Original author: Matthew Sigel, Patrick Bush

Original compilation: Luffy, Foresight News

1. The U.S. economic recession is coming, and spot Bitcoin ETF debuts

The U.S. economy will finally enter recession in the first half of 2024. Growth momentum has been slowing for months, taking inflation with it, making the economy more vulnerable to shocks. After declining for 19 consecutive months, the US leading indicator has now entered a recession phase and is close to its lowest level in history. Stock prices are struggling, commodities are weak, employment is weak, bankruptcy filings are back to early-COVID levels, and the yield curve is inverted but steepened in recent weeks — all signs of the end of the cycle. The media frequently refers to a soft landing, which usually occurs before a recession is officially declared. Bitcoin has only experienced one official U.S. recession, from January to April 2020, during which Bitcoin prices fell 60% from their peak before rebounding sharply after the Federal Reserve provided ample liquidity. Gold also tends to fall early in recessions: it fell 12% in two weeks in March 2020. However, gold’s recent breakout confirms the strong demand for hard currency that U.S. authorities cannot avoid, a characteristic shared with Bitcoin. As debt levels are more concerning at the national level than at the corporate or household level, we expect more than $2.4 billion to flow into the newly approved U.S. spot Bitcoin ETF in the first quarter of 2024 and drive Bitcoin prices higher. Despite the potential for significant volatility, Bitcoin prices are unlikely to fall below $30,000 in the first quarter of 2024.

We estimate Bitcoin ETF inflows by referring to the SPDR Gold Shares (GLD) ETF. The GLD ETF was launched on November 18, 2004, with inflows of approximately $1 billion within the first few days of launch, and by the end of the first quarter of 2005, GLD had inflows of approximately $2.26 billion. At that time, the total physical gold supply was approximately 152,000 tons, with a value of approximately US$15.6 million per ton, implying a total market capitalization of US$2.36 trillion. In the first few days after the launch of GLD, the US dollars flowing into GLD accounted for approximately 0.04% of the total market value of the gold market. About a quarter later, on March 31, 2005, GLD inflows reached US$2.26 billion. Taking into account supply growth and changes in gold prices, GLD accounted for 0.1% of global gold supply. If we apply these data to the Bitcoin spot market, we estimate that the Bitcoin spot ETF saw inflows of $310 million in the first few days and approximately $750 million in a quarter.

However, this was a time when interest rates were higher and the money supply was much lower. In 2023, we are no longer in the Dead Ball era of finance, but are entering the HGH/Steroid era. According to the Federal Reserve Bank of New York, M 2 supply was US$6.4 trillion in November 2004 and US$20.7 trillion in October 2023. Therefore, we believe it is reasonable to expand inflows into the Bitcoin Spot ETF by 3.23x. As a result, the spot Bitcoin ETF will see an inflow of about $1 billion in the first few days, and the inflow will reach $2.4 billion in a quarter. Extending our logic further, the more mature state of Bitcoin ETFs may be around 1.7% of the total Bitcoin spot market (about $12.5 billion), which is the approximate proportion of the total gold supply held in gold ETFs. We assume that Bitcoin is taking significant market share from gold and expect that in 2024 voters will be more understanding of the drawbacks of debt-driven money printing, so we apply a 3.23x multiple of M2 to estimate the Bitcoin ETF trading in the first two years Medium-term inflows were US$40.4 billion.

Finally, we note that Coinbase charges retail traders a fee of approximately 2.5%. We believe spot Bitcoin ETFs may trade with spreads of around 10 basis points, with many brokerage firms offering zero commissions. This means that spot ETFs can bring great cost advantages to users.

