VanEck’s 2024 Crypto Predictions with Matthew Sigel

Bangle Station, it's just about the end of 2023 and we are entering 2024. It's predictions time. We've got to make our new year's predictions. We've got 15 of them today. With Matt Siegel, he's the head of digital assets at FANEC. Fantastic predictions that span whether we're gonna have a recession, uh, talk about Bitcoin, whether we're gonna get to all time highs, DeFi, ETH versus Solana, all of the things. David, were you surprised by any of these predictions?

Some of them are extremely precise. Not only did we get a Bitcoin all-time high prediction, which is safe, but we got the day, the day of the Bitcoin all-time high breaking, which is uh extremely specific. Uh, some predictions for out of left field, some D-in predictions, uh, some predictions about accounting and how that's actually helpful for our bags. And if you are in the middle of the Solana versus Ethereum narrative awards, we got some predictions here for you as well. So uh whether you believe these predictions uh is up to you. They are all entertaining. None of them are financial advice. So let's go ahead and get into all of these predictions from Matthew Siegel. But first, a moment to talk about some of these fantastic sponsors that make this show possible, especially.

Bankless Nation, I hope you are ready for some predictions for 2024. What will the next year bring? Well, we have the perfect person to tell us. Matt Siegel. He's the head of digital asset research at Van Eck. He's been there since 2021. Van Eck has been totally doubling down. I would say tripling down on crypto lately, particularly in the research that they've uh been presenting. We had Matt on the podcast uh a few months ago, uh, and now he's back again with some of these fantastic predictions. By the way, toward the end of this episode, I think Matt's got some really interesting news for us with respect to the Bitcoin spot ETF. Okay. So that we'll save that as the cherry on top at the end of the episode. First, we're gonna get to the predictions. Matt, welcome to Bankless. How are you doing?

Thanks for having me back, guys.

Okay, so uh let's talk about these predictions. You got 15. Before we get into the first one, we're just gonna go go through through the order and kind of grill you on each. Um where did what what's the genesis for these predictions? Have have you guys done this in in previous year and like how'd you come up with these things?

Yeah, we we did it last year. I'd say our track record is uh is mixed on uh how how it all turned out, but it's it's really helpful for an investor to kind of like lay out a roadmap of how things may develop and then adjust your positioning as the facts change. So uh Jan asked for predictions and uh here they are. But you know, to the little disclaimer is that we're really stepping into the realm of speculation here. Um but in this asset class, uh imagination is uh not a luxury, but a necessary locomotive. Um so you know, I understand the skepticism that will surround these predictions. Send your complaints into the arena uh where I will find them.

Where wait, where's the arena? Is that on Twitter? Where all the good complaints go?

Okay.

In the YouTube comments, I guess.

Yeah, it get mad at bankless if if you're upset at these. Okay, let's talk about the first one. Um, this one was a little upsetting to me. I gotta be honest, Matt. So prediction one, the US recession will finally arrive, but so will the first spot Bitcoin ETF. Over 2.4 billion may flow into these ETFs in Q1, 2024 to support Bitcoin's price. It's not the second part of that that uh makes me nervous, it's the first part. So you guys think the US recession will arrive sometime in 2024? Explain that one.

Yeah, I mean this may come off as uh kind of crying wolf as everyone's been calling for a recession for a year now, but when you look at the data, uh the economic momentum has been slowing for months, uh, and that creates an economy that's more vulnerable to shocks. So leading indicators are now in recessionary territory. There's been 19 consecutive months of leading uh indicator declines. That's close to a record. We've got commodities and shares of retailers both struggling. Employment is softening, corporate bankruptcy filings are back to early COVID levels, and the yield curve is inverted but steepening in recent weeks. So these are all very late cycle dynamics. You can see it with dimensions of soft landing in the media, which have spiked as they often do before an official recession is called. Crypto and Bitcoin have really only experienced one official US recession, uh, Q1 of 2020, during which Bitcoin fell 60%, peaked to trough. So, you know, we'll see how much that matters this time. It may be an irrelevant prediction, but uh, you know, we are prepared for volatility in the first half of the year, and that would line up with some of the price action that surrounded kind of pre having Bitcoin uh in previous cycles as well.

So Matt, if we see that recession, are you predicting the first half or second half? Because, you know, uh we've got an election going on in the US next year too, which uh, you know, makes uh there's definitely some political incentive to defer the recession as long as possible.

I think the recession will be backdated to Q4. They tend to last one to two quarters. So we're out of it, and spending ad dollars on election ads in Q3 and Q4, that typically lines up with pretty positive markets.

All right, going into the next prediction in the list. Uneventful fourth Bitcoin halving. Of course, the Bitcoin halving, not a prediction. We all know exactly where that's coming. But um Matt, tell us about the specific nature of this Bitcoin halving. What are the predictions you're making around this Bitcoin halving?

So this is a pretty easy one. The prediction is that the halving will proceed without a major fork or missed blocks in April 2024.

