2024 Outlook: Cryptocurrency for Advisors

• 2024 Cryptocurrency Market Forecast for Advisors
• 2024 Cryptocurrency Market Forecast for Financial Advisors
• 2024 Cryptocurrency Market Forecast: Overview
• Crypto ≠ Bitcoin
• Improved Market Structure
• Perspective for Advisors in 2024
• Expert Insights

2024 Cryptocurrency Market Forecast for Advisors

As we approach 2024, a significant year for the cryptocurrency industry, both within the U.S. and internationally, is coming to an end. The market has been subjected to extensive regulation and cleanup. The next year promises to be full of anticipation, news, and activity, with high expectations of spot bitcoin ETF approvals and potential vast capital infusion in this sector.

2024 Cryptocurrency Market Forecast for Financial Advisors

Financial advisors and their clients must gear up for a potential transformative leap for the crypto asset class in 2024. Rapid institutional adoption, notably improved advisor investment accessibility, and a bullish catalyst for asset prices are expected, thanks to significant advancements in market structure in 2023 and industry innovation in the new year. Consequently, advisors should prepare a thoughtful digital assets allocation plan to diversify their overall asset mix for investors seeking to venture into crypto.

2024 Cryptocurrency Market Forecast: Overview

When it comes to digital assets, advisors need to ask themselves why they should invest in crypto and why now is the best time. The simple answers for these are:

1. Being part of a new asset class inception, powered by modern technology and in some cases, programmed to overcome the glut and friction of conventional financial markets is a generational, diversifying opportunity.
2. The move from early adoption to mass adoption in the industry is happening now. Significant shifts in industry leadership, product development, and fiduciary commitment in 2023 paved the way for a new suite of increasingly institutional-grade entry points into the asset class.

Besides the overall industry trends, several noticeable catalysts may also trigger quick investor adoption of digital assets in 2024. These include the possible regulatory approval of Bitcoin$42,260 -0.64% and Ethereum$2,315 -2.42% spot ETFs, the Bitcoin halving scheduled for April 2024, and an accommodating macroeconomic backdrop and a slowdown in inflation rates.

Crypto ≠ Bitcoin

From a conventional allocator's perspective, crypto has a problem of lopsidedness. The two megacap assets, bitcoin and ether, dominate 70% of the market capitalization for digital assets. While robust investment theses exist for both assets, it's essential not to disregard the inherent worth of blockchain-powered technologies driving new business sectors like decentralized financial services and smart contract platforms. As advisors progress in their crypto learning journey and prepare themselves for 2024, they should remain open to investment cases for other sectors.

Improved Market Structure

Advisors should also take into account the various methods of allocating to digital assets in the new year. 2023 marked a turning point for institutional readiness. Advancements in qualified custody and new, thoughtful connections between custodians and trading exchanges provide a more solid ground for advisors to plan their digital asset exposure. The next wave of market innovation will likely come from asset managers competing on intelligent exposure to crypto markets as the product adoption cycle moves from basic passive exposure to sophisticated active exposure.

Perspective for Advisors in 2024

While various events point to potentially favorable conditions for crypto in the upcoming year, it is also critical to comprehend how crypto's brief and volatile history has led to better, more durable options for investors. Repeated industry failures in 2022 stigmatized the asset class, and mixed regulatory responses have blocked timely solutions to help destigmatize it all. These events have prompted efforts by trained financial engineers, CFAs, and traditional asset managers to bring legitimate investment solutions over from the traditional asset class world, with prominent figures now leading key crypto leadership positions at digital and traditional asset management companies.

Expert Insights

With crypto becoming more mainstream as a new asset class, investing in digital assets can be complex and fundamentally different from traditional financial markets. Crypto is a nuanced and highly fragmented market, with hundreds of centralized exchanges worldwide. Yet, only about 20 capture significant volumes, and then about five get most of the trades. There are also decentralized exchanges (DEX), which are peer-to-peer marketplaces where trades occur on a chain directly between crypto traders. There are over-the-counter (OTC) desks that provide more white glove service to institutional investors.

Given this complexity, a good way for investors to gain access to crypto strategies is to find fund structures that manage the investing, such as classic hedge fund structures or asset management firms that create institutional-grade products using digital assets. There are innovative managed accounts platforms that allow investors access to many of these strategies in a more transparent, secure, and controlled environment.

Edited by Jonathan Stoker