Snow may be falling and temperatures dropping, but that hasn’t affected the mood in the crypto market. Rather than suffer another crypto winter, investors are anticipating the approach of a bitcoin spring and are excited about the market due to several major milestones this quarter, on top of last year’s gains.
Family offices, which withdrew their money from crypto hedge funds after the collapse of the crypto exchange FTX in late 2022, have been slow to return. Last year, the number of family offices surveyed by Goldman Sachs that expressed no interest in crypto jumped to 62% from 39%.
But 2024 promises to be different, and family offices have already started buying up bitcoin and ethereum, said Enzo Villani, the founder and CEO of Alpha Sigma Capital, an investment fund focused on blockchain companies.
“Now is a great time to get into crypto, and there’s a lot of interest,” Villani said, pointing to the Securities and Exchange Commission’s approval in early January of 11 exchange-traded funds from asset managers such as BlackRock, Invesco and Fidelity.
Such ETFs give investors an asset that closely tracks the price of bitcoin, overcoming the hesitancy of some family offices. Another draw of such ETFs is that fund managers will compete on fees, lowering the barrier to get in.
In addition, bitcoin enthusiasts are eagerly anticipating the April appearance of “the halving” — a term often referred to in hushed tones.
There is a fixed limit of 21 million bitcoin, the vast majority of which have already been mined, leaving only 1 million coins that will take 100 years to distribute. Every four years, the reward for mining new Bitcoin is cut in half, slowing the rate at which new coins are created. As the supply starts to slow, the demand should pick up, likely boosting the price.
“With the recent approval of bitcoin spot ETFs leading to new institutional inflows and the April 2024 halving set to further decrease the rate of new BTC supply, we can expect bitcoin’s price to continue increasing in 2024,” according to Alpha Sigma Capital research.
Meanwhile, the current round of enthusiasm over bitcoin is being echoed in the Ethereum community, with multiple issuers, including BlackRock, filing for a spot ethereum ETF. The SEC will decide whether to approve that ETF in May, easing the entry for investors attracted to ethereum as an alternative to bitcoin.
Former Goldman Sachs executive Raoul Pal caused a run on the coin recently by telling his 1 million followers on the social media platform X that ethereum is set to outperform bitcoin in the coming months.
As Peter Eberle, president and chief investment officer of Castle Funds, explains, such funds “make it easy for sticky money to get involved, as in wealthy people who aren’t looking at their statements every week.”
Eberle advises family offices to make at least a 2% allocation in crypto, calling it a “unique investment opportunity — you could have a huge portfolio at the end of the year. And on the other hand, if it goes to zero, you wouldn’t notice it.”
Another reason to allocate some money into crypto is for diversification, especially for those looking for something other than stocks and bonds in their portfolio and are “looking for some noncorrelated assets” rather than equities and bonds, which are highly correlated, Eberle said.
OTHER BLOCKCHAIN ON THE BLOCK
The momentum behind bitcoin and ethereum should lift alt currencies such as solana — which recently passed ethereum in transactional volume, though its revenue remains low because its transaction fees are very low, said Alpha Sigma’s Villani.
Other functions of blockchain technology expected to grow in 2024 include the tokenizing of real world assets — creating a digital token that represents ownership of that asset, including tangible assets such as real estate, artwork and commodities, Villani said.
“Many family offices have moved from cautious observers to actively exploring and investing in this space,” said Ben Wiener, the founder of Benaiah Capital in Sioux Falls, South Dakota, an investment firm focused on digital assets. “This trend is likely to continue into 2024 as more family offices recognize the potential benefits and long-term value of digital assets as part of a diversified investment portfolio.”
Wiener recommends to crypto investors a holistic approach that includes due diligence, diversification and risk management. “They should also stay informed about regulatory developments and emerging technologies,” he said. “Building partnerships with experienced digital-asset advisers can provide valuable insights and help navigate this evolving landscape effectively.”