ETC Group

2024 Outlook

For professional investors only. Capital at risk. etc-group.com

 Page 2 of 43

Executive Summary
The “ETC Group 2024 Outlook” provides a forward-looking analysis of the cryptoasset market, with
a particular focus on Bitcoin, as we head into a pivotal year. The report encompasses a comprehensive
examination of the interplay between macroeconomic factors, on-chain developments, and their
collective impact on the future trajectory of Bitcoin and other significant cryptoassets.

Institutional Adoption Macroeconomic Influence

and Market Growth
Global macroeconomic conditions, particularly
The entrance of major players like BlackRock into the anticipated US recession and monetary policy
the Bitcoin space has set the stage for increased changes, are identified as critical influencers
institutional adoption. The report forecasts a con- for the performance of cryptoassets. The report
tinuous growth trajectory for Bitcoin, with potential analyses how these macro factors have historically
all-time highs, surpassing 100k USD by the end impacted Bitcoin’s price and how they might shape
of 2024. This optimism is fuelled by factors like its future.
the Bitcoin Halving event, increasing scarcity
of Bitcoin supply, and growing mainstream interest.

Ethereum and Altcoins

Outlook
On-Chain Developments
Ethereum’s performance, especially in compari-
Significant attention is given to on-chain met- son to Bitcoin, is thoroughly examined. The report
rics and events, especially the upcoming Bitcoin predicts a possible reversal in Ethereum’s relative
Halving in April 2024. The Halving is expected underperformance, driven by its technological ad-
to have a profound impact on Bitcoin’s price, vancements and unique position as a leading smart
owing to the resulting supply scarcity. The report contract platform. The dynamics of other major alt-
also discusses the potential for Bitcoin to decou- coins are also explored in relation to market trends
ple from traditional financial markets in the wake and Bitcoin’s performance.
of the Halving.

Strategic Recommendations
Conclusion
The report offers strategic insights for investors
Conclusion: Looking ahead, 2024 is poised considering cryptoassets in their portfolio. It em-
to be a transformative year for cryptoassets. phasizes the importance of understanding market
The ETC Group remains committed to providing cycles, the impact of macroeconomic factors,
deep market analysis and strategic guidance, help- and the need for a balanced approach towards
ing investors navigate this complex and promising investment in this volatile and rapidly evolving
landscape. market.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 3 of 43

Introduction
The year is ending and with it, we start reflecting
upon the past, present and future.

2023 was mostly a recovery year for Bitcoin Needless to say, the adoption of Bitcoin and other
and cryptoassets with important catalysts that set cryptoassets like Ethereum are still in its infancy in most
the tone for next year as well. Most prominently, developed countries. Most recent surveys for retail
BlackRock’s spot Bitcoin ETF filing in June 2023 adoption in 2023 point to a global adoption rate
already set the stage for increasing adoption of this still of around 18%. So, approximately every 5th individual
emerging asset class in 2024 and beyond. on earth currently holds some type of cryptoasset1.

1 Source: Statista

Digital Assets outperformed traditional assets by a very wide margin in 2023

Source: Bloomberg, ETC Group

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 4 of 43

”  ore specifically, we expect

M
Adoption rates tend to be significantly higher in devel-
oping countries, sometimes already approaching 50%,
especially in those regions that experience structurally
the price of Bitcoin to reach
higher rates of inflation such as Nigeria or Turkey 1. new all-time highs during
However, as with most phenomena in social sciences 2024 and to break 100k
and nature, cryptoasset adoption also evolves USD by the end of 2024
in cycles.
as our base case
Although there is a structural increase in adoption over
time, the pace at which this happens tends to be more
pronounced in bull markets than during bear markets
Although there is some talk about diminishing returns
and may even accelerate depending on the phase
of the Halving in general, we believe that there is a con-
of technological adoption.
fluence of macro and on-chain factors in 2024 that
Price appreciation plays an important role for adoption could lead to a more pronounced bull market next year
which was also a recent finding by the BIS2 and there- than in 2020.
fore, it is quite likely that the next bull market will lead
For instance, most on-chain metrics imply that Bitcoin’s
to a significant increase in new users and investors
supply is significantly scarcer, and accumulation has
of cryptoassets again.
been more pronounced this cycle than during the last
In fact, the bull market may lead to a significant accel- cycle.
eration in adoption as most developed countries are at
Consider the following on-chain metrics for Bitcoin:
the edge of what is commonly referred to as the “early
majority” in the 5 stages of technological adoption • % of exchange supply is at a 5‑year low
famously put forth by Rogers (1962). • % of supply last active 1+ years at all-time high
• Illiquid supply measure by Glassnode
Based on this theory, growth tends to be highest in this
at all-time high
very transition between “early adopters” and “early
• 3‑months + realized cap HODL wave is higher than
majority” which happens around 16% adoption rate.
the last cycle’s top
In fact, the latest figures for the United States suggest
These on-chain metrics imply that both liquid supply
a retail adoption rate of exactly 16%. Significant price
on exchanges is relatively scarce and that there is a lot
appreciation will probably be the most important driver
of ‘dry-powder’ in terms of supply distribution during
to fuel this transition.
the next bull cycle.
After all, nothing changes investor sentiment like price
In general, in bull markets, there tends to be a distribu-
One of the most anticipated catalysts to lead to such tion of previously accumulated coins from long-term
a price appreciation is the Bitcoin Halving scheduled holders to new entrants at higher prices. Accumulation
to happen at the end of April 2024. activity has been very strong during the last bear cycle
While some pundits argue that, from a pure theoret- which suggests that there is lots of room to distribute
ical point-of-view, the Bitcoin Halving should already these coins to new investors.
be priced in since it is public knowledge, we demon- Besides, Bitcoin’s supply illiquidity could be amplified
strate empirically that these events were followed by by the fact that many Bitcoin lending desks went down
significant price appreciations in the past. during the last bear market that provided extra liquidity
via rehypothecated BTC such as BlockFi, Celsius,
Genesis and Voyager.

1 Ibid.
2 Auer et al. (2022) „Crypto trading and Bitcoin prices: evidence from a new database of retail adoption” BIS Working Paper No 1049

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 5 of 43

Apart from these on-chain developments, other These on-chain and macro factors combined could
important macro factors include: lead to a very interesting year 2024.

• A large cohort of new potential institutional in- The next chapter analyses the most important macro
vestors that are waiting for the spot Bitcoin ETF factors for Bitcoin and cryptoassets in general.
in the US. Chapter 3 takes a look at on-chain developments
• A very likely US recession & reversal of monetary in Bitcoin, Ethereum and other cryptoassets. Chapter
policy that potentially leads to a significant increase 4 concludes.
in macro liquidity.
We hope that we can give you the needed clarity
• The gradual demise of the Treasury bond
on what lies ahead with this ETC Group Outlook 2024
as a safe-haven asset and investors that are
publication and, as always, hope that you will find
in search of a new counterparty risk-free asset.
the information herein illuminating and useful.
• The dire situation in the US banking and financial
system that appears to be bankrupt if current Hold-
To-Maturity (HTM) bond losses would materialize.

