The Block Research Predicts Developments for 2024
The Block Research team has recently made predictions for the developments in 2024. The analysts have made forecasts for the new year’s trends, narratives, and expectations, including their thoughts on how artificial intelligence will play a role in the crypto space and whether they believe Bitcoin ETF will be approved, among others.
Here are some of the key predictions:
– In a risk-driven environment, investors commonly expect the appreciation of cryptocurrency prices in 2024.
– Bitcoin ETF is expected to be approved in the first quarter of 2024.
– Bullish narratives include RWA, DePin, and artificial intelligence.
– Coinbase’s strong performance will benefit institutional adoption of cryptocurrencies.
– Adoption of Ethereum-based Rollup will increase with the activation of proto-danksharding/EIP-4844.
George Calle predicts that the total market value of the crypto market and mainstream currencies like BTC, ETH, and SOL will appreciate in the risk preference environment of 2024. The performance of cryptocurrencies will generally outperform broader stock and tech industry indices. BTC ETF settled in cash will be launched in the early first quarter, but its dominance will be shaken as investors shift towards alternatives with greater upside potential.
Dencun’s upgrade, introducing proto-danksharding, is expected to occur in late first quarter or early second quarter of 2024. This will lead to a rebound in L2 tokens and their ecosystems driven by profit margin growth. It will also drive speculation cycles around platforms that provide services for a more modular blockchain stack.
The DeFi sector will benefit from financial and technological innovations in 2023. The growth of liquidity staking protocols in 2023 will allow staking returns to penetrate into a wider range of DeFi products, such as interest-bearing stablecoins, driving the industry’s “risk-free rate.” On the technological side, new yield optimization DeFi products will start delivering multi-chain and cross-chain strategies to users through account abstraction and multi-chain protocols.
As the practical or perceived utility of decentralized AI infrastructure grows, the DePIN industry will experience a revival. Given that AI requires computation, datasets, storage, and potential units of exchange, this rebound could touch many existing participants in the DePIN field and also foster the development of new entrants.
Coinbase will continue to be the best-performing crypto stock in the public market for several reasons, including its role as a custodian for multiple approved ETFs, international market growth, and the launch of related exchange products in the US. The potential advantages of developing L2 will also contribute to its strong performance. On the other hand, Circle’s performance will be relatively lackluster due to shrinking market share in the stablecoin market and the risk of reduced profits due to potential interest rate cuts.
Steven Zheng predicts that in 2024, we will see the ultimate integration of modular and integrated approaches. Ethereum will launch proto-danksharding and kick off a wave of application chain rollups along with modular protocols like EigenLayer and Celestia. At least 20 “Ethereum alliances” with TVL reaching or exceeding $1 billion will be seen. In terms of integration, the revival of Solana and Sei Network, along with the expected launch of Monad, will showcase the powerful capabilities of parallel processing/execution. The top 10 market capitalization will include two Layer 1 blockchains predominantly focused on parallelization.
Coinbase will become a $500 billion company. The first Bitcoin ETF will break inflow records. Ethereum ETF will not be approved. Decentralized computing will become a new narrative in the backdrop of AI hype. Two meme coins will be included in the top 10 tokens by market capitalization (excluding stablecoins and wrapped assets). An NFT season will occur with a revival of activity triggered by limited airdrops from major markets and projects. In 2024, Ordinals will account for 25% of Bitcoin miner fee revenue.
Eden Au notes that the approval of a spot BTC ETF will be a “sell the news” event based on price trends. However, Bitcoin will still reach historic highs. In spot ETF speculation, ETH will outperform BTC. Similarly, with Coinbase becoming the preferred custodian for major spot ETFs, COIN will outperform BTC. TIA performs well due to community discussions around (over)extreme blockchain modularity and is not affected by the fourth quarter “bullish unlocking” event.
In terms of scaling, the successful implementation of EIP-4844 will not have a significant short-term impact on L2 adoption. Arbitrum One and OP mainnet will still be the most popular L2s to some extent. Application-specific L3s will be launched. On the other hand, certain Cosmos sidechains will generate organic traffic by adopting native USDC through Noble.
In the DeFi space, (re)staking will fuel a liquidity black hole, drawing a significant amount of ETH. Decentralized derivatives exchanges will be the best-performing exchanges due to improved user experience and market conditions. Tokenized securities and private loans will continue to grow with the emergence of lending protocols focusing on RWAs. A recovery in prediction markets will be seen before the US presidential election.
NFT trading volume will gradually recover, but OG collections like CryptoPunks and BAYC will not set new all-time highs in terms of floor price. Opponents of Ordinals will attempt to fork Bitcoin but will fail. In the AAA gaming sector, Parallel and Illuvium will witness explosive adoption among crypto-native users, catalyzing the “GameFi season.”