2. The calm fourth Bitcoin halving

The fourth Bitcoin halving will take place in April 2024 without a major fork. As new coin issuance is cut in half, unprofitable miners will leave, ceding market share to those with low-cost electricity. Nonetheless, the public markets will not be affected much due to the significant improvement in the balance sheets of listed miners, which currently control a record percentage of global hashrate (around 25%). After a brief (days to weeks) post-halving consolidation, as the market digests additional selling pressure from unprofitable miners, Bitcoin will rise above $48,000, a head-and-shoulders completion in April 2022 The position of the neckline of the shape. Overall, Bitcoin miners will perform worse than before the halving, but low-cost miners CLSK and RIOT will stand out. Post-halving, we expect at least one publicly listed miner to achieve 10x growth by the end of 2024.

3. Bitcoin will hit all-time highs in Q4

In the second half of 2024, Bitcoin will cross the wall of worry. By 2024, the proportion of the global population voting in legislative and presidential elections will reach an all-time high of over 45%. Such a high level of important elections portends high levels of volatility and significant changes in the outlook. More specifically, there is growing evidence that voters and courts are rejecting the green lobby’s anti-growth agenda. So with optimism that the SECs hostile regulatory approach will be dismantled after Donald Trump won 290 votes and was re-elected President, we think Bitcoin price will hit an all-time high on November 9th, 2016 from the last time it hit It has been three full years since the all-time high. (Recall that Bitcoin’s November 2020 breakout also came a full three years from its November 2017 peak). If Bitcoin reaches $100,000 by December, we predict that Satoshi Nakamoto will be named Time magazine’s “Person of the Year.”

4. Ethereum has not surpassed Bitcoin

Ethereum wont be able to topple Bitcoin in 2024, but it will outperform all the big tech stocks. Bitcoin’s more visible regulatory status and energy intensity will attract interest from entities in Latin America, the Middle East and Asia. Argentina will join El Salvador, the United Arab Emirates, Oman and Bhutan as the fifth country to sponsor Bitcoin mining as state-owned energy giant YPF may express interest in using excess methane and natural gas to mine the digital asset. As in past cycles, Bitcoin will lead the market, with value flowing into smaller market cap coins after the halving. Ethereum is starting to outperform Bitcoin and may outperform Bitcoin overall in 2024, but not surpass it. Despite Ethereum’s strong performance in 2024, its market share will still be lost to other smart contract platforms with more solid scalability roadmaps, such as Solana.

5. After EIP-4844, L2 will dominate the Ethereum ecosystem

Ethereum will implement EIP-4844 (proto-danksharding), which will reduce transaction fees and improve L2 scalability of Polygon, Arbitrum, Optimism, etc. Within 1 year after the EIP-4844 upgrade, 2-3 leaders will be born in Ethereum L2 in terms of value and usage. This is because liquidity fragmentation will accelerate the dominance of the head L2. This is already happening in DEXs, with Uniswap, Pancake Swap, and Curve accounting for 78% of DEX trading volume in 2023. The same market consolidation will occur in the L2 space, with Arbitrum and Optimism expected to become major contenders.

For the first time, L2 will achieve higher monthly DEX trading volume and TVL than Ethereum. This is because L2 transaction fees are lower and therefore the bid-ask spread is smaller. The smaller the bid/ask spread, the greater the arbitrage opportunities, resulting in higher trading volume. In addition, faster block time (only 0.25 seconds on chains such as Arbitrum) can achieve higher transaction throughput and provide more opportunities for arbitrage between CEX and DEX. Therefore, DEX and L2 should attract more trading volumes due to the trading opportunities they offer. Overall, by the fourth quarter of 2024, the DEX transaction volume of these chains may reach 2 times that of Ethereum (currently 0.8 times), and the number of transactions may reach 10 times.

6. NFT activity will rebound to all-time highs

Monthly NFT trading volume is set to hit an all-time high as speculators return to cryptocurrencies and flock to top NFT series on Ethereum, improved crypto games, and new products from the Bitcoin ecosystem. Although the ratio of Ethereum to Bitcoin in major NFT sales since its inception is close to 50:1, Bitcoin’s Ordinals protocol and the emerging L2 on Bitcoin will drive the continued growth of Bitcoin network fees. The ratio of major NFT issuances between Ethereum and Bitcoin will be close to 3:1 in 2024. Stacks (STX) is a Bitcoin-based smart contract platform that will become a top 30 token by market capitalization (currently ranked 54th).

