What do leading institutions think about the bull market outlook in 2024?

2024 is a promising year for the crypto market. Everyone is focusing on the new tracks in the crypto field that are worth paying attention to, including the leading institutions. Various institutions have released their own research reports at the beginning of the year, looking forward to 2024 from a professional and meticulous perspective, which is very valuable for reference.

Vernacular Blockchain has consulted research reports from 23 leading institutions (including Messari, a16z, Coinbase, MT Capital, etc.), trying to summarize and find "institutional consensus" to increase certainty, and now summarizes them as follows:

01Top 10 Tracks That Are Generally Optimistic

1) Bitcoin ecosystem revival

The launch of Ordinals (a Bitcoin-based digital content encoding method) in December 2022 led to a boom in inscriptions and the Bitcoin ecosystem. In 2023, the Bitcoin ecosystem developed strongly, and Bitcoin's dominance (the proportion of Bitcoin in the market value of cryptocurrencies) rose from 38% in January to around 50% in December, making it one of the most noteworthy ecosystems in 2024.

Institutional predictions are generally optimistic about the development of the Bitcoin ecosystem this year:

Bitwise, a mainstream crypto index fund management company in the United States, predicts that the trading price of Bitcoin will exceed $80,000 in 2024;

Coinbase believes that the main focus of institutional investment will continue to be on Bitcoin until at least the first half of 2024, as the passage of ETFs will create a strong demand among traditional investors to enter this market.

Other institutions are also optimistic about the forecasts, mainly because:

The U.S. Securities and Exchange Commission (SEC) has approved a spot Bitcoin ETF, and the next big event, the Bitcoin halving in April, is coming, and supply and demand are expected to change significantly;

The Bitcoin ecosystem will see infrastructure upgrades and increased programmable functionality, including base protocols (such as Ordinals), as well as the development of Layer 2 and other scalable layers (such as Stacks and Rootstock).

2) Development of Ethereum L2

In addition to the Bitcoin ecosystem, Ethereum, as the pioneer of smart contracts, the development of Ethereum Layer2 is also a highlight that various institutions predict will be unanimously optimistic about in 2024. Especially with Vitalik’s release of the Ethereum 2024 roadmap and the approaching Cancun upgrade, Ethereum Layer2 project tokens such as ARB and OP have recently skyrocketed.

Competition in the public chain ecosystem has always been fierce. In 2023, public chain ecosystems such as Solana and Avalanche developed rapidly, and their momentum even surpassed that of Ethereum. However, Ethereum, as the leader, has also begun to exert its strength. Most institutions predict that with the completion of the Cancun upgrade, gas fees will further drop significantly, which will drive the explosion of Ethereum Layer2 ecosystem in 2024. Bitwise believes that major upgrades to the Ethereum blockchain will reduce the average transaction cost to less than $0.01, which can lay the foundation for more mainstream uses.

If the upgrade is successfully implemented, some leading projects of Ethereum Layer2 (such as Optimism, Arbitrum, Base, etc.) can compete with other Layer1 public chains in terms of performance.

In addition, according to Vitalik's vision, in the long run, zero-knowledge proof is the future of Ethereum Layer2, and the two Layer2 projects zkSync and StarkWare are also favored by everyone.

3) Development of the Solana Ecosystem

In the past 2023, the Solana public chain ecosystem has performed well. Whether it is technology accumulation or community, it has laid a solid foundation for the long-term development of the Solana ecosystem. The outbreak of the Solana ecosystem has also attracted a large number of users and funds.

Various institutions predict that in 2024, more projects will choose or migrate to the Solana public chain, and the Solana ecosystem will continue to explode. This is because Solana is relatively resistant to attacks, whether in terms of TPS, gas fees, or community users.

In 2024, market institutions’ expectations for Solana focus on the following aspects:

Solana’s technical upgrades, such as developing a light client through Tinydancer, allow validators to complete verification work at a lower cost and achieve a higher degree of decentralization;

Solana’s performance improvements, including increased throughput and performance, improved user experience, and deployment of new token standards, have enhanced its robustness.

The launch of new products, the increase in on-chain liquidity, and the expansion of developer tools have promoted the prosperity of the Solana DePIN ecosystem.