And as the new coin issuance gets cut in half, we will see unprofitable miners disconnect. They will cede market share to those with low cost power. And then after a period of digestion, the Bitcoin price should rally sharply. One difference about this cycle than previous cycles that we can will be able to observe in the markets is that publicly traded Bitcoin miners, so these are the stocks that you can buy, like Riot and Marathon, like Phoenix, that just went public in Abu Dhabi and is now the biggest Bitcoin miner by market cap in the world. These listed miners currently control a record percentage of the hash rate. It's more than 25%.

And

they they almost all went bankrupt last year. So they've emerged from bankruptcy with much better balance sheets. There's very little debt uh among these companies, and they should be set up for better performance next year.

Is that why you're saying significant gains for those low cost miners? Those are the the miners you're you're talking about? And y what why does the does the happening benefit them? Because it seems like their revenue is getting uh cut. Or are you just saying the the market for miners are are healthier at this point and you're expecting some recovery?

The overall market for miners is healthier with stronger balance sheets. They should be able to deal with the having better than in previous cycles. But I think the distinction that we're drawing here is that there's a couple of publicly traded miners, namely CleanSpark and Riot, that have a cost base which is well below other peers. And so the call is if we do have a kind of a trickier Q1,

then it'll be those guys who have low electricity costs and better balance sheets that will outperform the field. And then after the halving, assuming the Bitcoin price acts as expected, then the miners with trickier balance sheets, higher cost electricity may take the lead.

The typical meme around the happening is that, well, we have half as much Bitcoin being issued and going to the market, therefore bullish. Uh, but that's uh not a very sophisticated take because there's one more variable in that, which is well, the miners actually decide when they're going to sell that Bitcoin. And I think over the last year, miners historically um are known to be actually pretty good traders if you like interpret them as like when they decide to sell and when they decide to hold. Uh, is there anything you can add about this nature of Bitcoin coming onto the market that is like miners electing to take on debt in this present moment of the market cycle so that they can hold their Bitcoin to sell it at a higher uh price and later? Is there any indication or information you can share here?

The investors in the public markets don't want to see these miners take on debt because they all went bankrupt last cycle. So we we have seen some large purchases of uh ASICs. We saw one today, Riot announced a big deal, uh, but they they're net cash, uh, riot is. So it it's not um it's not a debt problem. It's just that uh uh being net cash, having low cost power is enabling Riot to uh hit the pedal on the gas and buy some more machines to try to set up these market share gains that are possible in that post halving period when the higher cost operators may be forced to shut down and stop mining.

Okay, prediction number three. Here we go. Bitcoin will make an all-time high. I like those words in Q4 2024. Pretty narrow time frame.

Yeah. Potentially spurred by uh political events and regulatory shifts following a US presidential election. So we know we're getting a U.S. uh presidential election. At least I sincerely hope that's the case. Um potentially spurred by political events and regulatory shifts. So all time high for Bitcoin by Q4 of 2024. And this is despite the recession prediction. Can you explain that one, Matt?

Yeah, so uh I think we'll get to the uh more details around the ETF at the at the end here. Um and you know that should keep the price somewhat supported in Q1. So even if we get a recession, I'm not calling for a dump. But the main call is that in the second half, Bitcoin will climb this presidential-sized wall of worry. Uh the the percentage of the global population that will be voting in legislative and presidential elections next year will hit an all time high. We've got data going back to 1800. Next year, 45% of all humans on the earth will vote in elections. Uh, again, that's an all time high, you know, with uh that.

Typically comes high volatility and the prospect for significant change. So we see mounting evidence that voters and courts are rejecting the anti-growth agenda of the green lobby. So we expect a combative election, but Donald Trump to prevail with 290 electoral votes, regain the presidency, that will of course raise optimism that the SEC's hostile regulatory approach will be dismantled. And maybe I'm being too cute with the timing, but I'm calling for an all-time high for Bitcoin on November 9th. That will be exactly three years to the day from its last all time high. And if you remember, Bitcoin's breakout in November 2020 also came exactly three years to the day from its November 7th, uh 2017 top. And then Cherry on the top, if BTC reaches 100K by December, Satoshi Nakamoto, Time magazine, man of the year.

Alright, alright.

Wish list predictions, you know, they start to blend a little bit when you're fully invested in this asset class.

Alright, all right, let's keep this going. Ethereum's market position behind Bitcoin. You are predicting that Ethereum will not flip Bitcoin in 2024. Flipping is not on the menu next year, but still will outperform tech stocks. Unpack this one for us.

Sure. I I remember being on a stage with you, David, a couple of years ago and there were that we were asked uh yeah, that's right. And you know, will ETH flip Bitcoin? Everyone on the stage raise their hand and I said no, I'm gonna stick with it. So

That was a flexible bit won't ever, or no, it won't soon.

Not next year.

Not next.

Oh shit.

I can get behind that, sadly.

Matt, David is not wrong yet, okay? He's not wrong yet.