”
• The rise in geopolitical risks & De-Dollarization
that is begging for an apolitical alternative global
 e wish all our clients
W
reserve asset outside of the US Dollar, Euro and readers a healthy and
or the Yuan. prosperous new year 2024

Stay humble and stack Sats,

André Dragosch, PhD

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 6 of 43

Macro

”  owever, the main macro risk

H
The development of the global macroeconomy plays
an increasingly important role for the performance
of cryptoassets and in particular Bitcoin as investors
in 2024 remains that Bitcoin
increasingly integrate this asset class into their broader and other cryptoassets could
asset allocation. be caught up in the quagmire
We tend to look at macroeconomic factors from of underperforming risky
the point-of-view of an investor, namely based on what
is being priced in financial markets and compare this
assets if a US recession
to the performance of cryptoassets such as Bitcoin. still materialized
In fact, the majority of fluctuations in the price of Bitcoin
can historically be explained by 4 major macro factors
which are global growth, monetary policy, US Dollar,
and Eurozone risks.

By extracting these macro factors from traditional

financial asset prices, we can try to analyse the impact
of changes in macro factors on the price of Bitcoin.

A more detailed explanation of this approach can

be found here.

From a statistical point-of-view, Bitcoin tends

to be mainly influenced by changes in global growth
expectations and, by association, changes in cross
asset risk appetite in traditional financial markets.

In this regard, the “soft landing” narrative, i. e.

the expectation that the US economy would avoid an
outright recession, combined with traditional financial
markets ignoring the telegraphed tightening by
the Fed have essentially fuelled a rallye in risky assets,
including Bitcoin since October 2022 which has mostly
continued this year.

One of the major reasons was the peak in CPI inflation

rates in the US in October 2022 and the collapse of Sil-
icon Valley Bank and other US regional banks in March
2023 that led to a stabilization in US liquidity and easier
financial conditions.

In fact, the latest Bloomberg consensus estimates still

assign a median 50% probability of US recession within
the next 12 months. Our own model for a US recession
over the next 12 months based on the US yield curve
assigned a 93% probability of US recession in June
2024 but has collapsed recently as the yield curve has
resteepened.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 7 of 43

Probability of a US recession in 2024 increased significantly

Source: Bloomberg, ETC Group; own calculations; gray areas denote actual NBER US recessions

Keep in mind though that a US recession is usually In the context of a potential US recession, it
declared with significant delays by the NBER, is important to note that the dominance of macro
sometimes even more than a year after the fact. factors for Bitcoin’s performance has indeed increased
during years when the US economy was either
More recently, there has been a significant weakness
in outright recession (e. g. 2020) or when the US
in cyclically sensitive US employment such as truck
economy was at least in a growth rate cycle downturn
transportation, temporary help services or durable
(e. g. 2011, 2015, 2018, 2022).
goods manufacturing.
During these years, the majority of Bitcoin’s
What is more is that the US unemployment rate has
performance (>50%) could be explained by changes
been rising gradually since the beginning of the year
in macro factors, predominantly global growth
when it was at 3.4% — at the time of writing it is at
expectations.
3.7% (and already was at 3.9% in October).

The reason why that is important is that the US econ-

omy has never avoided a recession when the 3‑month

”  he question for investors

T
moving average of the unemployment rate increased
by 0.5%-points or more from its preceding 12‑months
low — this is also known as the “Sahm Rule”.
is whether Bitcoin and
Thus, the US economy might already be sliding into
other cryptoassets can
a recession. decouple from a potentially
In fact, leading indicators like the NAHB Housing bad macro environment
Market Index or regional Fed manufacturing surveys amid the upcoming Bitcoin
have recently rolled over again, implying an increasing
Halving in 2024?
risk for a repricing of still sanguine global growth
expectations to the downside.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 8 of 43

”  he key lesson from this

T
On a positive note, during Bitcoin Halving years, es-
pecially 2012 and 2016, Bitcoin was mostly dominated
by unexplained/residual factors outside of the macro
analysis is that Bitcoin’s
realm. performance can be dominated
A clear exception is, of course, 2020 when the global by macro factors amid US
economy was literally shut down due to the Covid-19 growth rate cycle downturns
pandemic. Changes in global growth expectations
(light green bar) were the most important factor
despite the Halving but most
for Bitcoin in 2020 while Bitcoin-specific factors such Halving years generally see
as the Halving (light blue bar) only played a subordinate a dominance in Bitcoin-
role in 2020 based on this analysis.
specific factors which implies
that Bitcoin could possibly
decouple from traditional
financial markets next year

How much of Bitcoin’s performance can be explained by macro factors?

Source: Bloomberg, ETC Group; Results based on a regression between

3-months change in macro factors and Bitcoin performance

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 9 of 43

What is more is that even during the Covid-19 shock Historically speaking, the announcement of easing
and recession in 2020, Bitcoin experienced a signifi- monetary policy measures alone has already led
cant interim drawdown but was able to recover strong- to a significant repricing of US inflation expectations
ly due to the tailwind from the Halving and loose mone- to the upside in the past.
tary policy in response to the economic weakness.

On the bright side, any material economic weakness,

especially in US employment, is likely going to induce
renewed monetary easing by the Fed.

Yearly performance in Bitcoin Halving years (2012, 2016, 2020) was

still decent despite US recessions / slowdowns

Source: Bloomberg, ETC Group

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 10 of 43

”  carce digital assets like

S The reason is that Bitcoin has become
increasingly sensitive to changes in market-
Bitcoin should potentially based inflation expectations (5‑year CPI
profit from such a reversal Swaps), especially since 2020. We expect this
in monetary policy sensitivity to increase even further as supply
scarcity of Bitcoin is going to be exacerbated
and renewed increase with the upcoming Halving in April 2024.
in inflation expectations

Fed monetary policy easing announcements alone have led to significant increases in inflation expectations

Source: Bloomberg, ETC Group

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 11 of 43

Bitcoin is becoming increasingly sensitive to US inflation expectations

Source: Bloomberg, ETC Group

” A potential wild card for We do not expect the armed conflicts in Eastern
Europe or in the Middle East to resolve any time soon,
higher inflation expectations which is one of our assumptions for 2024.
in 2024 is an increase Bitcoin will climb the proverbial “wall of worry” in 2024
in geopolitical risks on account of rising geopolitical risks. In 2024, more
than 45% of the world’s population will have cast
ballots in both presidential and legislative elections,
including the US. A high degree of volatility and the
possibility of big changes are predicted by the high
number of major elections.

Historically speaking, periods of heightened geopo-

litical tensions were associated with significantly high
inflation rates in the US. Most notably the 1st and 2nd
World War in the 20th century.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 12 of 43

Periods of heightened geopolitical risks tend to be high inflation environments

Source: Robert Shiller, Caldara & lacoviello 2022)

Increases in geopolitical risks are usually associated with an increase in commodity demand and supply chain
disruption which tends to be inflationary 1.