4) DePIN (Decentralized Public Internet Network)

DePIN, or Decentralized Physical Infrastructure Network, is a new way to build and maintain infrastructure in the real world, with the goal of building decentralized networks in industries such as telecommunications, energy, mobile communications, and storage. In 2023, there are more than 650 DePINs with a market value of more than $20 billion and annual revenue of more than $150 million.

Overview of DePin development in 2023

In 2024, the cryptocurrency data platform CoinMarketCap has listed DePIN as an independent classification, reflecting the crypto market's high attention to this field.

DePIN covers a wide range of fields, including server networks, wireless networks, sensor networks and energy networks. Currently, various companies predict that the DePIN track has huge growth potential. For example, according to the crypto research organization Messari, the overall DePIN industry scale is currently about 2.2 trillion US dollars, and is expected to grow to 3.5 trillion US dollars by 2028. Messari also pays special attention to the following sub-tracks of DePIN: cloud storage market, decentralized database, decentralized wireless network and combination with AI .

However, while making predictions, various institutions also believe that the maturity of DePIN still requires long-term investment and operational development from the market, institutions and developers before it can gradually penetrate into people's lives and applications, and move from complementarity to parallel and then to replacement with existing infrastructure.

5) Combination of AI and blockchain

The rapid development of artificial intelligence (AI) in 2023 also promoted the development of AI+ web3 services. In early January 2024, the market value of AI-related tokens reached US$7.04 billion. Given the increasing popularity of artificial intelligence, most forecasts are optimistic about using AI as a core function to enhance the attractiveness of blockchain-based crypto platforms.

The tracks that various institutions are more optimistic about at present are:

• Direct applications of AI in the crypto space: trading robots, automatic payments, and arbitrage robots combined with blockchain. Combined scenarios include AI Agents using crypto infrastructure for payments, smart contracts for secure scheduling of AI models, token rewards for personal fine-tuning of models, and collection of valuable data. Messari believes that the advancement of AI will increase the demand for cryptocurrency solutions.

• Innovative applications of AI and encryption technology: Here AI is used to improve the user experience and efficiency of Web3, and more blockchain technologies are used as guardrails and transparent layers for AI. For example, we see research and new use cases on zero-knowledge and machine learning (ZKML), games that allow users to train AI agents with ERC 6551, etc.
  Bankless analyst Jack Inabinet believes that encryption + artificial intelligence could be an explosive combination. Although early activities are mainly to spread worthless projects to take advantage of the hype, the prospects are still huge.

  Crypto company DWF believes that by guiding social cognition and its limitations in centralized AI, decentralized AI has great development potential in 2024 and can lead the future of AI through Web3.

6) The explosion of GameFi and the development of blockchain games

In 2021 and 2022, blockchain games flourished, from "Play to Earn" to "X to Earn", and popular projects such as Axie and Stepn emerged. In comparison, blockchain games in 2023 were bleak. However, with the improvement of infrastructure, various institutions are still optimistic about the future development of blockchain games.

After all, from the perspective of the traditional Web2 market, games are a market with great potential and have almost become a part of many people’s lives. Moreover, most traditional game users do not have much knowledge of the GameFi (Gaming) field. From the perspective of TVL, as of the time of writing this article (February 1, 2024), the TVL of the GameFi sector in the figure below is only US$19.6 billion.

Overview of TVL of each track, source: coingecko.com

From the perspective of GameFi’s development space, it is often mentioned that GameFi is expected to have a larger narrative in 2024-2025 and will receive more attention.

For example, Azuki researcher Wale Swoosh believes that games will be one of the major trends that define 2024. In terms of cryptocurrency applications, games have always been and will always be a great Trojan horse, and he firmly believes that the Web3 game trend seen at the end of 2023 will not only continue next year, but will become more obvious.

Spartan Capital co-founder and CIO Kelvin Koh believes that a batch of AAA Web3 games will be launched in 2024, and believes that these games will bring millions of new Web3 users.

In general, the current institutions are optimistic about GameFi mainly for two reasons:

First, in 2024, the number of blockchains dedicated to games will continue to increase. In addition to some traditional old public chains, new public chains such as Oasys and Sui have also joined the group;

Second, the participation of traditional game companies. For example, Oasys has attracted many well-known publishers to join its ecosystem, such as Ubisoft Entertainment, Square Enix (a Japanese game software production and development company and publisher), Activision Blizzard, Epic Games, etc.

