The first quarter of 2024 was a mixed bag of optimism, caution and resilience in the cryptocurrency market.
“For an industry that has been marked with significant dramatic occurrences in the past, this quarter has been relatively quiet with respect to surprises, comparatively,” blockchain and smart contract technology specialist Adam Gareston, partner at Gowling, told the Investing News Network (INN). “To me that signals greater normalization of the industry and asset class as a whole, which typically tends to have a net positive effect overall on market sentiment.”
With Bitcoin reaching new heights, the arrival of spot Bitcoin exchange-traded funds (ETFs) and a rebound in institutional investment, the crypto industry showcased its growth potential in Q1. However, concerns about volatility and security underscore the challenges that lie ahead, and questions surrounding long-term, sustainable growth linger.
In January, the crypto market hit the ground running with a flurry of activity.
“Undoubtedly, the most significant development was the approval of Bitcoins spot ETFs,” Matteo Greco, a research analyst at Fineqia International, told INN. “The SEC’s authorization for ETFs to launch in the US, backed by Bitcoin, facilitated greater engagement between traditional finance investors and the digital assets market.”
Gareston sees this as an essential component of the crypto industry’s evolution, saying that the industry can advance towards widespread acceptance and stability through prioritizing partnerships with regulators and embracing risk mitigation.
“My view is the industry needs further integration with traditional financial markets,” he told INN. “I often characterize the digital asset industry as growing both from ‘bottom-up’ and ‘top-down’ perspectives. The industry continues to seek to find a consolidated identity, often contrasting those who advocate for more regulation against others who believe decentralization should result in greater independence.
“I think there are many incumbent market participants that continue to struggle to see the true merits of the broader digital asset ecosystem, and there are also many in the digital asset ecosystem that prioritize disruption, continuing to view digital assets as an alternative to existing financial structures. To me, the focus should be on the broader digital asset industry as a (complement) to and expansion of more traditional financial services.”
“Initially, I held a strong skepticism towards meme coins, questioning why individuals would invest in projects lacking real-world utility and use cases,” Greco said. “However, as I delved deeper into the space and observed the market cycles, I came to recognize meme coins as a significant representation of the digital assets’ internet community. I believe meme coins will continue to be an integral part of this sector for the foreseeable future.”
“This shift towards increased regulation is likely to result in a transformation of the market structure, with less ‘wildness’ and more transparency. Naturally, this will also lead to changes in the composition of investor cohorts compared to those seen in the past.”
“I think market reaction would be overall net positive if a spot Ether ETF were to be approved in the United States,” Gareston speculated. “The ETF vehicle itself supports the asset, and there appears to be enough investor demand to continue to drive the initiative from a commercial perspective. Canada, for example, has had spot Ether ETFs for the past three years or so, where custodied Ether can now be ‘staked’ to generate an additional, novel revenue stream for fund investors in accordance with applicable Canadian securities laws. I personally am bullish on the likelihood of SEC approval of spot Ether ETFs, but I think the timeline will be beyond 2024.”
Greco’s comments to INN reflect the same viewpoint, as he pointed out that the approval process for Bitcoin ETFs came after years of legal disputes between financial institutions and the SEC.
“Regarding market reaction, we may witness a similar trend to BTC, albeit with potentially lesser impact,” he hypothesized. “Initially, there could be outflows from the Grayscale Ethereum Trust, offsetting inflows into other newly launched ETFs. However, once the outflow subsides, net inflows are expected to strengthen. Ethereum continues to attract significant interest, and financial products with ETH as the underlying asset could attract substantial investments.”
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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