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In 2022, after the cryptocurrency market reached its all-time high, the total market value evaporated by $1.4 trillion, leading to widespread pessimism.
However, the crypto market once again demonstrated its resilience, recovering from 2023 onwards, with BTC rising from under $16,000 to over $40,000, and ETH rebounding to around $2,200.
In 2024, the outlook for the cryptocurrency industry will be more optimistic for the following reasons:
1. Enhanced scalability of blockchain infrastructure:
In 2023, Ethereum completed its merge, transitioning from PoW to PoS consensus mechanism, which improved network scalability but was still insufficient to meet market demand. To further enhance scalability, developers have created several on-chain and off-chain scalability solutions, including sidechains (e.g., Gnosis chain), state channels (e.g., Raiden Network), optimistic rollups (e.g., Optimism), ZK rollups (e.g., zkSync), Validium chains, and sharding (e.g., Zkporter root). These solutions are mostly based on Ethereum's layer-2 chains and are connected to the Ethereum network through interoperability protocols and improving bridges. These solutions have matured and improved over time, with projects like Optimism releasing tools to make developing new scaling solutions easier.
Additionally, innovative projects like Zircuit (EVM-compatible ZK-Rollup) and LayerZero (Omnichain messaging protocol V2 just launched) continue to emerge. If developers are dissatisfied with blockchain scalability, they can opt to build on blockchains with better scalability or even launch low-cost blockchains tailored for specific apps while still benefiting from Ethereum's security guarantees. Improved scalability translates to faster transaction processing, lower fees, and enhanced user experience, critical for mainstream adoption.
2. Accelerated blockchain innovation:
Like any emerging technology, blockchain initially progressed slowly and encountered various obstacles. But now, it has begun to gain momentum, with the pace of upgrades accelerating. With the maturity of blockchain technology, several new solutions have emerged, making it easier to create innovative projects. For example, ZK rollups add privacy to blockchains while providing high security, scalability, and usability. Due to early efforts by various projects, ZK-proofs have started to be widely adopted, becoming one of the biggest trends in the blockchain industry.
According to Cryptomeria Capital's zero-knowledge report, ZK technology is expected to redefine security and privacy paradigms in 2024, providing excellent solutions to emerging challenges. This is just one example in the crypto industry, with other innovations continually emerging, collectively driving the adoption of blockchain technology.
3. Active Web3 developer community:
Despite experiencing a deep bear market, the Web3 developer community remains active. This is one of the most important factors to look forward to in the cryptocurrency industry in 2024. After all, the developer community is Web3's biggest asset. As all blockchains and cryptocurrencies are built by developers, having a vibrant development community is essential for industry progress. You can see new Web3 projects being created or updates to excellent projects every day on sites like Coindesk and Cointelegraph. The developer community is more optimistic than ever, a critical indicator.
4. Significant improvements in developer tools:
Since 2023, developer tools have seen significant improvements. Notable examples include modern smart contract frameworks like Foundry, blockchain APIs like QuickNode, and leading rollup development frameworks like Bedrock by Optimism. Building blockchain applications has become increasingly efficient, promoting innovation, attracting more developers, enhancing interoperability, and improving cost efficiency.
5. Enhanced security of smart contracts:
Smart contracts have been combating hacker attacks since their inception, with hackers taking away significant funds from DeFi projects. However, the community is working hard to improve smart contract security. Currently, the smart contract auditor community is very active, and checking smart contract security issues can help them earn substantial income. In the past, such tasks were typically performed by large companies, but now more individual auditors are participating, thanks to bounty platforms like Immunefi and Hackenproof. With more security auditors involved, the future of cryptocurrencies will become safer, a crucial step in winning the trust of Web2 businesses and users.
6. Improved cryptocurrency user experience:
In the cryptocurrency industry, user experience (UX) is as important as security, as it is a key driver of mainstream adoption and engagement. Effective design is required to simplify usage because most users cannot dedicate a significant amount of time and effort to learning things like cross-chain compatibility and cryptographic keys. Poor UX can have serious consequences, such as asset loss, leading to user losses and reduced engagement. Optimizing UX design is crucial for building user trust, especially considering the anonymity of blockchain transactions.
