Main conclusions

• Crypto bulls say bitcoin may have room to grow as demand for spot bitcoin ETFs and the effects of the halving may not have kicked in yet.
• Some industry observers say that while there is demand for an ether ETF on sight at launch, it is unlikely to have the same level of success as bitcoin versions.
• Regulatory clarity remains a key hurdle, with investors watching statements from presidential candidates and recent developments for clues.

Bitcoin has surged this year, rising more than 30% as demand for ETFs holding the leading cryptocurrency helped its price rise. But bitcoin prices have cooled recently, pulling back from record highs set earlier this year.

That trend continued on Friday, with bitcoin falling below $57,000 in late afternoon trading after climbing above $73,000 in March. So what’s the outlook for the rest of 2024? Bullish investors say increased demand for cryptocurrency-focused exchange-traded funds could drive prices higher. But other questions loom on the horizon.

Demand for Bitcoin and Ether ETFs Could Boost Cryptocurrency

Demand related to spot bitcoin (BTC) exchange-traded funds that started to negotiate in January has supported the cryptocurrency this year. Bulls say that effect has not yet happened.

New ETFs have seen net inflows of more than $14.4 billion, according to Farside Investors. Most of the flows into bitcoin ETFs, which hold the currency, currently come from self-directed investors, and market watchers believe more demand could come as financial advisors become less cautious recommending crypto products to customers, boosting bitcoin itself.

“We also don’t see a lot of institutions like pensions or endowments getting involved in ETFs yet,” said Bloomberg Intelligence analyst James Seyffart. “To me, that means there are definitely areas of potential growth in demand.”

Investors are widely expecting ether-based ETFs (ETH) to hit the market this year: The Securities and Exchange Commission is expected to approve individual ETF applications by the end of summer. This could increase demand for cryptocurrencies.

Bitwise CIO Matt Hougan estimates $15 billion in inflows into ether ETFs within the first 18 months. Seyffart, meanwhile, expects them to capture 20% to 25% of what bitcoin funds attracted during the first few months.

“We don’t believe Ethereum ETFs will have as much impact as Bitcoin ETFs, which have broken many different records in terms of their flows, assets and trading volumes,” Seyffart told Investopedia.

Rising demand for ETFs and the underlying bitcoin could mean higher prices, especially as the cryptocurrency’s supply approaches the 21 million cap.

The election – and other issues to watch

Other topics to watch in crypto this year include:

The presidential election. Donald Trump emerged as more supportive cryptocurrency than during his presidential administration. President Joe Biden’s administration has been seen as supportive of stricter regulation, although some industry observers have interpreted it as a recent decision not to press charges related to Ethereum 2.0 as a sign of an evolving perspective.

“I would put the chances of ‘clarity’ before the election at 0%, and I think if there is a legislative framework, it would emerge next year at the earliest,” said Sarah Brennan, general counsel at Delphi Ventures.

The Aftereffects of Bitcoin Halving: Bitcoin halving—in which the amount of new bitcoins generated roughly every 10 minutes is cut in half— have historically had a positive impact on their price, according to analytics firm CCData, for periods ranging from about 370 days to nearly 550.

The last halving occurred about six months ago, but differed from previous instances because bitcoin had rallied long before that. Analysts at Deutsche Bank and JPMorgan said much of the expected the price increase was already expected before the last halving.

While recent volatility may support this theory, bitcoin bulls believe the bearish trend is temporary.

“It’s normal for a price drop like this to happen after a halving — halvings are incredibly bullish, but bull markets usually don’t start until several months later — for fundamental reasons,” Caitlin Long, founder and CEO of CustodiaBank, said in a post on X in late June.

Mt. Gox Distributions: Mt. Gox Bitcoin Exchange Fails this week began distributing billions of dollars worth of bitcoin to former customers this month. The net effect of this supply increase, which began hit the markets on Fridayis uncertain, with some seeing this as pessimistic and others saying the issue is overblown.

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