Thomas Daniels
Gemini’s latest institutional investor crypto research report indicates a positive outlook for the crypto market, despite recent declines in major crypto prices. The report, shared with crypto.news, outlines several factors that could drive crypto expansion over the next one to two years, including easing monetary policies, improving regulatory conditions, and potential consumer applications.
The report notes concerns among some crypto supporters about the market’s lack of new participants, despite the launch of Bitcoin and Ethereum ETFs and sales by long-term holders. Additionally, some believe the previous crypto rally was driven by the extraordinary global pandemic, with current demand not matching the significant block space supply from new scaling solutions.
However, Gemini’s report suggests that both external and idiosyncratic factors point to continued growth in the crypto industry and its market capitalization. A key factor highlighted is the shift in global monetary policy. With the European Central Bank and the Bank of Canada cutting rates and a more favorable bias in interest rate markets, this environment could lead to a depreciation of the US dollar, benefiting crypto prices as they rise against the weakening currency.
The report draws parallels to early 2019, when similar conditions led to a boost in crypto assets. Recent moves by central banks to manage inflation and shrink their balance sheets have led to higher long-term real interest rates. As these rates trend lower, it creates another favorable factor for the crypto market.
Political and Regulatory Developments
In the United States, there’s a notable shift towards bipartisan support for crypto-friendly legislation. The upcoming elections could further influence this trend, with a potential Republican victory expected to introduce more favorable regulations. Regardless of the election outcome, Democrats are also starting to embrace crypto, with presumptive nominee Kamala Harris receiving crypto advice from leading tech experts.
This political shift, combined with significant industry advocacy and widespread adoption of crypto assets by Americans, suggests a more supportive regulatory climate, with more institutional and retail investment opportunities. Patrick Liou, Principal of Institutional Sales at Gemini, highlighted that nearly half of individuals who have yet to invest in cryptocurrency express concerns about the industry’s future, indicating a strong need for increased government regulation.
On the international front, the possibility of China lifting its crypto ban and Hong Kong’s increasingly supportive regulatory environment are poised to positively impact the global crypto market. These changes could be crucial, especially if Bitcoin gains global recognition as a strategic asset.
Infrastructure Growth and New Applications
Despite concerns about the abundance of crypto infrastructure development at the expense of end-user applications, the report argues that this scenario could pave the way for globally successful consumer applications. The rise of prediction markets, such as Polymarket, and the rapid growth of stablecoins highlight the potential for robust applications supported by the expanding blockspace supply.
Stablecoins, in particular, are on a rapid growth trajectory, with significant capitalization and increasing integration into layer 2 solutions on Ethereum. These stablecoins could play a crucial role in global payment networks, leveraging the available blockspace.
