BlackRock predicts three events that could impact the cryptocurrency market in 2024.
The financial market in 2023 was a series of unexpected changes, including groundbreaking technological innovations and unexpected economic changes. As 2024 begins, BlackRock has identified three macro developments that could have a major impact on cryptocurrency markets.
These insights are important for investors looking to navigate the digital asset industry and make informed decisions.
What Happened in 2023 and What It Means for the Future
The unexpected strength of the U.S. economy
Contrary to the expected ‘hard or soft landing’ scenario, the US economy showed a remarkable growth trajectory throughout 2023.
“The much-discussed “hard versus soft landing” for the U.S. economy turns out to be impossible to land, or even impossible to take off. U.S. GDP growth continued to accelerate throughout the year and consistently exceeded expectations,” BlackRock said.
Challenges to these expectations, fueled by robust GDP growth and substantial fiscal incentives such as the Inflation Reduction Act (IRA) and CHIPS Act, present a unique backdrop for the cryptocurrency market.
US GDP growth rate in 2023. Source: BlackRock
The resilience of the U.S. economy despite high real interest rates suggests investor confidence is likely to increase. This trust can also extend to digital assets. However, America’s strong economic performance raises questions about the Federal Reserve’s future monetary policy, which could indirectly impact the cryptocurrency market.
Liquidity Environment Post-Fed Action
At first, a liquidity crunch seemed inevitable, with the Fed’s policy rate expected to end 2023 below 4.5%. Surprisingly, the interest rate reached 5.25% after several hikes along with unexpected liquidity expansion due to Silicon Valley bank concerns.
These differences in monetary policy, especially compared to other countries, have led to higher U.S. stock returns. This factor may also affect the cryptocurrency market. The unique liquidity situation in the United States may impact investor behavior toward riskier assets, including cryptocurrencies.
China’s economic performance and global impact
The expected surge in global demand following the lifting of China’s COVID-19 lockdown in early 2023 did not materialize. China’s return to deflation and its impact on commodity prices offer contrasting economic explanations for Japan’s continued reflation and stock market outperformance.
These differences have implications for the global economic environment and could impact cryptocurrency markets. This is especially true when these trends impact investors’ risk appetite and global capital flows.
3 events that could impact the cryptocurrency market in 2024
As 2024 begins, BlackRock expects a regime of greater macro diversification and higher market volatility to persist. This environment, characterized by positive stock-bond correlations and above-target core inflation, presents unique challenges and opportunities for investors in the cryptocurrency market.
Key considerations include:
Persistence of Inflation: There is a desire to believe that the “inflation beast” has been tamed, but services inflation could remain stubbornly well into 2024. This scenario could impact investor sentiment for assets such as cryptocurrencies, which are often seen as a hedge against inflation.
Future of the US Dollar: Given the fiscal challenges and unsustainability of the US twin deficits, the potential for downward pressure on the US dollar raises questions about the attractiveness of cryptocurrencies as alternative assets.
Market Potential in Europe: Optimistic outlooks for revenue growth and consumer spending in Europe could impact the broader economic environment and indirectly impact cryptocurrency markets, particularly with respect to global investment flows and risk appetite.
Read more: How to Make Money in Cryptocurrency: Top 4 Ways in 2024
As investors navigate these uncertain times, it will be critical to monitor the intersection of macroeconomic factors and their impact on cryptocurrency markets.
America’s leading cryptocurrency platform | January 2024
coinbase
Navigation →
iTrustCapital
Navigation →
MetaMask Portfolio
Navigation →
surge up
Navigation →
eToro
Navigation →
World Fi
Navigation →
Learn more
The post BlackRock Predicts 3 Events That Could Impact Cryptocurrency Markets in 2024 appeared first on BeInCrypto.