7. Binance will lose its No. 1 position in spot trading

Binance will lose its spot as the number one centralized exchange by trading volume after reaching a settlement of more than $4 billion with U.S. regulators. OKX, Bybit, Coinbase, and Bitget will be well-funded competitors with the potential to seize the number one spot. The inclusion of cryptocurrency exchange quotes in regulated indices, such as those managed by VanEck subsidiary MarketVectors, will become a key variable in determining whether centralized exchanges are eligible to provide liquidity to ETF authorized participants and sponsors. With Binance now facing a three-year Department of Justice inspection, Coinbase will seize share of the international futures market, with daily trading volume exceeding $1 billion, up from approximately $200 million in November 2023.

8. USDC’s market share rebounded, and the market value of stablecoins hit a record high

The total value of stablecoins will reach an all-time high of over $200 billion (currently $128 billion). As MiCA comes into effect and regulated stablecoins are launched in Europe, revenue-generating stablecoins surge and trading volumes continue to rebound. More controversially, USDC will replace USDT because institutions prefer USDC, which is already evident on the new L2 chain. Tether’s market share losses may finally become a reality after the U.S. Department of Justice (DOJ) took enforcement action against Justin Sun and his company.

9.DEX spot market share will reach a record high

As high-throughput blockchains like Solana improve users’ on-chain trading experience, the market share of decentralized exchanges (DEX) in spot trading will rise to an all-time high. At the same time, the combination of the account abstraction wallet realizes the key function of automatic payment, which will promote more users to conduct on-chain activities and manage their own assets. As the market dominance of Bitcoin and Ethereum may decline after the Bitcoin halving, long-tail assets may grow more significantly, and DEXs that actively list new tokens will have an advantage.

10. Remittances and smart contract platforms will drive new Bitcoin revenue opportunities

Remittances will be blockchain’s trump card as stablecoins are easier to withdraw and spend, making emerging markets happy to embrace them. Given the use of Bitcoin and the Lightning Network (LN) in some remittance channels, “Bitcoin staking” is possible. By 2024, this will become a dominant narrative. As transaction costs rise on the Bitcoin blockchain, Bitcoin maximalists will start spreading the word that you can stake and earn on the Bitcoin network. Today, staking to Lightning nodes already happens, but there are risks and lower rewards since your Bitcoins are used to settle payments on the Lightning Network. With the development of protocols such as Amboss that abstract the technical details of managing Lightning nodes, and the popularity of joint self-custody solutions such as Fedi, users will be able to participate in the remittance market and earn some income through cold wallets. Additionally, Bitcoin holders will gain access to new business opportunities in 2024 as a security provider for proof-of-stake blockchains. Leveraging projects like Cosmos-based Babylon, Bitcoin holders will be able to earn through non-custodial staking.

11. Breakthrough blockchain games emerge

At least one blockchain game has more than 1 million daily active users, demonstrating long-awaited potential. Among the candidates to achieve this milestone, IMX is most likely to become a top 25 token by market cap (currently ranked 42nd) due to the launch of Illuvium, Guild of Guardians, and other high-budget games in 2024 and the well-designed token currency. According to a recent report by DappRadar, the WAX ​​blockchain currently leads the gaming space with 406,000 unique active wallets daily, of which approximately 100,000 are currently playing Alien Worlds 。Its a metaverse of simple games that reward players with Trillium tokens. However, due to the simplicity of the game, many of these players may be bots for farming. Immutable, on the other hand, has built several AAA games on its platform that implement a token model that cannot rely on bots for gold, and are genuinely fun games. The games have been in development for years and have received over $100 million in funding, and will be released in 2024. They can attract players in the same way as traditional AAA games like Starfield, which launched earlier this year and attracted 10 million players in two weeks.