7) Development of modularization and zero-knowledge proof (Snark) technology

In 2023, modular blockchains and zero-knowledge proofs (ZKP) have been fully developed, such as Celestia, zkEVM, etc. And an obvious phenomenon is that these two narratives are beginning to show a trend of convergence and development. Projects in the ZK field are beginning to combine specific vertical fields (such as coprocessors, privacy layers, proof markets, and zkDevOps) for "modular" development.

Spartan Managing Director Leeor Groen believes that privacy and security will be key drivers in Web3. As technology develops, users will begin to realize the value of zero-knowledge proofs and modular blockchains. Users may not even know that they rely on these zero-knowledge proofs and modular blockchains in the back-end of various applications ranging from digital identity to games.

A16z believes that the rise of modular technology stacks brings the greatest advantages of open source, modular technology stacks. As tools inspired by formal methods are widely adopted by developers and security experts, the next wave of smart contract protocols are expected to be more robust and less vulnerable to expensive hacker attacks. The mainstreaming of SNARKs technology will become a trend.

Looking ahead to 2024, various institutions and researchers expect this trend to continue, with zero-knowledge proofs becoming the interface between different components of the modular blockchain stack. This provides developers with greater flexibility in building dapps while lowering the threshold for blockchain stacks; for consumers, zkp may be seen as a way to protect identity and privacy, such as in the form of zk-based decentralized identities.

Another important point to mention is that SNARKs will become a key project to watch in 2024 because it can provide corresponding proofs for calculations that generate specific outputs, making the speed of verifying proofs much faster than the speed of performing corresponding calculations.

8) Mobile and decentralized trends may become mainstream channels, improving user experience.

Regardless of which crypto ecosystem, if it wants to develop in the long run, its ultimate goal is to attract new users and encourage existing users to become more active participants. With the market recovery, the improvement of infrastructure and the layout of various institutions, institutions generally believe that there will be a large influx of crypto users in 2024.

For example, a16z CTO Eddy Lazzarin believes that although the user experience in the encryption field has been criticized, developers are actively testing and deploying new tools to reset the encryption front-end user experience, such as multi-party computing, simplified delivery passwords for logging into applications and websites, embedded wallets, etc. These innovations will enable users to experience a better and safer environment when using encrypted applications.

However, in general, the reasons why various institutions are optimistic are mainly due to the following two points:

On one hand, one of the big themes that has emerged from the recent bear market cycle is the focus on making crypto more user-friendly and easy to use. The added responsibility of managing cryptocurrencies and all that goes with it (wallets, private keys, gas fees, etc.) is not for everyone, and it makes it hard for the industry to mature unless it can overcome some key challenges related to user experience. Things like developments around account abstraction to facilitate the development of wallet recovery mechanisms and better failsafes against simple human errors (such as losing private keys).

On the other hand, the Ethereum Cancun upgrade may reduce rollup transaction fees by 2-10 times, and it is believed that more Dapps may pursue the "gas-free transaction" path, effectively allowing users to focus only on high-level interactions.

9) Regulatory policies

Over the past year, the entire crypto industry has faced intensified regulation. As the crypto industry expands, regulatory compliance is an inevitable issue .

Many institutions predict that in the new year, as leaders of various countries hold elections, other regulatory policies will continue to be introduced.

Ji Kim, general counsel and global policy director at the Crypto Innovation Council (CCI), believes one of the bigger stories of 2024 will be the continued jockeying for top status among jurisdictions, vying to become a key hub for digital assets and the future financial system.

Gillian Lynch, head of Gemini EU, believes that although there are still differences in views on cryptocurrencies and blockchain technology, the vast majority of people will agree that the crypto industry needs a regulatory framework with customer protection at its core, while striking a balance between creating a clear and consistent rulebook, which will ultimately help promote innovation.

Ripple Chief Legal Officer Stuart Alderoty expects the SEC's lawsuit against Ripple to end in 2024, but its regulatory strategy may continue to target other high-profile figures. The U.S. Congress will work to reach an overall agreement on cryptocurrency regulation, but still needs to determine the best approach.

02 Less popular track

The more controversial tracks are RWA and NFT, with some predictions being bullish and some bearish, and they are mentioned relatively less frequently.

1) NFT

Compared with the popular inscriptions, NFT has been in a downturn in 2023. Except for a few projects, the top blue-chip projects have fallen into the dilemma of rebounding rather than reversing. Take BAYC as an example. The average price reached 71 ETH at the beginning of the year, but the floor price fell to less than 30 ETH by the end of the year.

