The cryptocurrency industry was busy in 2023. The sector experienced several changes, including an emergence from a prolonged bear market and renewed regulatory scrutiny from several authorities worldwide. Whether good or bad, the industry taught participants and observers many lessons, some of which can be applied to an educated outlook into 2024. The trends noticed throughout last year could also help to point investors and enthusiasts in the right direction as they interact with cryptocurrencies in 2024.
DeFi is Expanding
Last year, the decentralized finance (DeFi) world was as promising as it was the previous year. The number of DeFi projects increased along with use cases as crypto enthusiasts enjoyed the basic decentralization model. Interestingly, several stats now point to continued DeFi growth in 2024. The finance phantom continues to drive innovation and interest in the DeFi space.
Firstly, the total value locked (TVL) in DeFi protocols was $55.7 billion on January 2, for the first time since September 2022. This is an exciting increase, considering that DeFi TVL hit $52.8 billion on April 15 last year, and then tanked to $35.9 billion last October. In addition, individual DeFi revenue increased last year, with Maker nearly hitting 96 million, while Lido came in at $55.79 million.
The rising interest in DeFi reflects an abundance of financial projects that solve problems in traditional finance and centralized crypto. In 2024, especially as the market will likely see a bull rally, DeFi expansion will continue with increasing volume, revenue, and TVL.
Increase in Crypto Regulation
In 2023, the crypto sector received a lot of backlash from regulatory agencies tackling illegal activities. Although there has always been some regulatory scrutiny, much of the enforcement action that characterized 2023 followed the FTX collapse in November 2022. Since then, authorities have taken several steps to sanitize the sector, sometimes targeting crypto exchanges.
For instance, the United States Securities and Exchange Commission (SEC) sued major exchanges Binance and Coinbase for several alleged offenses. While the SEC sued Binance for commingling user funds, Coinbase was accused of operating as an unregistered securities exchange. The allegations eventually resulted in Binance founder Changpeng Zhao pleading guilty to committing anti-money laundering offenses and leaving his CEO role.
Crypto trading platforms are an essential part of the sector. Although some have criticized the enforcement action authorities employ, users must be careful about depositing funds in unregulated exchanges as doing this may have dire effects. In addition to monitoring regulations, users looking to trade should learn about the best options here before depositing funds, to minimize the ever-present risks of trading digital assets.
The SEC continued its attack against Ripple Labs last year, eventually partially losing the case. If 2023 is anything to go by, authorities will focus more on the crypto sector, likely ensuring more enforcement action. On the flip side, a silver lining from increased crypto attention is the introduction of robust laws and clear regulations in the sector.
Cryptocurrencies and the Environment
A 2022 White House press release specifies that miners in the US use between 120 and 240 billion kW hours of power annually. This is higher than the total annual electricity usage of Australia or Argentina. The amount of electricity used for mining cryptocurrencies on proof-of-work (PoW) networks is a major concern for the US government.
In 2021, China banned all crypto activities, including mining. According to the Columbia Climate School (CCS), China was responsible for 75% of global mining activities. Following the ban, several miners moved operations across the globe, with some of them domiciled in the US. In 2022, the CCS found that the US housed 35% of all Bitcoin mining activity.
The environmental impact of mining is slowly telling on the US, enough for authorities to design specific regulations. In Oregon, for instance, lawmakers are forcing miners to follow restrictions set for data centers or pay fines of $12,000 per MW-hour each day. In Texas, the country’s mining leader, observers suggest that crypto miners will increase the relatively cheap electricity costs such that the government may have to regulate mining. It is safe to predict that these legislations would unfavorably impact the mining sector when introduced.
Crypto in 2024
Even though crypto regulation will likely increase, there are several reasons to be optimistic about the sector in 2024. The Bitcoin halving, expected in April, is expected to be bullish for the world’s king coin and the entire cryptocurrency industry. When miner rewards halve, the scarcity would likely bump prices and support a rally in altcoins. In addition to the halving event, a possible spot ETF approval is another potential catalyst for the growth of crypto in 2024. However, users must pay attention to regulatory pronouncements, as evolving laws could erase investment returns.
