As the year draws to a close, the speculation surrounding the approval of Bitcoin exchange-traded funds (ETFs) by the US Securities and Exchange Commission (SEC) is reaching a fever pitch. While many anticipate that the introduction of these index funds will drive a significant surge in Bitcoin and the broader crypto market, one financial services platform, Matrixport, offers a different perspective. In their latest report, Matrixport confidently asserts that Bitcoin and crypto prices are poised to soar in 2024, regardless of the SEC’s decision on ETF approval.
One of the key factors identified by Matrixport is the recent declaration of victory over inflation by Jerome Powell, the Chairman of the US Federal Reserve (Fed). Powell’s mention of potential rate cuts caught the attention of the digital asset platform, leading them to observe that Bitcoin prices experienced a staggering 300% increase in 2019 when the Fed ceased its hiking cycle and maintained interest rates for an extended period of time. Matrixport draws parallels between that scenario and the present, as the Fed projects three cuts, equivalent to 75 basis points, for 2024.
Analyzing the Inflation Model
Matrixport’s analysis incorporates a proprietary inflation model that was presented a year ago. This model projected a significant decline in inflation from 8% to 3-4% by the end of 2023. The platform places great confidence in this model, suggesting that risk assets, including stocks and cryptocurrencies, will witness a substantial rally in 2023. The model also indicates the possibility of the US Consumer Price Index (CPI) dipping below 2% by the end of 2024. This prediction holds crucial implications for Bitcoin’s price and its potential role as a hedge against inflation.
The CPI, which serves as a key measure of inflation, indicates changes in the average prices of goods and services over time. A dip below 2% suggests a deceleration in the rate of price increases, potentially indicating a more subdued inflationary environment. In such a scenario, investors may seek alternative assets like Bitcoin, which can preserve their purchasing power and protect them from the erosion of value caused by inflation. Matrixport emphasizes that even if the SEC remains opposed to Bitcoin Spot ETFs in January 2024, higher crypto prices are still expected throughout the year.
The Growth of US Money Market Funds
The report also highlights the substantial growth of assets in US money market funds, which have doubled since the onset of the COVID-19 pandemic, reaching an astonishing $6.1 trillion. This growth implies an additional $320 billion in interest rate payments per year, potentially resulting in an influx of $370 billion annually or approximately $1 billion daily into risk assets such as stocks and cryptocurrencies. Matrixport takes this significant financial shift into account when formulating its bullish outlook for 2024.
Matrixport’s optimistic forecast for 2024 also considers other key events on the horizon. The year is marked by a Bitcoin halving cycle, historically associated with substantial price increases averaging 192%. Additionally, 2024 is an election year, with a high probability of former President Donald Trump being reelected. Matrixport suggests that his policies could potentially bolster the US economy, driving up stock prices and cryptocurrencies.
As of now, the largest cryptocurrency on the market is trading at $42,600, experiencing a 1.8% increase in the past 24 hours. While this serves as a snapshot of the present, Matrixport’s analysis focuses on the future potential for significant growth in the Bitcoin market.
Matrixport’s report provides a compelling case for a soaring Bitcoin market in 2024, based on various factors including the Federal Reserve’s stance, inflation projections, the growth of money market funds, and other catalysts. While the anticipation for spot Bitcoin ETFs remains high, Matrixport suggests that regardless of the SEC’s decision, Bitcoin’s price is destined to rise. As with any investment, it is essential to conduct thorough research and be aware of the associated risks when considering getting involved in the cryptocurrency market.
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