With the mass adoption of blockchain technology, only products with good user experience can attract and retain more users. Additionally, blockchain solutions need to compete with existing services such as finance, social media, and supply management applications that have seamless UX and familiar interfaces.
Previously, Dapps' user experience was unsatisfactory, but it has now been improved through various practices. For example, crypto wallets now offer smoother experiences, making it easier for non-technical users to participate in Web3. For example, Immutable's "passport" allows users to enter games through a single login process instead of connecting a wallet. This abstracts blockchain interaction, making user login more familiar. This increased convenience can lead to greater adoption of blockchain-based games.
7. Continued growth of blockchain user base:
The purpose of building cryptographic infrastructure is to support Dapp development, serving a large number of users. Therefore, user adoption is an important indicator. Thanks to better security, improved user experience, and lower costs, the crypto world is attracting more users. While adoption rates are still relatively low, we can see some progress in decentralized social media like Lens. In addition, the future of Web3 games is vibrant, with many new games released.
According to Vaneck's 2024 cryptocurrency forecast, this year will see projects in the blockchain gaming sector with daily active users exceeding one million, with Immutable's game launch being the most likely candidate.
8. Convergence of Tradfi, Fintech, and the crypto world:
A prime example of the convergence of Tradfi, Fintech, and the crypto world is the financial technology company PayPal embracing cryptocurrencies. PayPal holds a 42% market share in online payments and has been allowing merchants to accept crypto payments since October 2020. In August 2023, PayPal launched its stablecoin, continuing its development in the cryptocurrency field. It also introduced the crypto wire feature, enabling users to buy and sell cryptocurrencies. Given that PayPal is the preferred payment method for most online merchants and a key player in the e-commerce field, this is a significant development. It can be said that PayPal has opened up new possibilities and opportunities for wider adoption of digital currencies by improving accessibility, credibility, liquidity, and mainstream awareness. Additionally, the participation of major players like this may encourage regulators to develop clearer and more favorable regulations for the cryptocurrency industry.
9. Approval of Bitcoin ETFs and the Arrival of the Halving Cycle
As widely known, a significant amount of funds in the United States is tied up in retirement funds, which are often limited to investing in stocks. Technically speaking, Bitcoin ETFs are also a type of stock, and in the long term, retirement funds may enter the cryptocurrency market through diversification.
As of January 26th, the historical cumulative net inflow of Bitcoin spot ETFs has reached $756 million, with the total net asset value of Bitcoin spot ETFs standing at $26.74 billion. Currently, the entire cryptocurrency market is valued at $16.7 trillion, and according to relevant data statistics, the annual investment amount of retirement funds can exceed $60 trillion. From the perspective of market size, the future growth potential of cryptocurrency ETFs is enormous.
Additionally, the fourth Bitcoin halving cycle is set to occur in April this year. The selling pressure from miners will continue to decrease, which, from a market supply-demand perspective, is also a long-term bullish factor for Bitcoin.
10. Interest Rate Cut Cycle on the Horizon
Cryptocurrencies are highly correlated with the stock market, and thus, are significantly influenced by interest rate levels. Since the end of 2021, central banks worldwide have been raising interest rates to curb inflation. According to Reuters, due to significant alleviation of inflation, most major developed economies are considering halting aggressive interest rate hikes.
To ensure a soft landing rather than an economic recession, some Federal Reserve officials believe that interest rate cuts will begin in 2024, with the expectation of a 75-basis-point reduction in interest rates throughout the year. The European Central Bank may also start cutting interest rates in June 2024. When interest rates decrease, more capital will be available in the market, which is conducive to stock market prosperity. This positive effect will also extend to the cryptocurrency market. |
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Post time 16-2-2024 21:36:06
Post time 20-2-2024 13:10:59