As far as cryptoassets are concerned, Bitcoin tends to sell off on increases in geopolitical risks but tends to rebound
to higher price levels than before the initial increase in geopolitical risks. So, any spikes in geopolitical risks should
be used as potential tactical buying opportunities in cryptoassets as the analysis in the box below demonstrates.

1 Bouri et al. (2023)

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 13 of 43

Can Bitcoin provide a hedge against

geopolitical risks?
In order to answer that question, we performed an In order to create the index, Caldara and Iacoviello
event study analysing Bitcoin’s historical performance count the number of articles (as a percentage of all
around significant spikes in geopolitical risks based news stories) in each newspaper for each month that
on the Geopolitical Risk Index by Caldara and Iacoviello discusses unfavourable geopolitical developments.
(2022).
We defined a significant geopolitical risk event
The Geopolitical Risk Index is a gauge of unfavourable as the date when the Geopolitical Risk Index increased
geopolitical events and related hazards derived from above 2 standard deviations. By doing so, we identified
a count of newspaper stories discussing geopoliti- 101 dates since July 2010 when this was the case. Our
cal tensions. More specifically, the Chicago Tribune, sample size is constrained by the fact that reliable daily
the Daily Telegraph, the Financial Times, The Globe historical price data for the price of Bitcoin only start
and Mail, The Guardian, the Los Angeles Times, as late as July 2010.
The New York Times, USA Today, The Wall Street
Journal, and The Washington Post are among the ten
newspapers whose electronic archives are reflected
in the automatic text-search results.

Geopolitical events were followed by significant price appreciations in the past

Source: Glassnode, ETC Group; matteoiacoviello.com;

Results based on previous geopolitical risk events since July 2010 — today

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 14 of 43

”  asing financial conditions

E
Apart from that, one of the key reasons for an increase
in inflation expectations through monetary policy
easing is the fact that the US Dollar tends to weaken
in the US coupled with
on any Fed guidance that implies declining interest a significant depreciation
rates in the US. This also tends to be a positive factor of the US Dollar could
for Bitcoin.
therefore provide a significant
Periods of US Dollar weakness are historically
also periods of significant Bitcoin outperformance
tailwind for Bitcoin
and vice versa. and cryptoassets in 2024
The next table shows Bitcoin’s performance subject
to the performance of the Dollar Index (DXY). The 1st
quintile represents the 1/5th of worst Dollar perfor- More generally, increases in the money supply
mances, while the 5th quintile represents the 1/5th tend to be associated with Bitcoin and cryptoasset
of best Dollar performances. bull markets as well. In this context, it is important
to note that both global money supply growth
Periods when the Dollar performs worst (1st quintile),
and the aggregate balance sheet of major central
i. e. depreciates the most, are also the best periods
banks have been increasing since late 2022 already —
for Bitcoin.
coinciding with the recovery in traditional financial
In that context, Bitcoin could provide a good hedge markets like equities as well.
against a more structural depreciation of the US Dollar
However, global central bank liquidity has recently de-
due to ongoing “De-Dollarization”.
clined again, predominantly led by declines of the ECB
and PBoC while the Fed’s liquidity has continued
to increase.

Dollar weakness historically provides a significant tailwind for Bitcoin

Source: Bloomberg, ETC Group; Sample: Jan 2011 - Today;

Orange dashed line denotes mean BTC performance over a 6-months time period

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 15 of 43

Central bank liquidity growth has stabilized but has recently decreased again

Source: Bloomberg, ETC Group

The reason why that is important is that Bitcoin’s performance has historically been tightly correlated with changes
in the global money supply. As a scarce digital asset, Bitcoin’s price appears to fluctuate with the ebbs and flows
of global liquidity. In a way, Bitcoin can be regarded as a good barometer for the degree of monetary debasement
around the world.

Bitcoin’s performance tends to be tightly correlated with global money supply growth

Source: Bloomberg, ETC Group

More recently, there has been a slight decline in global money supply growth. This suggests that there is a risk
for a short-term pull-back in Bitcoin due to the decline in liquidity.

However, financial conditions and expectations for monetary policy as priced by financial markets have recently
reversed again, suggesting a renewed reacceleration in global money supply growth.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 16 of 43

Reversal in monetary policy expectations suggests renewed increase in global money growth

Source: Bloomberg, ETC Group

The above measure is derived from financial market US Treasury markets still exhibit the lowest liquidity
prices which suggest that financial markets are since March 2020 based on the US Government
expecting a looser stance of monetary policy. Securities Liquidity Index provided by Bloomberg. One
of the reasons is the ongoing tapering of the Fed’s
bond portfolio and the ongoing divestment of major
foreign Treasury holders like China. Any material

” In fact, rates markets already

suggest that the peak
in the Fed interest rate hiking
spike in yields could move the Fed to intervene in US
Treasury markets by providing additional liquidity.

It is also an open secret that the US banking system

is in a very dire shape. Unrealized losses on bank’s
cycle is behind us and that balance sheets due to losses on securities have piled
the Fed will likely cut interest up to more than 684 bn USD per end of Q3 2023
rates going forward. according to data by the FDIC.

The Fed and other financial institutions like the Federal

Home Loan Bank (FHLB) were thus far able to cover
More specifically, at the time of writing, Fed Funds up these losses through significant liquidity provisions
Futures already price in almost 5 rate cuts of 25 basis such as the Bank Term Funding Program (BTFP)
points each with an implied policy rate of only 4.2% by the Fed. The BTFP is planned to expire in March
at the end of December 2024. This is probably due 2024 with more than 100 bn USD in short-term loans
to ongoing expectations for declining inflation rates to troubled financial institutions coming due. This will
and increasing unemployment in 2024 which are be a key event to watch early next year.
bound to lead to a reversal in monetary policy.

Other factors that could potentially lead to a reversal

in US monetary policy are Treasury market dysfunction
(spikes in yields due to illiquidity) or a renewed increase
in systemic banking stress.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 17 of 43

” It is important to note that any During that period, Bitcoin and other cryptoassets
significantly outperformed traditional assets like
increase in systemic sovereign equities.
or banking risks would most Apart from that, 2023 has already shown frequent
likely be bullish for counterparty episodes when Bitcoin-specific factors (“Residual” —
risk-free assets like Bitcoin light blue area) were more important than macro
factors. Highlights are at the beginning of the year (rise
as was the case during of inscriptions & SVB collapse) and in Q4 2023 (likely
March 2023 when Silicon US spot Bitcoin ETF approval):
Valley Bank collapsed

How much of Bitcoin’s performance can be explained by macro factors?

Source: Bloomberg, ETC Group

This is probably one of the major reasons why Bitcoin was able to decouple from the recent performance observed
in traditional financial markets throughout 2023.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 18 of 43

In the context of a potential US spot Bitcoin ETF approval, it is quite striking that the performance sensitivity of Bitcoin
to changes in global Bitcoin ETP flows has indeed increased significantly over the course of 2023.