The NFT market has also undergone tremendous changes. Blur went from competing fiercely with Opensea in early 2023 to almost monopolizing the market share by the end of the year. Opensea, which once dominated the market, only accounted for 20% of the market in weekly trading volume in December 2023. Although Opensea has made product and community feedback to try to resist the impact of Blur, the effect is minimal. With the rise of Blur, the debate over zero royalties has gradually disappeared, and the discussion about "whether creators should receive royalties" has gradually faded away.

NFT trading platform market share comparison in 2023

Some organizations believe that consumer brands will use NFT to promote new user participation models. NFT can continue to promote liquidity in the collectibles and art markets, especially if GameFi develops, NFT as an important basic accessory can also develop with it. A16z, for example, said that more and more well-known brands have begun to launch digital assets to mainstream consumers in the form of NFT. Entering 2024, the conditions for NFT to become a ubiquitous digital brand asset are already in place.

Some institutions also believe that it will be difficult for NFT trading volume to replicate the booming scene in 2021, because most NFT projects are more hype and lack real accumulated value, and NFT creators need to adjust their strategies to improve their competitiveness.

2) RWA

Compared with NFT, more institutions are optimistic about RWA:

The Block researchers believe that the Bitcoin spot ETF has triggered a surge in institutional interest, and the bridge between DeFi and TradFi continues to widen. In turn, as more types of traditional financial elements enter the on-chain environment, tokenized real-world assets have gained more adoption, so RWA is bullish.

Bitwise believes that RWA will set off a new trend. At the request of Wall Street, JPMorgan Chase will tokenize the fund and put it on the chain.

Delphi Digital believes that RWA is one of the most successful areas of cryptocurrency in 2023 and will continue to develop in 2024.

In summary, their reasons are as follows:

It is conducive to building a bridge of communication between traditional institutions and the crypto world. RWA tokenizes off-chain assets and converts them into blockchain digital assets, which are easy to understand. Stablecoins are a common RWA application because they are based on the tokenized expression of legal currency.

Many large institutions have increased their investment in the RWA field. At the same time, crypto projects such as Chainlink are also working with the world's largest traditional financial institutions to introduce a large number of RWA into the crypto industry and tokenize them.

RWA is building a financial ecosystem in which digital tokens represent tangible assets that are more accessible and extendable to the public, not just privileged or institutional investors. RWA has a broad scope and can be divided into various categories such as private credit, government bonds, real estate, commodities, stablecoins, insurance, etc., and has great application potential.

However, less optimistic institutions believe that:

As interest rates peak, on-chain Treasury yields emerge. Cryptocurrencies are pursuing the same or even greater returns that traditional financial investors are pursuing, but everyone's needs need to be further explored, and this will require a long development process, but it is difficult to have major developments in 2024.

3) SocialFi

SocialFi is the fusion of social media and DeFi. From a macro perspective, Web2 has a trend of shifting from social to finance, while Web3 has a trend of shifting from finance to social.

Looking back at social media in Web2, it took Twitter 5 years to attract 100 million users, and Facebook took 8 years to reach 1 billion. In comparison, SocialFi is still a relatively new concept.

The SocialFi track has attracted much attention from investors in the second half of 2021. Many projects such as Whale, Chiliz, Rally, BBS network, Showme, Mirror.xyz, etc. have become popular, and even some platforms have seen a situation where registration invitation codes are hard to come by. However, as the overall market has turned bearish, SocialFi has also stopped.

The reason for the resurgence is that in August 2023, friend.tech pioneered a new form of social experience on Base Layer 2, where users can buy and sell other people's "shares" on X (Twitter). It reached a peak of 30,000 ETH TVL in October and inspired several copycat projects. Friend.tech pioneered a new Token economics model for the SocialFi field by financializing Twitter profiles.

However, in the forecasts of these institutions, there is little mention of SocialFi's development prospects in 2024. It is occasionally mentioned because with the continuous spread of the concept of decentralization, more decentralized social media networks and tools will be launched. However, we can only look forward to whether it can really stand out.

03 Conclusion

In general, the entire crypto industry has gone through the trough and despair of the bear market in 2023 and has begun to set off a small bull market. The development of the public chain ecosystem led by Bitcoin has entered a new stage, and new narratives and new tracks have taken turns to appear on the stage, laying the foundation for the next big bull market.