Amid a global economic slowdown and geopolitical risks, cryptocurrencies are making a comeback, ranking among the world's top-performing assets in the first seven months of 2024 along with Nvidia, one of the "Magnificent 7" tech stocks on the US stock exchange.
Among cryptocurrencies, Binance Coin (BNB), which can be used to trade and pay fees on the Binance exchange, offered the highest return for 2024 of 89.6% as of July 22, followed by Bitcoin at 51.0% and Ethereum 47.5%.
Other top performers include the Nasdaq 100 index at 19.8%, gold 16.4%, MSCI World 14%, oil 13.4%, MSCI Asia 8.21%, MSCI Emerging Markets 6.80% and coal 5.68%.
This year cryptocurrencies received regulatory support, starting with the US Securities and Exchange Commission's (SEC) endorsement of the first spot Bitcoin exchange-traded fund (ETF) in January.
On May 24, the SEC approved the establishment of a spot Ethereum ETF (ETH ETF) and registered the trading of investment units on US stock exchanges, allowing institutional investors, a group with high purchasing power, to invest in this asset.
As a result, the market capitalisation of cryptocurrencies has increased to roughly US$2.5 trillion as of July 3, from around $1 trillion in mid-October last year.
Kavita Gupta, founder and partner at Delta Blockchain Fund, said the launch of spot ETH ETF could have major implications for other altcoins.
"The launch of the ETH ETF was a major development for the space and will kick-start the next altcoin rally, despite the Bitcoin dominance we have seen thus far," she said.
Cryptocurrency enthusiasts expect four more coins have the potential to be endorsed for spot ETFs, which could attract institutional investors to invest more in the crypto market in second half of the year.
BNB'S UTILITY
BNB, issued by the Binance exchange, was created in 2017 as a utility token for discounted trading fees before it was expanded to numerous applications on a wide range of platforms. It is used to pay transaction fees on Binance.com, Binance DEX and Binance Chain.
BNB can also be used for payments on Monetha and HTC; to book accommodation at sites such as TravelbyBit, Trip.io and Travala.com; to buy music or game rewards; to pay for online services at BitTorrent, Canva and Storm; or to take out a loan at ETHLend or invest at Moeda.
Every quarter, Binance uses one-fifth of its profits to repurchase and permanently destroy or "burn" BNB held in its treasury.
At the time of writing, BNB had a market cap of more than $87 billion, ranking behind only Bitcoin, Ethereum and USD Tether.
Sanjay Popli, chief executive of Cryptomind Advisory and co-founder of Cryptomind Group Holdings, said BNB has been a popular coin for a long time. However, over the past few years, some investors were concerned about how much the Binance Exchange and BNB coin would be affected by the US SEC's investigation.
Changpeng Zhao, a former chief executive of Binance Exchange, was sentenced to four months in prison by a US court on April 30 after pleading guilty to violating US money laundering laws.
Zhao is scheduled to be released from prison this month. Though he is no longer an executive at Binance, he is an important figure behind the scenes, leading investors to speculate on the price of BNB, said Mr Popli.
BNB coin may also benefit from Binance Launchpad, the exclusive token launch platform of Binance that assists blockchain startups in raising funds for new projects.
Investors prefer holding BNB coins when the crypto market is active because many new coins are expected to list on the Binance platform, and they will receive free coins from Launchpool according to conditions, he said.
SECOND-HALF OUTLOOK
Mr Popli said interesting coins for the second half of the year include NEAR Protocol, which offers backups related to artificial intelligence (AI) technology.
He also singled out Render, a distributed graphics processing unit rendering network that operates on the Ethereum blockchain.
Mr Popli said Worldcoin is designed to become the world's largest privacy-preserving human identity and financial network, giving ownership to anyone.
Solana is a blockchain platform designed to host decentralised, scalable applications, while meme coins are another interesting development this year, he said.
SPOT ETF POTENTIAL
According to Bitkub Academy, part of Thailand's leading cryptocurrency exchange, four coins have the opportunity to be endorsed as the next spot ETFs, following Bitcoin and Ethereum.
First is Solana because it has a high market cap, ranked fourth in the crypto market with high liquidity and reliability, according to the academy.
The SEC recently decided to abandon an effort to have a court determine if 10 crypto assets, including Solana and Cardano, should be designated securities in the case against Binance. This move supports Solana eventually being endorsed, said Bitkub Academy.