Over the past 6 months alone, changes in global Bitcoin ETP flows were able to explain around 30%–40%
of Bitcoin’s price variation. In fact, BlackRock’s spot Bitcoin ETF filing in June 2023 has served as a very significant
catalyst for global cryptoasset ETP flows in general.

Bitcoin: The importance of ETP flows recently increased significantly

Source: Bloomberg, ETC Group

Since an approval is already mostly priced in judging by the narrow NAV discount of Grayscale’s Bitcoin Trust
(GBTC), the potential price impact is more a medium- to longer-term topic rather than a short-term spike in prices
which is most-likely going to be limited.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 19 of 43

What is the price effect of a potential

US spot Bitcoin ETF approval?
A major talking point among investors is the potential Moreover, the sensitivity of Bitcoin to these ETP
price impact on Bitcoin if a spot Bitcoin ETF flows was around 10 suggesting that a +1% increase
is ultimately approved in the US. in global Bitcoin ETP AuMs was on average associated
with a +10% weekly performance of Bitcoin — a very
In general, a good starting point to answer this question
significant number.
is Bitcoin’s performance sensitivity to global ETP
flows. As the chart above suggests, both the sensitivity That being said, this “multiplier” can sometimes
(Beta) and the importance (R^2) of the flows even be negative as was the case in 2016 —
for the performance of Bitcoin can vary significantly negative inflows being associated with positive price
over time. performance and vice versa.

The most recent numbers over the past 6 months However, the average numbers suggest that 1%
suggest that variations in global Bitcoin ETP flows were of global Bitcoin ETP inflows were on average
able to explain around 40% of the variation in the price associated with a 0.96%-points weekly performance
of Bitcoin. of Bitcoin.

Bitcoin’s Performance Sensitivity to ETP Fund Flows

Source: Bloomberg, ETC Group

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 20 of 43

So, almost a 1‑to-1 relationship. Keep in mind that this is possibly a conservative
number since the Beta (“multiplier”) of Bitcoin’s
Now, the aggregate amount of AuM of ETFs in the US
performance to these fund flows has sometimes
around 6,982 bn USD of which 5,585 bn USD are
increased up to a factor of 20 as happened during
invested into risk assets like equities according to data
the bull market in 2021.
by ICI.
Caveat: Other unobserved factors might be more
Under the assumption that 20% of investors would
important at times. As always, correlation is not
consider such an investment and allocate 3% of their
causation.
AuMs into Bitcoin, the potential amount of new capital
entering the market would be around 33.5 bn USD But this amount of capital won’t enter Bitcoin overnight.
(5.585 trn USD * 20% * 3%). In comparison, the global It will take many months before investors start migrat-
Bitcoin ETP market currently amounts to only 34 bn ing into these newly issued ETFs.
USD. Hence, an inflow of around 33.5 bn USD would
Gradually, then suddenly as they say.
imply an increase of around 98% in AuM — almost
a doubling in global Bitcoin ETP AuMs.

If you assumed the abovementioned almost 1‑to-1

price sensitivity on average, we would be talking about
a potential price impact of approximately +98% (!).

Bottom Line
We still assume a US recession, most-likely in June 2024, as a base case macro scenario next year. Bitcoin’s annual
performance in past Halving years was still decent despite US recessions or slowdowns albeit with large interim
drawdowns.

Bitcoin-specific factors were generally more relevant than macro factors during past Halving years. Bitcoin-specific
factors have recently become more relevant as well, most likely related to ETP inflows. We expect a significant price
impact from a potential spot Bitcoin ETF approval in the US.

The reversal in monetary policy with a weak Dollar and rising inflation expectations should provide a tailwind
for Bitcoin and Cryptoassets in 2024. Recent reversal in monetary policy expectations already foretells an increase
in global money supply growth again.

Rising geopolitical risks represent a wild card in 2024, but we expect only a short-term negative impact with
above-average returns thereafter.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 21 of 43

On-Chain
Bitcoin

” On average, the post-

Probably the most anticipated on-chain event in 2024
by far is the upcoming Bitcoin Halving. Bitcoin’s algo-
rithm dictates a –50% reduction in the block subsidy
Halving performance was
which is the reward paid to miners when a valid hash approximately a 17‑fold
is found. This reduction is dictated every 210000 increase in the price of Bitcoin
blocks while one block is mined slightly less than every
10 minutes on average. This block subsidy currently
500 days after the Halving
stands at 6.25 BTC and will halve to 3.125 BTC in April (34‑fold peak increase)
2024. This will be the fourth Halving event since Bit-
coin’s genesis block in January 2009.

What is relevant for Bitcoin and cryptoasset investors The chart below shows the respective mean, median,
is the fact that these Halving events were followed by minimum, and maximum performance around the past
very significant price appreciations in the past. 3 Bitcoin Halving events that happened in 2012, 2016,
and 2020 so far:

Halving events have led to significant price appreciations in the past

Source: Glassnode, ETC Group; Results based on the previous Halvings in 2012, 2016, and 2020

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 22 of 43

As one can see from the chart above, the halving already tends to be anticipated around 400 days before the Halving
date itself. However, the large majority of performance on average accrues after the Halving date.

There are frequent discussions within the Bitcoin community about whether these Halving events are priced in ahead
of time since they are public information which, we think, is neither supported by theory nor the statistical evidence
that is provided in the following box.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 23 of 43

Is the Halving priced in?

There are frequent discussions within the Bitcoin com- X days after the Halving with the performance X days
munity about whether Halving events can be priced before the Halving.
in ahead of time since they are public information.
The rationale: If there was no statistical significance
The Efficient Market Hypothesis assumes that there in the Halving, post-Halving performances should not
is perfect information among homogenous market be significantly higher than pre-Halving performances
participants at all times and that, therefore, any public for any given identical time period.
information is instantly reflected in price.
The results are quite staggering: although there does
Based on this theory, only new information can lead not seem to be a significant performance effect until
to changes in the price and performance is therefore 100 days after the Halving (performances are only
a non-predictable statistical “random walk”. weakly statistically significant), the performance
differences become highly significant after that.
However, the empirical evidence for Bitcoin suggests
that, although being publicly available information, Halv- All in all, the results suggest that the Halving effect
ing events do not seem to be priced in ahead of time. starts to become significant only as late as 100
days after the Halving date but then becomes highly
In order to test the hypothesis that there is no
significant which suggests that it was not being priced
significant effect of the Halving on the performance
in ahead of time historically.
of Bitcoin, we compared the respective performances

Is the Bitcoin Halving priced in? History suggests it isn’t...

