Crypto is coming back smarter and more efficient

After Bitcoin peaked in November 2021, companies in the Crypto and fintech space rushed to buy ads in Super Bowl 2022, including Coinbase, FTX, eToro, and Crypto.com.

Unfortunately, the crypto market declined in 2022 before climbing again throughout 2023.

So what’s different now? And should consumers consider investing in crypto markets this time around?

Like all financial markets, cryptocurrency is cyclical, with peaks and valleys, just like Wall Street and every other financial market. So investments in crypto, like every other investment, should be made intelligently based on an understanding of the market dynamics.

With all of the ups and downs in the cryptocurrency market, the trend has always been up in the long term view. Bitcoin peaked in late 2013 at $1238 before slumping in 2014. Bitcoin peaked again at $19,345.49 in December 2017 before dropping again. Bitcoin again reached an all-time high of $68,789 in November 2021 before beginning to drop. It’s now in the $40,000s where it was in early 2024.

There have been a few regulatory and structural changes that should help the cryptocurrency market mature in the coming years.

SEC Bitcoin Exchange-Trade Fund Approval

On January 10th, the Securities and Exchange Commission (SEC) approved the first 11 Bitcoin Exchange-Traded Funds (ETFs). This represents a vote of confidence in the future of Bitcoin as a mainstream asset from America’s SEC, and will support and validate the entire US crypto market and exchanges beyond the 11 ETFs. As President Kennedy once said, it’s the “high tide that lifts all boats”, and the entire crypto market will benefit. These ETFs should track the price of Bitcoin and provide consumers with a significantly easier way to invest in cryptocurrencies than the typical crypto wallets that are now used.

Though the SEC approval for the Bitcoin ETFs is an important first start, the industry needs to work together to create more communities where people can gather to share information and knowledge about Bitcoin, and the other leading cryptocurrencies. Such communities will enable growing the base of users interested in cryptocurrencies, which will empower adoption and usage.

Crypto becoming more Efficient

A second factor supporting the increased investment in cryptocurrencies is improvements in scalability thanks to rollups. As the name suggests, rollups enable combining multiple transactions into a single batch outside of the main blockchain. Rollups facilitate the reduction of the amount of data, which needs to be stored and processed on the main chain. Therefore, the transactions are both faster and cheaper.

There have also been improvements in scalability with other cryptocurrencies as well. Ethereum Layer 2 (L2) uses nearly 1000x less gas fees than Ethereum mainnet, and Solana has even lower gas fees.

Greater legal clarity

EU lawmakers voted into law the Markets in Crypto-Assets (MiCA) last year, which provides a clearer legal framework for cryptocurrencies in the European Union. For example, a company providing cryptocurrency-related services only needs to apply for regulatory approval in one EU country, and if approved, the company could operate freely across the EU.

In an attempt to make the EU a hub for cryptocurrency companies, the MiCA legislation encourages the creation of “priority areas” to ensure that the EU regulatory framework is “innovation-friendly” and open to the application of new technologies.

Large European institutions like the European Investment Bank have issued bonds on Ethereum, as has the leading French financial services company ‘Société Générale’. Moving forward, the use of blockchain networks by respected financial institutions will only increase the use of blockchain and cryptocurrencies.

Coupled with the SEC’s ETF approval, it’s clear that the industry is already benefiting from greater legal clarity in 2024.

Crypto hit a low point due to the FTX trial and verdict and the Binance plea deal, but since Bitcoin and cryptocurrency lows in 2022, the market has bounced back. With greater legal clarity both in the US and the EU markets, as well as in other global markets, coupled with advancements in technology and efficiency, and greater usage of crypto platforms by financial institutions, now is the time to re-enter the cryptocurrency market.

Are you ready?