On the other hand, social, privacy, and insurance sectors will experience a stagnation phase. Despite narrative-driven interest, AI-related products will still struggle to find product-market fit.
Brandon Kae predicts that the AI subsector of the crypto industry may be one of the best-performing sectors this year. Key issues with traditional models, such as centralization and regulatory challenges, may drive increasing interest in open-source, decentralized AI/machine learning development. Additionally, the crypto industry allows market participants to invest and speculate on AI-related opportunities that are not accessible in traditional markets, further fueling speculative narratives.
At least one AI-related project will enter the top 10 market capitalization by the end of this year, and many projects will achieve valuations in the billions of dollars.
The end-of-year ETH/BTC price will be higher, but a “flippening” will not occur.
Telegram trading bots will undergo product developments to enhance user experience and will remain popular among market participants despite inherent security risks.
At least one NFT collection will surpass BAYC in market capitalization and launch its own token with widespread recognition among non-crypto investors.
Abraham Eid predicts that with the increasing attention to security tokenization in traditional finance, we will see a large number of acquisitions of crypto-native infrastructure platforms, allowing investment firms, banks, and financial market infrastructure participants to consolidate their digital asset product portfolios more quickly. We will also see more major investment firms tokenizing ETFs and money market funds on-chain, similar to Franklin Templeton’s Benji Investments FOBXX fund.
While receiving more positive speculation aided by exponential progress in generating AI, Web3 games will continue to struggle to find market-fit products.
The biggest product innovation in DeFi will come from the tokenization of real-world assets platforms and expand into existing major areas like private loans and US treasuries.
Dedicated DePIN networks for digital commodities like computation, storage, and bandwidth will continue to emerge and be more competitive than some traditional infrastructure providers in hyper-local markets.
Technological applications that combine the advantages of cryptography and AI, such as zero-knowledge machine learning, will attract significant speculative and venture capital but have not yet reached the maturity level for mass adoption.
Carlos Guzman predicts that the theme of 2024 will be the revival of cryptocurrencies and digital assets. The bullish sentiment at the beginning of the year will be driven by the expectation of Bitcoin ETF approval, which will ultimately happen in the first quarter. However, the approval itself will be more of a “sell the news” event and will not have a sustained positive impact on Bitcoin prices in the short term. While the inflows into ETFs will be substantial, the initial scale will not be significant.
The total market value of the entire crypto market will continue to be driven by macro and liquidity conditions, with everyone’s focus on the direction of the US Federal Reserve. The initial crypto excitement of the first quarter may fade due to a high-interest rate environment that lags behind the impact on household and corporate debt, leading to broader economic slowdown. The US may enter a recession or even if a soft landing is achieved, early-year macroeconomic indicators will be weak. On the other hand, weak macroeconomic indicators may prompt the Federal Reserve to eventually signal interest rate cuts, leading to a crypto rebound in the second half of the year.
The excitement around Solana will fade in the early part of this year, and Bitcoin will dominate the market before the halving. However, after the halving, Bitcoin will lose its dominance in the face of broader alternatives. ETH and L2 tokens will experience a rebound with the support of EIP-4844, driven by reduced fees and a new narrative around ecosystem scalability. Alt-L1 will also rise as the market bets on a comprehensive approach to scaling smart contract platforms. With this narrative deepening, platforms like Aptos, Sui, Sei, Solana, Monad, and NEAR will be in focus.
Privacy-focused smart contract platforms that combine cryptography and AI advantages will be a major topic throughout the year with the launch of fully functional mainnets supporting smart contracts, such as Aztec, Aleo, and Mina. The tension between transaction data privacy and chain-level regulations centered around privacy will continue to be a topic of discussion and controversy, which will be addressed through novel solutions in privacy-preserving identity and zero-knowledge proof protocols.
The total market value of stablecoins will continue to grow, but leading stablecoins like USDT and USDC will lose some market share in the face of increasing competition from yield stablecoins. Tron’s dominance as a low-cost stablecoin transfer platform will be challenged due to heightened awareness of other low-fee, low-latency chains and other centralized exchanges gaining market share from Binance. This trend will have a negative impact on USDT and favor its competitors.
2024 will be a record year for institutional adoption due to matured infrastructure and new revenue opportunities. More crypto-savvy institutions will create interoperable environments using application-specific Rollups/chains/subnets and interact with their chosen counterparties through innovations like smart contract hooks. With potential declining returns in traditional finance in the second half of the year, there will be renewed interest in institutional-grade staking products, leading to a resurgence of CeFi lending incorporating DeFi elements for transparency and trustless operation. We will see continued growth in RWA, and interest in tokenized government bonds will expand to other higher-yielding assets like corporate and consumer debt.
2024 will also be a record year for smart contract hacks and vulnerabilities exploitation. With the deployment of L2 and
