Bitcoin, once the poster child of volatility and rapid gains, has entered a period of stagnation over the last three months, with its price hovering between $56,000 and $63,000. This comes in stark contrast to its impressive 45% jump in the first half of 2024, driven by the much-anticipated launch of US exchange-traded funds (ETFs) tracking its spot price.
As the year draws to a close, crypto market participants are keeping a close eye on potential developments that could give bitcoin the boost it needs. Market analysts are looking beyond traditional macroeconomic events, such as US interest rate shifts and the upcoming presidential election, towards new crypto-specific catalysts in late 2024 and early 2025.
One such event is the imminent launch of options on BlackRock’s spot bitcoin ETF, a product that some believe could attract a wave of retail investment from the US market. Jake Ostrovskis, a trader at UK-based crypto firm Wintermute, views this as a potential game-changer, especially after the ETF’s approval by the Securities and Exchange Commission last month.
However, there may be regulatory hurdles ahead. Youwei Yang, chief economist at BIT Mining, points out that while bitcoin is classified as a commodity by US regulators, the launch of options on the ETF may require further approval from the Commodity Futures Trading Commission, which oversees commodity derivatives. “If successful,” Dr. Yang said, “[ETF options] could increase bitcoin’s market sophistication and volatility, driving greater institutional and retail engagement.”
The influence of US crypto ETFs has already made waves globally. According to CoinGecko, the cryptocurrency market ballooned to a staggering $2.2 trillion as of October 1, up from just $8.3 billion at the start of 2023. This surge in market size has been accompanied by a rise in institutional activity. “We’ve observed a significant increase in institutional on-boarding and trading activity,” noted Mr. Ostrovskis, underscoring a strong demand for platforms that resemble traditional financial structures.
Despite the growing institutional interest, bitcoin’s famed volatility has notably declined. Data from Deutsche Bank shows that bitcoin’s 90-day volatility dropped to 42% this year, down from 67% in mid-2020. Yet market experts caution that bitcoin remains highly correlated with other cryptocurrencies and is still vulnerable to broader market sentiment. For instance, bitcoin fell 5% last week amid renewed hostilities in the Middle East, highlighting its sensitivity to geopolitical uncertainty.
Meanwhile, crypto adoption continues to grow globally, with a focus on emerging markets. Chainalysis’ Global Adoption Index, which tracks cryptocurrency use in 151 countries, showed that crypto adoption between late 2023 and early 2024 surpassed levels seen during the bull market of 2021. Lower-income countries with less developed financial systems are leading the way, with India and Nigeria ranking first and second, respectively.
Mauricio Di Bartolomeo, co-founder of crypto loan provider Ledn, pointed to the real-world use cases of bitcoin and stablecoins in high-inflation countries like Argentina and Turkey. “The value proposition for bitcoin and stablecoins in Latin America are intact,” he said. “Most of the emerging world wants to bank in dollars, but they don’t necessarily trust their banks.”
The United States also ranks highly in the crypto adoption index, coming in fourth overall, while South Korea and China round out the top 20. In terms of transaction volumes, the US remains the world’s largest crypto market, followed closely by India, according to Deutsche Bank.
As the year closes, bitcoin traders are hopeful that upcoming regulatory developments and new products, such as ETF options, will reinvigorate the market. But with the cryptocurrency’s notorious volatility now on pause, all eyes are on the catalysts that could reignite its momentum in 2025.