Source: Glassnode, ETC Group; Results based on the previous Halvings in 2012, 2016, and 2020
Mean Excess Performance = difference between performance X days after minus X days before the Halving
Orange dashed line denotes 95% level of confidence

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 24 of 43

For one thing, if this event was being priced in ahead In essence, there is a certain amount of rather constant
of time and the price of Bitcoin would be bid up in an- selling pressure exerted by daily selling of miner
ticipation of these events, Bitcoin miners would still revenues. Under the assumption that Bitcoin miners
be able to offload their BTC revenues and possibly mine around 900 BTC per day, after the Halving has
even more before the Halving. taken place, this daily potential selling pressure will fall
to ~450 BTC per day.
The data suggests that Bitcoin reserves in miner wal-
lets stay relatively flat over time and that Bitcoin miners Although this amount is miniscule compared to the av-
tend to sell most of their daily mining revenues. erage amount of exchange in- and outflows on a daily
basis, this decline in selling pressure tends to accumu-
In fact, in 2023 Bitcoin miners have sold around
late over time.
100.4% of their daily mining revenues so far according
to data provided by Glassnode as aggregate miner For instance, over a 1‑month time period, Bitcoin min-
BTC balances have even decreased a bit compared ers will potentially sell 13500 BTC (30 days * 450 BTC)
to the beginning of the year. less than before the Halving. At the time of writing, this
is equivalent to a US Dollar value of 560 mn USD per
month (see chart below).

Bitcoin Halving event is best understood as a supply shock

Source: Glassnode, ETC Group; Chart for illustrative purposes only; Data available as of close 2023-12-12

With every block mined, this decline in selling pressure Given this increase in supply scarcity, we think that
should therefore lead to higher prices, even if demand Bitcoin will reach a higher “equilibrium price” over
flow stays constant. the course of 2024.

Given the cumulative nature of this effect, it is therefore

not surprising to see that the price effect only tends
to be seen as late as 100 days after the Halving date,
as described in the abovementioned box.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 25 of 43

The “short-side principle” in disequilibrium economics A famous model to do so is the stock-to-flow model.
states that whichever side of either supply or demand Although this model is statistically flawed (Kripfganz,
is shortest ultimately determines the quantity 2020) it is still one of the most-widely followed models
transacted and therefore the price1. in terms of price predictions for Bitcoin. We will use
it here as a benchmark for our subsequent forecast.
Since the Bitcoin market will most likely
be in a significant disequilibrium after the supply shock
in April 2024, we think it is sufficient to model Bitcoin’s
price trajectory with supply only.

1 Van Aarle (2017)

The infamous stock-to-flow model is predicting above 300k USD at the end of 2024

Source: Coinmetrics, ETC Group; Past performance not indicative of future returns.

The original stock-to-flow model assumes that there is a log-linear cointegration relationship between
the stock-to-flow ratio and price of Bitcoin or the market cap.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 26 of 43

Cointegration implies that there is at least a long-term However, the stock-to-flow ratio is dependent on block
relationship between two variables over time, even height and therefore, ultimately, time. The model itself
when these variables can diverge over shorter time suffers from omitted variable bias since block height
periods. is the relevant variable that determines the stock-to-
flow ratio itself.
In this context, the stock-to-flow ratio is the ratio
between the current circulating supply of bitcoins For this reason, we prefer a more robust model which
and the annual production rate which is a concept accounts for the fact that Bitcoin is highly autocorrelat-
originating from the commodity space. Thus, Bitcoin ed, i. e. shows strong performance momentum.
is seen as a “digital commodity” in that model.
In addition, that model accounts for the increasing
As the production rate of bitcoins tends to decrease supply scarcity of Bitcoin based on the block reward
over time due to the effect of the Halvings, this ratio halvings but also accounts for the fact that there are
tends to increase over time, signalling an increasing diminishing returns of those halvings1.
supply scarcity.
The following chart presents the forecast of this model:

1 btconometrics (2023)

We expect Bitcoin to reach slightly more than 100k USD by the end of 2024

Source: Coinmetrics, ETC Group

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 27 of 43

As a robustness check, we have only used the first This prediction also appears to be more consistent
two epochs (until the 2nd Halving in 2012) as esti- with past recovery cycles of Bitcoin which are depicted
mation/training sample for the model. Nonetheless, below. Based on the median path of the past recovery
the model shows an out-of-sample “goodness of fit” cycles, it is sensible to assume for Bitcoin to reach
(R^2) of 83% which is relatively high. fresh all-time highs during October next year and then
continue rallying (towards 100k USD).
Based on this more robust model, we expect Bitcoin
to make new all-time highs during next year and reach This is also shown in the following chart:
slightly more than 100k USD by the end of 2024.

Based on past bitcoin cycle recoveries, we expect bitcoin to reach new all-time highs in October 2024

Past performance not indicative of future returns. Source: Coinmetrics, ETC Group

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 28 of 43

There is currently a debate about diminishing returns Consider the following on-chain metrics for Bitcoin:
of Bitcoin Halvings which would be accounted for by
• % of exchange supply is at a 5‑year low
the abovementioned model. That being said, it is quite
• % of supply last active 1+ years at all-time high
likely that bitcoin’s supply scarcity could be exacerbat-
• Illiquid supply measure by Glassnode at all-
ed in the next bull market cycle.
time high
For example, the majority of on-chain measures • 3‑months + realized cap HODL wave is higher than
suggest that there is far less bitcoin in circulation than the last cycle’s high
there was in the previous cycle, and that accumulation
According to these on-chain indicators, there will be
has been more pronounced this time around.
a lot of “dry powder” in terms of supply distribution
throughout the upcoming bull cycle, and liquid supply
on exchanges is likely to be rather sparse.

Bitcoin’s supply scarcity is more pronounced than during the last cycle

Source: Glassnode, ETC Group

”  ll in all, this would suggest that

A The reason for staying conservative is the fact that
prices have already rallied to the extent that valua-
the abovementioned bitcoin tions are not cheap anymore and are rather trading
price prediction of slightly on the expensive side already. For Bitcoin, this is likely
above 100k USD by the end going to improve with the Halving in April 2024.

of 2024 is rather a conservative However, moderately expensive valuations already

imply that markets have probably discounted a lot
base case estimate. of the positive developments that are shaping up
for 2024. This appears to be the case for both Bitcoin
and Ethereum.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 29 of 43

Based on a composite measure of valuations that combines multiple valuation approaches, we measure a historical
percentile of 62% for Bitcoin and 69% for Ethereum. The 50% percentile can be considered as ‘fair value’ within
this indicator.

Both Bitcoin’s and Ethereum’s valuations are trading slightly above ‘fair value’

Source: Glassnode, Coinmetrics, ETC Group;

Composite Valuation Indicators combine multiple valuation approaches

Bottom Line
The Halving is the most anticipated on-chain event by far in 2024. We still expect a significant post-Halving
performance based on historical patterns and show that it was not priced in ahead of time in the past. The Halving
effect historically becomes statistically significant after 100 days after the Halving date.

