The crypto market is expected to continue its growth over the next 2 years, as factors continue to stack up in its favor, according to a Gemini report.
In an August 1st Gemini Institutional Insights report, the crypto exchange cited a combination of favorable monetary policy, regulatory shifts, and infrastructure developments to drive growth, even in the face of recent market volatility.
Where are we in the crypto cycle?
Some believe the crypto market hit a long-term cyclical peak in early 2024. However, we think the story might be different…
Thanks to the growing real world applications such as prediction markets coupled with favorable policies from… pic.twitter.com/CAa7odtRTx
— Gemini Institutional (@GeminiInsti) August 1, 2024
Over the past 3 months, the market has been in a period of consolidation, with major cryptos seemingly range-bound. Most significantly, Bitcoin has fluctuated between $53,550 and $72,000, while Ethereum remains between $2,800 and $3,970.
This long period of consolidation follows significant price surges earlier this year driven by the launch of Bitcoin and Ethereum exchange-traded funds. The likes of which pushed Bitcoin to a new all-time high above $73,000 in March.
Prices have since cooled, with Ethereum down about 22% from its March all-time high of $4,090. Likewise, Bitcoin has slumped by roughly 12%.
While there is a narrative suggesting that this cycle has already peaked, the broader outlook remains positive. Gemini said:
“Factors external to crypto as well as idiosyncratic to the asset class point the way to continued growth for the industry and its market capitalization.”
One of the key drivers identified is the shifting stance of global monetary policy.
Gemini Report Points to Loosening Global Monetary Policy
After more than two years of persistent tightening, central banks such as the European Central Bank, Bank of Canada, and most recently the Bank of England have begun cutting interest rates.
Easing monetary policy has historically boosted risk on assets like Bitcoin and Gold, yet Bitcoin price remains range-bound. Recent sluggish price action could be attributed to the US Federal Reserve’s decision to hold rates steady in August.
However, the Bitcoin price could see significant new liquidity and upward momentum with a US rate cut in September. Gemini added:
“As interest rate risks skew to the downside, this may translate into depreciation pressures for the U.S. dollar. If a broad weakening of the dollar occurs, crypto prices should also rise.”
According to CME’s FedWatch tool, traders hold an 86.5% chance that the central bank will lower its rate to 5.00% – 5.25% in September, down from the current 5.25% – 5.50%.
This follows Federal Reserve Chair Jerome Powell’s comments on Wednesday, which indicated a potential rate cut coming as soon as September.
Powell stressed that they need strong economic data before considering making borrowing easier again. The central bank kept its main interest rate unchanged at 5.25%-5.50% in August, as expected.
However, Powell’s comments and the Fed’s stance indicate that a rate cut in September isn’t guaranteed. Instead, “it’s just a question of seeing more good data” on inflation and the job market.
Regulation And Innovation
Regulatory developments are also expected to play a crucial role in the market’s expansion.
Gemini highlighted the upcoming US Presidential election as a significant factor for future industry growth. Specifically, Gemini noted its potential impact on the cryptocurrency regulatory landscape.
Something that has divided voters due to the largely contrasting regulatory approach observed from both parties.
Running candidate Donald Trump’s proposal to establish a national Bitcoin stockpile and his commitment to creating a favorable regulatory environment bolstered his support from the cryptocurrency community.
Meanwhile, Kamala Harris has purported a pro-crypto stance, a swivel from the Bidens administration’s ‘hostile’ anti-crypto regulatory approach. Gemini added:
“The headwinds created by the enforcement approach from US regulators to the crypto industry may continue to abate in the years to come.”
A survey conducted by the Harris Poll has revealed that one in three voters in the US consider a candidate’s position on cryptocurrencies before making their voting decision.
However, these efforts to appeal to the cryptocurrency community have been in question as an effort to garner additional support.
Meanwhile, infrastructure development within the crypto space is poised to enhance market growth, per the report.
While concerns exist about the current focus on scaling solutions over end-user applications, the report suggests this phase is necessary for future growth within the sector.
The rapid growth of stablecoins and the increasing traction of prediction markets were cited as potential drivers of growth.
With this optimistic outlook, there is an interesting precedent for price action in the coming months, highlighting high-potential investment opportunities.