The regulator filed charges against Binance in June 2023 for breaching federal securities regulations, and included various tokens from Binance's listings in its claim.
These tokens comprised Cardano, Solana, The Sandbox, Polygon and Axie Infinity. Other tokens labelled as securities in this context included Binance USD, Binance Coin, Decentraland, Coti and Cosmos.
Another coin that could be endorsed for a spot ETF is Ripple (XRP), which ranks fifth by market cap.
Similar to Solana, the SEC accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
Ripple recently expressed its confidence that the judge will take a "fair approach" and that legal clarity on XRP is "here to stay".
Litecoin has been on the market for a long time. It is considered similar to Bitcoin because it uses the proof-of-stake (PoS) mechanism to process transactions, a decentralised mechanism that is considered safe from attacks. However, this coin has a low market value.
A final option, according to Bitkub Academy, is Dogecoin (DOGE), which was created for fun as an internet meme.
DOGE is considered similar to Bitcoin because it uses the PoS mechanism. It also has a high market cap, ranking sixth in the cryptocurrency market. The coin has a decentralised distribution of coin holders and quite good decentralisation properties, according to the academy.
TEMPER YOUR OPTIMISM
Robert Mitchnick, head of digital assets at the world's largest asset manager BlackRock, said there won't be a "long list of crypto ETFs".
Despite the recent launch of spot ETH ETFs, he said it is unlikely this will open the door to funds that track other crypto assets such as Solana or Polygon.
"I don't think we're going to see a long list of crypto ETFs," Mr Mitchnick said in a conversation with Bloomberg Intelligence ETF analyst James Seyffart at the Bitcoin 2024 conference.
"If you think of Bitcoin, today it represents about 55% of the market cap. ETH is at 18%. The next plausible investible asset is at 3%. It's just not close to being at that threshold or track record of maturity, liquidity, etc."
That said, it is "increasingly clear" that crypto as an asset class is "not going away", and there will likely be opportunities for firms like BlackRock to get more involved in the market.
Competitor VanEck, for instance, recently filed to launch a Solana ETF, which analysts see as a long shot for approval.
Mr Mitchnick said while there isn't "full-blown clarity" from regulators, the US SEC has been clear that it wants to draw the line somewhere. For instance, the regulator is unlikely to approve spot ETH ETFs with staking components, he said.
BlackRock is largely credited with rekindling interest in launching spot Bitcoin ETFs when it filed to launch the product in June 2023.
The SEC had been reluctant to approve these investment products for more than a decade, often citing the potential for market manipulation and surveillance concerns.
The iShares Bitcoin ETF filing changed the game when it included a market observation agreement that addressed those risks, said Mr Mitchnick.
BULLISH OUTLOOK
Bitcoin prices climbed more than 11% in July, finishing the month above $67,700. ETH prices dropped 3.4% in July to close out the month at $3,272.
Among the 10 largest cryptocurrencies by market cap, Ripple was the best July performer with a 26.9% gain.
Toncoin was the worst performer for the month, but remains up 21.5% overall over the past three months.
Earlier this month, Bitcoin prices plunged below $60,000, attributed to risk aversion in global markets that saddled the digital asset with its heftiest weekly loss since the collapse of the FTX Exchange in 2022.
The decline came amid a global stock sell-off, reflecting concerns about the economic outlook and questions over whether heavy investment in AI will live up to the hype surrounding the technology.
Geopolitical tensions are also rising in the Middle East, adding to investors' skittishness.
Investors are upbeat about reports that Morgan Stanley will give thousands of financial advisors the green light to solicit eligible clients to purchase spot Bitcoin ETFs as soon as next week, according to a person familiar with the matter.
In a memo, the company told its group of 15,000 advisors they can offer some clients the chance to buy either BlackRock's iShares Bitcoin Trust or the Fidelity Wise Origin Bitcoin Fund, as reported earlier by CNBC.
Morgan Stanley's decision may pave the way for other banks that have been reticent to offer digital assets to consider tapping the sector, noted the report.
The industry is also hoping the upcoming US presidential election will lead to a more crypto-friendly White House. Once a critic of the industry, former president and 2024 Republican candidate Donald Trump has now become a cheerleader of Bitcoin.
Democratic Vice-President Kamala Harris has not issued a digital asset policy.
"Obviously, if we see a Republican administration come in, it might be more bullish for crypto more broadly, which is fantastic," said Nic Roberts-Huntley, chief executive of crypto startup Concrete.