We expect Bitcoin to make new all-time highs in October next year and reach slightly more than 100k USD
by the end of 2024. This bull cycle could perform better than the past cycle due to more pronounced supply scarcity,
but valuations already appear to be moderately above ‘fair value’.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 30 of 43

Ethereum and Altcoins

One of the big topics for cryptoasset investors at the beginning of the year, while Bitcoin’s network
in 2024 is whether the significant underperformance activity was increasingly buoyed by the rise
of Ethereum (and other major altcoins) vis-à-vis Bitcoin in inscription demand.
is likely going to reverse.
As a result, Bitcoin’s network activity significantly
Ethereum saw a significant underperformance outperformed both ETH and even major ETH Layer 2s
throughout 2023, mostly related to the uncertainty such as Polygon in 2023.
surrounding the possibility of staking withdrawals

Bitcoin’s stronger network activity was one of the reasons for ETH’s underperformance

Source: Glassnode, ETC Group; Based on daily active addresses and transfer count

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 31 of 43

In fact, inscriptions on Bitcoin already account That being said, Ethereum’s ecosystem still enjoys
for approximately 60% of transactions. So, every 3 out the first-mover advantage as the first major smart
of 5 transactions on average contains an inscription contract platform.
according to data provided by Glassnode.
Consider the following statistics for Ethereum:
Bitcoin inscriptions have certainly made Bitcoin more • According to data provided by
“Ethereum-like” in the way that non-fungible tokens blockchaincenter.net, Ethereum is still the most
(NFTs) like the Taproot Wizard collection of pictures dominant smart contract platform by far
are now inscribed into Bitcoin and also BRC-20 tokens commanding 58.5% of the market cap, followed
such as ORDI have been issued on the Bitcoin block- by Binance’s BNB token and Solana which only
chain. account for 8.5% and 6.6% of the total market cap,
respectively2.
Although the core Bitcoin community is deeply divided
• Moreover, thousands of ERC-20 tokens have
on the usefulness of these predominantly non-
already been issued on the Ethereum blockchain
monetary transactions, they have clearly contributed
since its inception in July 2015. The top 10 ERC-
to a significant rise in overall network activity in 2023.
20 tokens alone which include Shiba Inu, Dai,
So, competition in the realm of NFTs and secondary Sandbox, or Arbitrum already account for around
tokens has certainly increased for Ethereum. In fact, 21 bn USD while the whole universe of BRC-20
Bitcoin NFT trading volumes have even recently tokens on Bitcoin only accounts for 1.6 bn USD3.
surpassed Ethereum NFT volumes in November 2023 • The value of stablecoins which include Tether
according to data provided by CryptoSlam. (USDT), USD Coin (USDC) or Dai (DAI) issued
A key risk for Ethereum represents the BitVM paper on Ethereum accounts of 51% of the total
recently presented by Robin Linus that could render stablecoin market cap. Second is Tron which
Bitcoin a Turing complete blockchain1. The conse- accounts for 37.9% of the total4.
quence of that would be that any kind of computation • Furthermore, the all-time value of NFTs traded
could be performed on Bitcoin. This remains a key risk on Ethereum is already 10 times bigger than
for Ethereum over the long term and was also seen the second platform Solana5.
as one of the major catalysts for its most recent under-
performance.

1 https://bitvm.org/bitvm.pdf
2 https://www.blockchaincenter.net/market-cap-dominance/?include=35%3B&exclude=36%3B&limit=5
3 Sources: coinmarketcap.com and brc-20.io
4 Source: https://defillama.com/stablecoins
5 Source: https://www.cryptoslam.io/blockchains

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 32 of 43

These statistics highlight the ongoing dominance of Ethereum within

secondary tokens issued, NFTs, and smart contracts in general.

Ethereum is still very dominant in many segments of the market

Data is correct as of 13 December 2023

Furthermore, Ethereum’s transition to proof-of-stake All in all, cryptoasset investors should be cognizant
algorithm (aka “The Merge”) in September 2022 of the fact that, despite the recent developments
allows investors to earn a (staking) yield on a protocol surrounding inscriptions on Bitcoin, Ethereum
level — something which is not possible with Bitcoin and Bitcoin are still different types of cryptoassets,
at the moment. Thus, Ethereum investors can earn an especially since The Merge. While the former
additional uncorrelated source of yield as well. is the unchallenged store-of-value, the latter
is the dominant smart contract platform for building
decentralized applications and tokenizing assets.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 33 of 43

Ethereum (ETH): Staking Yield and Burn Rate

Source: Glassnode, ETC Group

In addition to the abovementioned staking yield Traditional investors can think of the staking yield
that is earned as reward for validating transactions as some kind of equity dividend, while the burn rate can
on Ethereum, investors are positively affected by be considered as an equity buyback yield.
the supply deflation due to the burn mechanism
At the time of writing, Ethereum’s staking yield is at
introduced with the Ethereum Improvement Proposal
around 3.4% p. a. while the burn rate amounts to 1.8%
EIP-1559 in August 2021.
p. a. putting Ethereum’s total yield at approximately
At the time of writing, Ethereum’s net supply issuance 5.2% p. a.
amounts to –1.1% p. a. as approximately 1.84% p. a.
are currently being burnt, i. e. ETH supply put out
of circulation.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 34 of 43

”  e therefore think that it

W
So, the strong dominance of Ethereum in terms
of smart contract platforms and the possibility to earn
an additional source of yield imply that it should also
is quite likely for the relative
be a core holding in a diversified cryptoasset portfolio performance of ETH/BTC
as well. to reverse itself in 2024.
In other words, when ETH underperformed BTC over In fact, ETH/BTC’s 12‑months
the past 12 months, ETH tended to outperform BTC
over the following subsequent 12 months:
relative performance has
historically shown a strong
tendency to mean revert.

ETH/BTC relative performance exhibits mean reversion

Source: Glassnode, ETC Group; Sample: August 2016 - December 2022

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 35 of 43

”  hus, both in terms

T
More specifically, at the time of writing, ETH has un-
derperformed BTC by –27% over the past 12 months.
Based on historical performance patterns, such a stark
of outperformance vis-à-vis
underperformance was historically associated with Bitcoin and portfolio
a subsequent 12‑months forward outperformance diversification there are
of approximately +100% over the following 12 months.
This would imply new cycle highs in ETH/BTC but not
clear benefits of diversifying
new all-time highs in the relative performance ratio some of the Bitcoin exposure
next year. into altcoins next year
Moreover, ETH’s outperformance against Bitcoin tends
to correlate strongly with the general degree of altcoin
outperformance vis-à-vis Bitcoin as well.

Generally speaking, there is a rising outperformance

of altcoins during Bitcoin bull markets and vice versa.
In addition, there is also a rising performance dis-
persion among altcoins vis-à-vis Bitcoin during bull
markets as well.

