Cryptocurrency has come a long way since its inception, and the past year has been no exception. Despite facing challenges such as fraud and falling prices, the crypto market continues to thrive with a market cap of $1.77 trillion and a global user base of 320 million people. As we enter 2024, it’s crucial to understand the trends that are shaping the future of cryptocurrency. In this article, we will explore the biggest trends in the crypto space happening right now and those likely to continue through 2025 and beyond.
Table of Contents
1. Bear Market Takes Hold
The cryptocurrency market is currently experiencing a bear market, with asset prices down considerably and investors fleeing. This bear market, often referred to as “crypto winter,” has lasted for over 350 days and has seen the market cap fall by 65% from its all-time highs in 2021. However, there are positive signs emerging. Bitcoin, the leading cryptocurrency, has climbed back above its 200-day moving average, signaling a potential end to the bear market. Additionally, a survey conducted by CoinWire suggests that 64% of investors believe the market is close to reaching rock bottom. Factors such as regulatory action, the pausing of Fed rate hikes, and user sentiment could all play a part in Bitcoin’s near-term value.
2. Resurging and Expanding Use Cases for NFTs
Non-fungible tokens (NFTs) experienced a surge in popularity in 2021, with a notable sale of an NFT for $69 million. However, the market collapsed by 97% in November 2022. Despite this setback, experts predict a recovery in the NFT market in 2023. The gaming industry is one sector where NFTs have maintained traction, with players using NFT-linked digital cards to earn and trade in-game perks. ImmutableX, a popular video game firm, has fully embraced NFTs and Web3, with their platform seeing a 250% increase in NFT trading volume in 2022. The fashion industry has also embraced NFTs, with brands like Nike and Prada launching NFT-based platforms and collections. As NFTs continue to grow in fashion, art, and gaming, their use may expand into other unexpected areas, such as real estate.
3. Continuing Fallout from FTX Collapse
FTX, once one of the world’s largest crypto exchanges, filed for bankruptcy in November 2022, leading to a domino effect throughout the industry. The fallout from FTX’s collapse has affected several companies, including BlockFi and Genesis Global Capital, which filed for bankruptcy in late 2022 and January 2023, respectively. This consolidation of the market is expected to continue, with many companies scaling down their workforce. Additionally, VC investments in the crypto space have seen a decline, indicating a shift in funding towards Web3, DeFi, and other digital platforms. CyberX, a digital asset trading company, recently secured $15 million in funding to integrate DeFi protocols into its network. As the fallout from FTX continues to unfold, the crypto industry will undergo significant changes in the coming years.
4. Increasing Regulation of Cryptocurrency and Exchanges
Regulatory scrutiny of the crypto market is at an all-time high, especially in the wake of the FTX implosion. The US government has few laws and regulations surrounding cryptocurrency, leaving much of the lawmaking up to the states. However, there is a growing demand for more legislation and regulatory clarity. In late 2021, cryptocurrency was mentioned in federal law for the first time as part of the Infrastructure Investment and Jobs Act, which mainly focuses on the tax implications of crypto exchanges. President Biden has also released an executive order and proposed framework for regulating cryptocurrency, aimed at stopping criminal activity in the industry. The Financial Stability Oversight Council has called on Congress to pass laws regulating crypto, specifically mentioning stablecoins, crypto spot markets, and regulatory arbitrage. The possibility of the US introducing a central bank digital currency (CBDC) is also gaining traction, with several countries around the world researching or developing their own CBDCs.
5. Crypto’s Growing Climate Impact
The energy and climate change implications of the crypto industry are becoming increasingly relevant. The production of crypto assets consumes a significant amount of electricity, with estimates suggesting it uses more electricity than the annual usage of countries like Argentina or Australia. The energy consumption is mainly attributed to the proof-of-work consensus mechanism used by cryptocurrencies like Bitcoin. However, there are efforts underway to address this issue. Ethereum, for example, has implemented a software upgrade called The Merge, which replaces proof-of-work with proof-of-stake, significantly reducing energy consumption. Bitcoin, on the other hand, still relies on proof-of-work and has faced criticism for its environmental impact. As the crypto industry continues to grow, there will be a greater emphasis on sustainable practices and the development of more energy-efficient consensus mechanisms.
Conclusion
As we look to the future of cryptocurrency, it’s clear that the industry is constantly evolving. While the current bear market poses challenges, positive trends suggest a potential recovery on the horizon. The resurging NFT market, increasing regulation, and the growing climate impact of crypto are all factors shaping the industry. As institutional investors await the approval of spot Bitcoin ETFs, the market dynamics could experience a significant shift. It’s essential for investors and enthusiasts to stay informed about these trends to make informed decisions in the ever-changing crypto landscape.