has also introduced a pilot regime, offering an advanced framework for issuing tokenized assets on public networks.

Binance noted in its report that friend.tech attracted significant attention beyond the cryptocurrency field, demonstrating the immense potential of Web3 social applications. They predict that in 2024, the focus on SocialFi (Social Finance) will shape the way social interactions occur on Web3 in the coming years. Crypto institution Spartan also observed that the rise of friend.tech and possible airdrop activities have spurred an increase in imitative projects, marking a significant shift in industry focus towards consumer and social applications.

（Overview of tokens in the SocialFi field｜Data from: https://alpha.sosovalue.xyz/）

Decentralized Science (DeSci) as a Powerful Use Case

Messari discusses Decentralized Science (DeSci) as a promising use case in 2024. They note that many DeSci projects are relatively new, with significant growth in the past year. The focus is on using cryptocurrency incentives to revolutionize research methods in fields like longevity and space exploration. Spartan also emphasizes the potential of DeSci in 2024, particularly for creating a secure and enduring record of scientific contributions using Web3 technologies, aiming to simplify transactions and enable global collaboration.

GameFi Sector to Transition to Play-and-Earn, NFTs as Brand Assets

In its nine major predictions for the 2024 crypto market, a16z made significant forecasts for the GameFi sector. They noted that the once-popular "Play to Earn" concept is shifting towards "Play and Earn." a16z believes the gaming industry genuinely needs games that can both attract players and create more value for them. This shift establishes a clear distinction between gaming and "working (gold farming)." Additionally, the Messari report points out that the current market size of the gaming industry is around $250 billion and is expected to grow significantly. Games utilizing Web3 architecture are hoped to improve user acquisition and retention rates, although this has not yet been fully validated.

Furthermore, a16z also made predictions about the development of the NFT space in their report. They foresee NFTs becoming ubiquitous brand assets, with more and more well-known brands bringing digital assets into the mainstream consumer market through NFTs. With the development of custodial wallets and low transaction cost Layer 2 (L2) networks, NFTs are becoming digital brand assets for a wider range of companies and communities, creating conditions for their widespread adoption.