Benefits of diversifying into altcoins are greatest during Bitcoin bull markets

Source: Coinmarketcap, ETC Group; Dispersion = (1 - Average Altcoin Correlation with Bitcoin)
Altseason Index = % of 20 major altcoins outperforming Bitcoin

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 36 of 43

In the context of Ethereum, Proto-danksharding, Diversification into major ETH L2s altcoins like Polygon
or EIP-4844, will be implemented by Ethereum. This could therefore be beneficial in 2024.
would lower transaction costs and increase scalability
That being said, it should be highlighted that
for layer 2 chains like Optimism, Polygon, and Arbitrum,
the majority of altcoins are high beta but negative theta
among others. Our expectation is that Ethereum L2s
“derivatives” of Bitcoin.
will concentrate into two or three major players based
on usage and value within a year following the upgrade. In other words, most altcoins tend to outperform
Bitcoin in bull markets but tend to exhibit a structural
Both the percentage of Ethereum users using ETH L2s
underperformance against Bitcoin over the long run
relative to Ethereum and the TVL just hit a new all-time
as well. This means that cryptoasset investors need
high in early December according to data provided by
to exercise high selectivity with regards to the right set
Dune and L2BEAT — we expect this trend to continue
of altcoins next year.
well into 2024 and reinforce itself with EIP-4844.
The following table shows the respective performance
Beta (sensitivity) and Theta (relative time trend)
to Bitcoin of the current 20 constituents of the MSCI
Global Digital Assets Select Top 20 Capped Index:

Beta and Theta of MSCI Global Digital Assets Select Top 20 Capped Index Constituents

Source: Coinmarketcap, ETC Group; Differing sample sizes;

Results based on linear regression, Beta = sensitivity to BTC: Theta = relative time trend against BC

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 37 of 43

”  rom a pure statistical point

F
A beta value above 1 implies that, on average, if bitcoin
increased by 1%, the respective altcoin outperformed
by 1% * beta in the past.
of view, it makes sense
A positive theta value implies that for every day that
to allocate to these altcoins
passed, the respective altcoin has outperformed bit- that both exhibit a high beta
coin regardless of bitcoin’s performance by the theta but also a positive theta
value per day.
relative to Bitcoin in order
As one can see from the abovementioned table, most
to harvest the full performance
altcoins exhibit a higher beta than 1 but also exhibit
a negative theta value. benefits of altcoins.
The following bar charts order the current 20
constituents of the MSCI Global Digital Assets Select
Top 20 Capped Index based on their respective
Beta and Theta:

Beta: MSCI Global Digital Assets Select Top 20 Capped Index Constituents

Source: Coinmarketcap, ETC Group; Differing sample sizes;

Results based on linear regression, Beta = sensitivity to BTC

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 38 of 43

Theta: MSCI Global Digital Assets Select Top 20 Capped Index Constituents

Source: Coinmarketcap, ETC Group; Differing sample sizes;

Results based on linear regression, Theta = relative time trend against BTC

”  ased on this rationale,

B market. An efficient way to implement such a strategy
are diversified but capped cryptoasset indices like
in order to maximize returns the MSCI Global Digital Assets Select Top 20 Capped
in 2024, a sensible strategy Index.
was to overweight high beta Based on this rationale, in order to maximize returns
and positive theta cryptoassets in 2024, a sensible strategy was to overweight high
beta and positive theta cryptoassets such as Solana,
such as Solana, Polygon, Polygon, Chainlink, and Avalanche vis-à-vis Bitcoin.
Chainlink, and Avalanche
Lido DAO and Tron both exhibit a positive theta but are
vis-à-vis Bitcoin. low beta cryptoassets relative to Bitcoin.

That being said, there is generally a “size effect” visible

during cryptoasset bull markets as well, i. e. smaller
Lido DAO and Tron both exhibit a positive theta but are medium cap cryptoassets tend to outperform large cap
low beta cryptoassets relative to Bitcoin. cryptoassets.
That being said, there is generally a “size effect” visible So, a sensible strategy was also to overweight medium
during cryptoasset bull markets as well, i. e. smaller caps vs large cap cryptoassets in the upcoming bull
medium cap cryptoassets tend to outperform large cap market. An efficient way to implement such a strat-
cryptoassets. egy are diversified but capped cryptoasset indices
So, a sensible strategy was also to overweight medium like the MSCI Global Digital Assets Select Top 20
caps vs large cap cryptoassets in the upcoming bull Capped Index.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 39 of 43

The reason is that, due to the capping mechanism, Hence, capped indices amplify a “size effect”
large caps like Bitcoin (and Ethereum to a smaller by overweighting smaller cap cryptoassets relative
extent) are underweighted relative to their true market to large cap cryptoassets. In bull markets, this tends
cap weighting while smaller medium cap crytoassets to be beneficial as smaller cap cryptoassets tend
such as XRP, Solana, Cardano or Avalanche are to outperform Bitcoin:
overweighted relative to their market cap weighting.

Capped diversified indices tend to outperform bitcoin in bull markets on account of the ‘size effect’

Source: Bloomberg, ETC Group

Bottom Line
Bottom Line: Rising inscription demand and network activity were probably the reasons for BTC’s outperformance
of ETH in 2023. However, we expect this relative performance to mean revert in 2024 based on historical patterns.

The benefits of diversifying some BTC exposure into altcoins tends to be highest in BTC bull markets.

We recommend diversifying into high beta and positive theta altcoins which are Solana, Polygon, Avalanche,
and Chainlink.

Capped diversified cryptoasset indices can also offer performance benefits via the “size effect”.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 40 of 43

Conclusion

1 2
As we wrap up an eventful year and look forward Our analysis indicates that 2024 could be a land-
to 2024, the landscape of Bitcoin and cryptoassets mark year for Bitcoin, potentially reaching new all-
is poised for an exciting phase of growth and in- time highs and breaking the 100k USD barrier. This
novation. The upcoming year promises a blend optimism is grounded in a confluence of factors,
of challenges and opportunities, with pivotal events including the increasing scarcity of Bitcoin supply,
like the Bitcoin Halving and the evolving macroeco- heightened institutional interest, and significant
nomic climate shaping the future of digital assets. macroeconomic shifts. The anticipated US reces-
sion and shifts in global monetary policy are likely
to play a crucial role in the cryptoasset market
dynamics, presenting both risks and opportunities.

3
4
The journey of cryptoassets, especially Bitcoin,
is intricately linked with broader economic trends
and technological advancements. As we navigate
this complex terrain, we foresee a heightened
interest in Bitcoin and other cryptoassets, not just In essence, 2024 is set to be a year when cryp-
as investment vehicles but as integral components toassets, led by Bitcoin, may not only weather the
of a diversified financial portfolio. storm of economic uncertainties but also emerge
stronger, marking a new era of digital financial
innovation and adoption. At ETC Group, we remain
committed to providing our clients with insightful
analysis and strategic guidance, helping them
make informed decisions in this ever-evolving and
exciting market.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 41 of 43

References
• 100trillionUSD. (2019). Modeling Bitcoin’s value • de Best, R. (2023). Cryptocurrency adoption in
with scarcity. Medium. Retrieved from https:// 56 different countries worldwide 2019-2023.
medium.com/@100trillionUSD/modeling-bitcoins- Statista. Retrieved from https://www.statista.
value-with-scarcity-91fa0fc03e25 com/statistics/1202468/global-cryptocurrency-
ownership/
• Auer, R., Claessens, S., Frost, J., & Shin, H.
S. (2022). Crypto trading and Bitcoin prices: • Dragosch, A. (2020). Which macro factors explain
Evidence from a new database of retail adoption. the price of Bitcoin? Medium. Retrieved from
BIS Working Papers, 1049. Retrieved from https:// https://andre-dragosch.medium.com/which-
www.bis.org/publ/work1049.pdf macro-factors-explain-the-price-of-bitcoin-
f0538420c2c4
• Bouri, E., Gabauer, D., Gupta, R., & Kinateder,
H. (2023). Global geopolitical risk and inflation • Kripfganz, S. (2020, May 12). The Bitconometrics
spillovers across European and North American of the stock-to-flow model: An introduction and
economies. Research in International Business and critical assessment [Video]. Retrieved from https://
Finance, 66. www.youtube.com/watch?v=u_VkwA5fkLA

