2023 was an eventful year in the digital asset industry, with a wide range of notable happenings including the ongoing saga of FTX, the collapse of Silicon Valley Bank, and massive fines and penalties for Binance. However, the outlook for 2024 is looking much brighter with a resurgence in positive market sentiment, especially for Bitcoin (BTC). With the imminent launch of spot exchange-traded funds (ETFs) across the globe and the upcoming halving in April, investors are eagerly awaiting the year ahead.
It is worth noting that the spot BTC ETFs of BlackRockBLK, Fidelity, and VanEck are getting a lot of attention, though similar products are also being launched in other jurisdictions such as Hong Kong, which is likely to be one of the first in Asia to allow spot virtual asset ETFs.
Stablecoins, tokenized deposits, and central bank digital currencies (CBDCs) are all a part of the “international finance 2.0” that is aiming to challenge the dominance of the US dollar. Several consultations and regulations regarding stablecoins have been announced in Japan, Singapore, Hong Kong, the United Kingdom, and other countries, meaning the gap between local currency pegged stablecoins and USD-based ones may start to narrow. Additionally, over 70% of the world’s central banks have experimented with CBDCs, with various projects in collaboration with the Bank for International Settlements (BIS).
The discussions around layer-1 (L1) infrastructure have mostly settled, whereas layer-2 (L2) and rollup solutions are still a heated topic of debate. EthereumETH protocols remain dominant, though other projects such as SolanaSOL have been making significant progress with their ecosystems and total value locked (TVL). On the Bitcoin network, BRC-20 token standard has driven a lot of transaction volume on the main chain, offering a layer-2 solution to take token minting and trading transactions off the main chain and reducing transaction fees on the network.
Regulatory frameworks are also advancing, with global policies around centralized finance (CeFi) largely in place and jurisdictions vying to be digital asset centers beginning to create policy frameworks for stablecoins, DeFi, decentralized identity, and self-hosted wallets. The Crypto Council for Innovation has published a recap of crypto policy in 2023 that provides further insights.
Looking ahead to the year, I predict that tokenized real-world assets (RWA) will be launched on public networks, USD-based stablecoins will remain strong but start to see a decrease in their 90+% market share, Web3 will feature in more government development announcements, and Bitcoin will take up a larger share in investment portfolios across major funds and corporate treasuries.
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