Additionally, Immutable has been working to solve many of the technical challenges that have hindered the success of Web3 games to date, such as wallet management. Immutable’s “Passport” allows users to log into games and manage blockchain-based game items through a familiar single sign-on process, while abstracting away blockchain interactions. Immutable offers simplicity to gamers that, combined with large publishing partners like the Epic Games Store and GameStop, can finally make blockchain-based games mainstream.

12. DeFi TVL is back, Solana will outperform Ethereum

Solana will become the top three blockchain by market capitalization, total value locked (TVL), and active users. Fueled by this rise, Solana is set to join the spot ETF fray as a flood of asset managers file. Related to the continued growth of Solanas market share, we believe that it is possible for Solana-based price oracle Pyth to surpass Chainlink in terms of TVS (Total Value Secured). For reference, Chainlink currently has about $15 billion in TVS, while Pyth has less than $2 billion in TVS, a dominance largely driven by blue-chip DeFi protocols on the Ethereum mainnet. As TVL continues to grow in high-throughput chains such as Solana, and Chainlink continues to struggle to find institutional adoption of its LINK token, we expect Pyth to make strides in several real innovations, including its “push” architecture and confidence interval system ) to gain meaningful market share.

13. DePin Network Sees Meaningful Adoption

Multiple decentralized physical infrastructure (DePin) networks will gain meaningful adoption, capturing public attention.

Hivemapper is a decentralized mapping protocol designed to compete with Google Streetview, which will map 10 million KM, more than 15% of global road capacity. Hivemapper uses its native token $HONEY to incentivize thousands of drivers around the world to install dashboards on their cars and contribute to its growing database. This global network of permissionless contributors could give Hivemapper meaningful progress and cost advantages relative to existing Google. Google Maps revenue is expected to exceed $11 billion by 2023, which would represent a meaningful opportunity for Hivemapper.

Helium, a decentralized wireless hotspot network, will increase the number of paid subscribers to its nationwide 5G plans to 100,000 from the current 5,000. Anyone can set up a hotspot, and hotspot operators receive payment via the Helium native token. This powerful incentive system provides Helium with some key advantages over existing wireless network infrastructure:

• It is capital light (from Heliums perspective).

• It turns hotspot providers into advocates and supporters (given that they stake their tokens in the network).

• It enables Helium to respond to real-time data by adjusting incentives to improve the network (i.e. increasing rewards in areas with poor coverage).

Wireless network infrastructure is a $200 billion, relatively mature market. As end-users gravitate toward lower-cost solutions with differentiated brands (“user-owned”), we will see significant scope for disintermediation from traditional providers. Helium claims they can deliver data at less than 50% of the cost of traditional networks. As cryptocurrency adoption becomes more mainstream, if this claim is true, they could gain significant market share.

14. New accounting standards drive increased corporate cryptocurrency holdings

Coinbase will become the first public company to announce Layer 2 blockchain revenue in a quarterly report, with Bases annualized revenue exceeding $100 million. Additional disclosures may be spurred by corporate adoption of new FASB standards that allow companies to mark-to-market for cryptocurrencies, which will push companies to hold Bitcoin and other cryptocurrencies as treasury assets. Since these accounting changes will take effect in 2025, but businesses can adopt them earlier, major non-crypto financial entities (banks, exchanges) may announce the creation of L2-like public blockchains.

15. Coordination of DeFi and KYC regulations

Walled garden applications that support KYC (such as those using the Ethereum Proof Service or Uniswap Hooks) will gain significant traction, approaching or even surpassing non-KYC applications in terms of user base and fees. Uniswap will spearhead this feature, which will drive institutional liquidity and trading volume on the protocol. The additional transaction volume brought by KYC-gated hooks will significantly increase protocol fees, allowing new entrants to participate in DeFi without worrying about interacting with OFAC-sanctioned entities. The increase in pegs will help Uniswap strengthen its moat and competitiveness, which should drive token appreciation, especially if the DAO ultimately votes to turn on the Uniswap protocol fee switch to allow the token to appreciate in value. If so, we dont expect this charge to be higher than 10 basis points.