• btconometrics. (2023). The Bitcoin auto- • Linus, R. (2023). Compute anything on Bitcoin.
correlation exchange rate model: A novel two-step Retrieved from https://bitvm.org/bitvm.pdf
approach. Medium. Retrieved from https://archive.
• Nakamoto, S. (2009). Bitcoin: A peer-to-peer
is/3XfkY
electronic cash system. Retrieved from https://
• Caldara, D., & Iacoviello, M. (2022). Measuring bitcoin.org/bitcoin.pdf
geopolitical risk. American Economic Review,
• Rogers, E. M. (1962). Diffusion of Innovations. New
112(4), 1194-1225.
York, NY: Free Press of Glencoe.

• Van Aarle, B. (2017). Macroeconomic fluctuations

in a New Keynesian disequilibrium model. Journal
of Economic Structures, 6(10).

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 42 of 43

Contacts

Head office
etc-group.com
ETC Management Ltd
3rd Floor Quality House,
[email protected] 5-9 Quality Court Chancery Lane,
WC2A 1HP, London, United Kingdom
linkedin.com/company/
etcgroup-crypto

Issuer
Product materials, analysis as well as due
diligence collateral including SFDR information ETC Issuance GmbH
are available upon request. Thurn- und Taxis Platz 6,
60313 Frankfurt am Main
Deutschland

Be the first
to get expert insights
on the latest in crypto
Subscribe to our industry-leading
newsletter and research content

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024
 Page 43 of 43

Disclaimer

Important Information
The information provided in this advertising material is for informative purposes only and does not constitute investment advice, a recommen-
dation or solicitation to conclude a transaction. This document (which may be in the form of a marketing brochure, press release, social media
post, blog post, broadcast communication or similar instrument – we refer to this category of communications generally as a “document” for
purposes of this disclaimer) is issued by ETC Issuance GmbH (the “issuer”), a limited company incorporated under the laws of Germany, having
its corporate domicile in Frankfurt, Germany. This document has been prepared in accordance with applicable laws and regulations (including
those relating to financial promotions). If you are considering investing in any securities issued by ETC Group, including any securities described
in this document, you should check with your broker or bank that securities issued by ETC Group are available in your jurisdiction and suitable for
your investment profile.
Exchange-traded commodities/cryptocurrencies, or ETPs, are a highly volatile asset and performance is unpredictable. Past performance is not
a reliable indicator of future performance. The market price of ETPs will vary and they do not offer a fixed income. The value of any investment
in ETPs may be affected by exchange rate and underlying price movements. This document may contain forward looking statements including
statements regarding ETC Group’s belief or current expectations with regards to the performance of certain asset classes. Forward looking
statements are subject to certain risks, uncertainties and assumptions, and there can be no assurance that such statements will be accurate
and actual results could differ materially. Therefore, you must not place undue reliance on forward-looking statements. This document does not
constitute investment advice nor an offer for sale nor a solicitation of an offer to buy any product or make any investment. An investment in an
ETC that is linked to cryptocurrency, such as those offered by ETC Group, is dependent on the performance of the underlying cryptocurrency,
less costs, but it is not expected to match that performance precisely. ETPs involve numerous risks including among others, general market risks
relating to underlying adverse price movements and currency, liquidity, operational, legal and regulatory risks.
ETC Issuance GmbH, incorporated under the laws of Germany, is the issuer of any securities described in this document, under the base pro-
spectus dated 21 November 2022, supplemented from time to time, and approved by BaFin.
Any decision to invest in securities offered by ETC Group (including products and amounts) should take into consideration your specific cir-
cumstances after seeking independent investment, tax and legal advice. You should also read the latest version of the prospectus and/or base
prospectus before investing and in particular, refer to the section entitled ‘Risk Factors’ for further details of risks associated with an investment.
These prospectuses and other documents are available under the “Resources” section at etcgroup.com. When visiting this website, you will
need to self-certify as to your jurisdiction and investor type in order to access these documents, and in so doing you may be subject to other
disclaimers and important information.

IF YOU ARE IN THE UK, US, OR CANADA

Information contained in this document is not, and under no circumstances is to be construed as, an advertisement or any other step in further-
ance of a public offering in the United States or Canada, or www.etc-group.com any state, province or territory thereof, where neither the issuer
nor its products are authorised or registered for distribution or sale and where no prospectus of the issuer has been filed with any securities
regulator. Neither this document nor information in it should be taken, transmitted or distributed (directly or indirectly) into the United States.

PUBLICATIONS & SOCIAL MEDIA DISCLOSURE

Social media posts (including, but not limited to, LinkedIn and Twitter) of ETC Group and its subsidiaries (“Social Media”) are not, and should not
be considered to be recommendations, solicitations or offers by ETC Group or its affiliates to buy or sell any securities, futures, options or other
financial instruments or other assets or provide any investment advice or service. ETC Group makes all reasonable efforts to ensure that the
information contained on Social Media is accurate and reliable; however, errors sometimes occur. You should note that the materials on Social
Media are provided “as is” without any express or implied warranties. ETC Group does not warrant or represent that the materials on Social
Media are accurate, valid, timely or complete.

RISKS OF CRYPTOCURRENCIES
Cryptocurrencies are highly volatile assets and are known for their extreme fluctuations in prices. While there is potential for significant gains,
you are at risk of losing parts or your entire capital invested. The value of the ETCs is affected by the price of its underlying cryptocurrency. The
price of cryptocurrencies can fluctuate widely and, for example, may be impacted by global and regional political, economic or financial events,
regulatory events or statements by regulators, investment trading, hedging or other activities by a wide range of market participants, forks in
underlying protocols, disruptions to the infrastructure or means by which crypto assets are produced, distributed, stored and traded. The price
of cryptocurrencies may also change due to shifting investor confidence in future outlook of the asset class. Characteristics of cryptocurrencies
and divergence of applicable regulatory standards create the potential for market abuse and could lead to high price volatility. Amounts received
by Bondholders (i) upon redemption of the Bonds in USD, in cases where Bondholders are prevented from receiving cryptocurrency for legal
or regulatory reasons; or (ii) upon sale on the stock exchange depend on the price performance of the relevant cryptocurrency and available
liquidity.
For a detailed overview of risks associated with cryptocurrencies and specifically associated with the ETCs, please refer to the prospectus and
base prospectus available at the issuer’s website at www.etc-group.com.

© ETC Group 2023 [email protected] ETC Group Crypto Market Outlook 2024