The cryptocurrency market is projected to sustain the bullish momentum as it becomes an attractive segment to traditional finance institutions (TradFi). A report from a study by analysts drawn from three crypto exchanges and lending platforms observed a likely uptick in activity from institutional investors next year.
Institutional Investors Poised for Crypto Activity
The analysts observed that institutional investors will sustain an active interest in the digital assets sector in 2024. The analysts link the uptick with the anticipation that the US Securities and Exchange Commission (SEC) will approve the spot Bitcoin Exchange Traded Funds (ETFs).
The analysts attributed the likely increase in institutional investors’ activity to the realization of regulatory clarity and the likely dovish initiative by the US Federal Reserve to enforce rate cuts. The analyst acknowledged that the trend from institutional investors already started.
A review of Deribit derivatives exchange data reveals an uptick in institutional activity since October.
Deribit chief commercial executive Luuk Strijers opined that the data indicates that more experienced participants from the conventional markets are eyeing ideal positioning for their active involvement in 2024.
Luuk observed the existence of a noticeable uptrend in institutional activity fueled by the anticipation of ETF approval in January. Such anticipation prompts strategic positioning for the institutional clients owing to fear of missing out.
TradFi to Leverage Spot Bitcoin ETFs to Increase Crypto Activity
The analysts observed that Wall Street asset management firms led by BlackRock have submitted bids and await US SEC decisions. Other applicants include BlackRock, ARK Invest, Fidelity, and Valkyrie.
Approving the financial instrument would yield a regulated pathway for institutional investors to bet on tracking the largest crypto by market capitalization. The analysts are predicting the approval to occur before January 10.
The analysts are tying the January 10 prediction to the latest amendment executed by Cathie Wood’s ARK Invest in its bid for Bitcoin ETF.
Analysts Forecast Fed Rate Cuts
Bitfinex analysts consider that the Federal Reserve is bound to ditch the hawkish stance for the dovish policies through interest rate cuts. The reduced rates could embolden institutional investors to adjust their risk-on sentiment.
The analysts observed that the higher appetite for risky assets could trickle into Bitcoin, which they perceived as the gateway for the entire cryptocurrency sector.
The Bitfinex analysts observed that the rate cut would make the risk assets more attractive to institutional investors who desire higher returns at a lower interest rate context.
Market indicators signal that the rate pause could translate to cuts during the 2024 spring. Such anticipation is already influencing the bond yields.
YouHolder’s head of risk, Sergei Gorev, indicated that the market anticipates softened rhetoric on the rate increments from the Fed. The prediction dictates futures and options markets where traders are laying lower interest rates.
Regulatory Clarity to Attract Investors
The realization of regulatory clarity in 2024 is a welcome catalyst that has proven elusive for US investors. The regulatory clarity starts with approving pending bids for the spot Bitcoin ETF. Such is set to offer a regulated and easily accessible retail and institutional investment vehicle.
Bittrex Global chief executive Oliver Lonch indicated that 2024 could be the year for global jurisdictions to clarify their regulatory frameworks for digital asset space.
The UK’s initiative to unveil the Digital Securities Sandbox (DSS) portrays the government’s devotion to finalizing its march towards a crypto hub. The DSS is set to attract institutions, particularly those eyeing robust and fit-for-purpose rules rather than political aspirations.
The realization of regulatory clarity is a critical objective in China, which recently urged joint regulation to create a favourable environment for the evolving crypto landscape. Its achievement will entice institutional investors to assume a more active role.
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