2024 Q4 crypto outlook

This Q4 2024 market report is brought to you by the Research Team at Techemy Capital. Techemy Capital Limited is a boutique investment management company

This Q4 2024 market report is brought to you by the Research Team at Techemy Capital. Techemy Capital Limited is a boutique investment management company focused on digital asset management. We seek to provide fund managers and institutional investors with clear, well-researched, and cutting-edge investment opportunities. Techemy Capital Limited is an authorised Financial Services Provider to wholesale investors under New Zealand law.

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2024 Q4 crypto outlook

Introduction:

Deep into the final quarter of 2024, the global economy and cryptocurrency markets are navigating a complex landscape marked by anticipation with a touch of uncertainty. With the US Federal Reserve’s efforts to engineer a soft landing reminiscent of the 1990s and Bitcoin’s steady ascent as a digital hedge, market sentiment is cautiously optimistic. As has been the case for much of the year, Bitcoin has been steady, and threatening to break out, but as yet unable to push on to new all-time-highs. 

In this piece, we explore the key macro trends shaping the digital asset markets in Q4 2024. We then focus specifically on Bitcoin and Ethereum’s respective positions as we approach the end of the year before reviewing the growing relevance of meme coins and the implications this may have for the broader digital asset space.

90s Nostalgia and the Soft Landing

A theme running through Russell Investments’ Q4 economic outlook is 90’s nostalgia. Noel and Liam Gallagher have miraculously found a way to make up and go on tour again, while the US is seeking to deliver a soft landing, a Central Bank holy grail last pulled off in the 1990s. A soft landing is a Central Bank-driven cyclical slowdown in economic growth that ends without a period of recession. 

Between 1994 and 1995, the US Federal Reserve raised rates 7 times, and then a few more times in 1995. The US, under Fed Chairman Alan Greenspan, was able to successfully cool off inflation without derailing the growth of the economy. Alan Blinder, former vice chairman of the Federal Reserve, noted that this was the “perfect soft landing that helped make Alan Greenspan a central banking legend.”

US GDP growth. 

Source: U.S. Bureau of Economic Analysis

Several major American institutions have assured citizens that a soft landing is coming in 2024.

Source: Google

Central Banks are often pushed into raising interest rates to deal with quickly rising inflation and prevent the economy from overheating. Following the compensatory quantitative easing that the US Federal Reserve used to deal with an economy struggling during the pandemic of 2020-2023, the money supply rose, and so did inflation. 

US inflation rate 

Source: U.S. Bureau of Economic Analysis

In this economy, people needed more dollars to buy the same things, and wages could not keep up. To combat this, the Fed began a monetary tightening cycle, raising interest rates and making capital more expensive, signaling the beginning of a saver’s economy.

Interest Rate Movements and Market Reactions

The US target rate began rising in March 2022. It continued ramping up before peaking in July 2023. The rate was then left flat for over a year before finally being cut in September 2024. 

Source: The Federal Reserve

US Fed Funds Rate

This recent cut on the cusp of Q4 2024 has created hype, excitement, and bullish expectations. Russell Investments notes in its Q4 outlook: “The stakes are high. Markets are priced for a soft landing, so even a mild recession is likely to trigger a significant equity-market correction.” 

Risks to the Soft Landing Narrative

S&P Global, in its Q4 outlook, predicts volatility and outlines risks that may disrupt the soft landing narrative. Labor demand has been resilient. “Despite fast policy and market interest rate increases, labor demand has remained reasonably strong.” If free-market-driven services spending and labor were to teeter and fall off, interest rates would likely have to drop more than planned to avoid a deeper recession, which could lead to overheating and a terminally dysfunctional economy.

This is the situation US Central Bankers have been trying to avoid, and they use it to justify their slow, steady approach to interest rate cuts. If interest rates were cut too sharply, that could trigger a hard landing. Another potential danger for a soft landing scenario is geopolitical tension. 

The increasing likelihood of a land war in the Middle East combined with the ongoing conflict in Ukraine may mean the immediate and disruptive reconfiguration of supply chains and energy sourcing. These could create a risk-off environment, where market participants flee from riskier assets to safer ones.

Impact on Digital Assets

A risk-off environment would be detrimental to the crypto sector, even for assets such