Up more than 50% in 2024 and an astounding 200% since the beginning of 2023, it's safe to say crypto is officially back. Today, the collective market cap of the asset class sits at roughly $2.6 trillion. Yet, one CEO thinks it still has plenty of room to run.
In a recent interview with CNBC, Ripple CEO Brad Garlinghouse, whose company created the XRP (XRP +1.17%) cryptocurrency, pointed to several macroeconomic factors that could converge in 2024 and help push the total crypto market to $5 trillion, a near doubling from today's prices. While perhaps coming off as sensational, he might just be right.
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Institutions are piling into Bitcoin
The overarching reason for Garlinghouse's belief that the crypto market will double in 2024 is related to institutional interest. For most of crypto's history, its ascension as an asset class was driven by retail investors like you and me. But over the last few years, and specifically in 2024, the long-awaited arrival of deep-pocketed institutional investors slowly began to take shape.
In January, the U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs, effectively giving Wall Street direct access to the cryptocurrency, something previously not possible. With pent-up demand sidelined for years, the spot ETFs have generated massive trading volumes in just the first few months of trading and put a serious strain on Bitcoin's (BTC +1.26%) supply.
In just the month of March, firms backing these ETFs purchased three times the amount of Bitcoin mined during that stretch. Since their launch, the ETFs have attracted net inflows of more than $12 billion, making them one of the most successful groups of ETFs in history.
As Garlinghouse pointed out, this new demand is going to have to compete for a smaller supply after Bitcoin undergoes its fourth halving. Projected to occur on April 20, this halving will cut Bitcoin's inflation rate from roughly 1.75% to somewhere around 0.8%. Hinting at the near-inevitable price increase, which should occur after the halving, Garlinghouse commented that it "doesn't take an economics major to tell you what happens when supply contracts and demand expands."
Here lies case in point No. 1 for Garlinghouse's prediction. With some of Wall Street's most prominent names now in the game, Bitcoin's supply will become subject to added demand, and as the most valuable cryptocurrency on the market, it should pull the rest of the asset class along with it.
CRYPTO: BTC
Key Data Points
A possible regulatory boost for crypto
Reason No. 2: With the spot Bitcoin ETFs proving to be a major hit, Garlinghouse believes Wall Street's growing interest in crypto will force policymakers to enact clear and supportive regulation for crypto in the United States.
While the rest of the world has pursued more favorable policies toward crypto, Garlinghouse explained, "The U.S. is still the largest economy in the world, and it's unfortunately been one of the more hostile crypto markets. And I think that's going to start to change, also."
Not only is it an election year, which could see several pro-crypto politicians make their way to Washington, D.C., but there are also a series of courtroom battles that could sway in crypto's favor.
If the world's largest economy finally gets on board the crypto train, it should be full steam ahead for the asset class in 2024 and accelerate the market toward Garlinghouse's prediction that crypto will see its value double.
How far crypto can go in 2024
Bitcoin's halving and the likelihood of more favorable legislation are undoubtedly key catalysts that could help the crypto market reach Garlinghouse's prediction of a $5 trillion valuation. Yet, when looking at past years when a Bitcoin halving occurred, a $5 trillion market cap might only be scratching the surface of what's possible.
In 2020, the last time Bitcoin underwent a halving, the crypto market grew fivefold, rising from around $200 billion to more than $1 trillion. It then went on to reach its current all-time high of nearly $3 trillion in 2021.
If this year were to follow a similar trajectory as 2020, then a price target of somewhere around $7.5 trillion would be plausible. That may sound sensational, but keep in mind that this is crypto, and predictions often underestimate its true potential.
With Wall Street's newfound access to Bitcoin along with the possibility of crypto-friendly regulation, 2024 could be the year crypto finally solidifies itself as a legitimate asset class as institutional money begins to trickle in. To what extent remains to be seen, but rest assured, this crypto bull cycle will be unlike any we've ever seen.
