Is Bitcoin’s (BTC) run-up to over $40,000 a signal that the crypto winter has thawed? Whatever lies ahead, it doesn’t hurt to be prepared as we go into 2024 by thinking about future crypto market trends.
In this article, we have listed our choices for the top five narratives for the new year.
Whether there is a crypto bull run or a winter in 2024, understanding the emerging uses for crypto might help you better understand the market.
Let’s dive right in.
Top 5 Crypto Market Trends To Watch in 2024
5. Data Availability Layers
The future of blockchain is expected to be modular. This means that instead of a single blockchain system handling everything from settlement, execution, and consensus, a lone blockchain will only be responsible for a specific operation. Modularity will thus allow blockchain networks to scale and specialize in a single function.
Data availability networks provide an off-chain solution for blockchains to store and verify their transaction data. Storing data on-chain can congest the blockchain and will require nodes to upgrade their hardware to cope with the ever-increasing of the blockchain.
Data availability layers allow blockchains to offload their data storage needs and guarantee that the historic transaction data is available when required, allowing anyone to verify transactions. Therefore, data availability layers not only help with scale but also help keep peer blockchains secure.
The market narrative around data availability has grown in 2023 mainly due to its place in Ethereum’s rollup-centric scaling roadmap. As more specialized rollups arise, the demand for data availability solutions is expected to increase proportionally.
In October 2023, Celestia became the first modular data availability blockchain to launch its mainnet. Other data availability blockchains include NEAR data availability layer (NEAR), Avail, and EigenDA.
Crypto investors love yield. Taking this market narrative into hyperdrive is restaking protocols.
Simply put, restaking is the process of locking up liquid staking tokens (LST) for extra yield. For example, when you stake your ether (ETH) on staking protocols like Lido and Rocket Pool, you get LSTs like stETH and rETH, respectively, as your receipt. With restaking protocols, you can earn additional yield by staking your stETH and rETH tokens.
From a financial standpoint, restaking is like yield farming. While yield farming requires crypto investors to stake, lend, and restake cryptocurrencies, LSTs, and other receipt tokens in a series of steps across various decentralized finance (DeFi) protocols to get multiple yields, restaking simplifies the process making it convenient for everyone to try.
From a technical standpoint, restaking provides security to roll-up applications in the same way that staking provides security to Layer One blockchains like Ethereum. To understand restaking better, let’s look at EigenLayer – a protocol pioneered restaking on Ethereum.
Developers can build roll-up chains for individual decentralized applications (DApp) using the EigenLayer protocol. LST holders can earn rewards by becoming validators of DApps they support by restaking their LST tokens. If you do not want to operate a validator node, you can simply delegate your LST for restaking to an operator.
Restaking is an interesting new approach to crypto-economic security. The LST protocols that gained immense popularity following Ethereum’s move from proof-of-work (PoW) consensus to proof-of-stake (PoS) consensus in 2022 now have an added utility with restaking.
Decentralized physical infrastructure networks (DePIN) have garnered plenty of interest from the crypto community in 2023. The DePIN sector is expected to gain wider investor attention in 2024 due to its compatibility with the artificial intelligence (AI) industry.
What are DePINs? DePINs are blockchain protocols that build, maintain, and operate physical infrastructure in an open and decentralized manner. The physical infrastructure can be hardware such as hotspot routers for wireless connectivity, GPU chips for computing, or data centers for file storage.
- Experts Roundtable: What DEXs Must Do Better for Adoption
- Understanding DePIN Protocols: How AI and Crypto Fit Together
- Project Guardian: Singapore’s Plan for DeFi and Tokenization
As of December 2023, Filecoin is the largest DePIN by market capitalization. Filecoin is a crypto-incentivized peer-to-peer storage network that allows anyone to store and retrieve data. Suppliers get paid in FIL tokens for providing reliable storage service.
Other DePIN networks include computing resource providers like Render, Theta Network, and Akash, which incentivize users to supply graphic processing unit (GPU) computing power. Meanwhile, Helium is a decentralized wireless network that incentivizes users to provide wireless network coverage using hotspots.
The beauty of DePIN networks is that they provide an open and permissionless marketplace for infrastructure to any industry, be it media, gaming, AI, information services, or life sciences.
2. Real World Asset Tokenization
Tokenization of real-world assets (RWA) represents real-world assets like real estate, fine art, credit, and precious metals as digital tokens on a blockchain.
Every year, an increasing number of traditional finance companies are looking to leverage the power of tokenization due to the benefits of secure and decentralized trading, property rights transparency, and fractionalization.
For illiquid real-world assets such as real estate and fine art, tokenizations enable the ownership rights of a commercial build or an expensive painting to be divided into thousands of digital tokens, bringing down the entry barrier for small investors and allowing the property rights benefits to trade seamlessly and instantaneously on the blockchain.
Blockchain transparency will also allow buyers to check and verify the transaction history of real estate, fine art pieces, and classic cars.
Intangible assets such as copyrights, trademarks, and patents – typically stored in paper or digital form – have much to gain from tokenization. An owner’s property rights to the copyrights, trademarks, or patents are stored immutably on the blockchain. Once tokenized, copyrights, trademarks, or patents become tamper-proof, traceable, and verifiable in real time.
In recent years, we have also seen the tokenization of credit markets. Crypto investors can remotely buy U.S. treasuries, bonds, and cash-equivalent tokens on the Internet. Similarly, investors can earn yields by investing in tokens representing private credit loans to businesses. According to rwa.xyz, the tokenized private credit market has active loans worth over $571 million and tokenized US treasuries worth over $771 million as of December 2023.
Exotic products such as carbon credits are also being tokenized. Carbon credit tokens are awarded, sold, transferred, and retired on the blockchain. Tokenized carbon credits create a liquid market for these exotic products, allowing companies to buy carbon offsets more easily while enabling climate action projects to raise funds more efficiently.
1. Artificial intelligence (AI)
Whether it is the equity or crypto market, no one can deny that the AI market narrative will grow stronger in 2024. The disruptiveness of AI has made it a force to be reckoned with.
Crypto investors are looking to profit from AI by identifying two types of crypto projects:
- Projects that support AI operations
- Projects that create AI solutions and provide AI services
AI-focused DePINs make up the first category. These include crypto projects providing the basic infrastructure for AI applications to operate.
Data storage and computing resources are the two main areas that AI-focused DePINs are working on. For example, Akash and Render are two crypto projects with a decentralized marketplace where users can buy and sell GPU power required by AI applications to process data.
Fetch.ai is a good example of the second category of AI-related crypto projects. Fetch.ai is a platform that allows developers to create and sell autonomous AI software and services. These AI software can operate independently, allowing buyers to automate a wide range of business functions.
Similarly, Bittensor is a crypto project focused on creating a decentralized AI industry. Bittensor’s vision includes both producing new AI frameworks and creating decentralized markets for compute resources, data storage, data processing, and oracles, all under one ecosystem.