The crypto market is expected to continue its expansion over the next two years as several tailwinds continue to stack up for the asset class, crypto exchange Gemini said in its latest Institutional Insights report on Thursday.
A combination of favorable monetary policy, regulatory shifts, and infrastructure development will drive growth, even in the face of recent market volatility, the exchange said.
Over the past three months, the prices of major cryptos Bitcoin and Ethereum, have traded within a broad range. Bitcoin has fluctuated between $53,550 and $72,00, while Ethereum has oscillated between $2,800 and $3,970.
It follows significant price surges earlier in the year, driven by the launch of Bitcoin and Ethereum exchange-traded funds, with Bitcoin breaching a new all-time high above $73,000 in March.
Prices have since cooled, with Ethereum down about 22% from its March all-time high of $4,090, while Bitcoin has slumped by roughly 12%.
That has baffled some analysts who told Decrypt Bitcoin’s price should have resumed northward towards a $70,000 price tag by now.
While there is a narrative suggesting a long-term cyclical peak occurred in the first half of 2024, the broader outlook remains positive, Gemini said.
"Factors external to crypto as well as idiosyncratic to the asset class point the way to continued growth for the industry and its market capitalization," the report reads.
One of the key drivers identified is the shifting stance of global monetary policy.
After more than two years of persistent tightening, central banks such as the European Central Bank and the Bank of Canada have begun cutting interest rates.
A cut to rates could, theoretically, bolster risk assets, including crypto, as borrowing becomes cheaper, Decrypt was previously told.
In the U.S., while short-term interest rates remain elevated, expectations for future rate cuts have risen, with projections tipped for the first cut in two years to occur next month, CME’s FedWatch Tool shows.
"As interest rate risks skew to the downside, this may translate into depreciation pressures for the U.S. dollar. If a broad weakening of the dollar occurs, crypto prices should also rise," Gemini said in the report.
Regulatory developments are also expected to play a crucial role in the market's expansion.
Gemini points to a potential shift in the U.S. regulatory landscape, with the upcoming Presidential election seen as a deciding factor for future industry growth.
Prediction markets at the end of July favored the Republican party to win the White House and Senate, with the party platform promising to support an individual’s right to self-custody digital assets and mine Bitcoin.
"The headwinds created by the enforcement approach from U.S. regulators to the crypto industry may continue to abate in the years to come," Gemini said in the report.
Meanwhile, infrastructure development within the crypto space is poised to enhance market growth, per the report.
While concerns exist about the current focus on scaling solutions over end-user applications, the report suggests this phase is necessary for future growth within the sector.
The rapid growth of stablecoins and the increasing traction of prediction markets were cited as examples of potential growth drivers.