You know, my call is that there's there's more money in TradFi looking to get involved in crypto than there is in crypto that can be recycled. And in the current regulatory regime, Bitcoin's regulatory status is unique, and its energy intensity is also unique. And it's the energy intensity that is attracting this interest from quasi-state entities in Latin America, in the Middle East, in Argentina. So we expect Argentina will join El Salvador, the UAE, Oman, and Bhutan as the fifth country to sponsor Bitcoin mining at the state level. We expect Argentina's state-owned energy giant, YPF, will mine digital assets using stranded methane and gas. And so, similar to past cycles, during a halving year, Bitcoin will lead the market. And then post halving, the value will slow will flow into smaller tokens. So ETH will start outperforming Bitcoin post halving. It may outperform for the year, but it's a high hurdle on a flipping. And we also expect ETH will lose market share to other smart contract platforms with less uncertainty surrounding their scalability roadmap, like Solana.

Okay, hold on. This is uh not the same sounds that I've heard other people predict, make predictions around the Bitcoin ETF and Ethereum ETF. Uh Ethereum, ESG you know, friendly, ESG approved, compared to Bitcoin because of Bitcoin's energy consumption. Also, external like Trad investors enjoy Ethereum more because of its similarity to a high growth tech stock in comparison to Bitcoin. And so what some of the rumblings I've heard is that um when we have both a Bitcoin and an Ethereum ETF, Ethereum will have outsized flows versus Bitcoin in relation to its market cap. Uh what would you say to this alternative?

I I don't believe in ESG. I think the ESG narrative is fading. Uh the courts in Canada have dismantled Trudeau's green agenda. The UK Prime Minister has backed away from their green agenda. South Korea has just reinstituted plastic straws, baby. So

that story is going away, right? Bullish carbon use. The other wrinkle here is that, especially for these ETFs in the US, it doesn't appear like there will be staking

uh involved in those ETFs because of the regulatory uncertainty. So I'm not sure that the the product will have quite the same appeal as the buy and hodl Bitcoin ETF, at least in the early days.

Matt Matt, do you think that uh Ethereum will get an ETF in 2024? Like what's your overunder on that prediction? It's not one of your 15, I don't think, but I'm curious about that.

I do. I do. I think the the deadlines for the SEC to rule on the spot applications that are pending, which include ours, is May.

So th there is some time.

So that'll be good for Ethereum, and you're you're saying that in this prediction. Not good enough to flip in uh Bitcoin and not good enough to preserve its market share in the face of uh what you call growing competition from other smart contract platforms. That's that's the prediction for 2024.

Precisely.

Okay, so that kind of seems to fit under the general sentiment that Ethereum is just squeezed. You got the bigger, bigger brother capturing a lot of attention on the trad side of things, and then you have Solana, which is like the shiny new fast toy on the crypto side of things. Are you saying that you're in line with this kind of like vibe of the crypto space in the present moment?

Yeah. I mean, I think that ETH is going to outperform BTC for next year. I just think that most of that outperformance will come in the second half of the year.

Um, and you know, we can we can get into with the next one why that's the case, but it th there's a lot that has to do with ETH roadmap.

So prediction number five, post, and this is what I love about uh this new van act that I'm seeing. Maybe you guys were always doing this, but I didn't realize you were going this deep on crypto, and it's great to see. Um, post EIP 4844 implementation, Ethereum layer twos will capture the majority of EVM compatible TVL and trading volume. Of course, as crypto natives, we understand what EIPs are, uh, and we've defined what this is many times. We've got entire episodes on EIP 4844, but tell me about this prediction. So you're saying Ethereum layer twos will capture the majority of EVM compatible uh TVL, total value locked, so assets under management in these chains and trading volume. What's uh what what are the details there?

Well, as you guys have covered so well, Ethereum will have a fork next year. This fork will reduce transaction fees dramatically and improve scalability for layer two chains like Polygon, Arbitrum, Optimism, and others. So one of the challenges of managing assets in this space as the L2s have come to market is that the market share has been super volatile and investors have just been kind of going where the airdrops will be. And it's hard to allocate capital if you have to change your mind every couple months, especially when you're managing a decent amount of money and the space is not that liquid. So I'd say my confidence level on this prediction is perhaps lower than the others. But our call is that within one year of the Ethereum fork, the upgrade, EIP4844, Ethereum L2s will consolidate down to two to three dominant players as measured by value and usage. And one of those players will achieve a higher monthly DEX volume and TVL than the ETH mainnet for the first time. And collectively, those chains may accumulate 2x the DEX volume of Ethereum. Right now, that ratio is 0.8x and 10x the number of transactions, as you know. Right now, that ratio is about five.

So this is this is predicting that one of Ethereum's layer twos will actually be a stronger settlement layer than Ethereum itself, at least in terms of on-chain dex activity.

I wouldn't say s that settlement because it still settles back to Ethereum.

Sure.

Exactly.

Exactly.

Exactly.

But but but but it does predict you are predicting more of kind of like power law winners in the layer two space rather than just we have thousands of chains and it you know like all of these layer twos and the TVL is distributed across these hundreds or thousands of chains.

Yes, by volume. Now mm by users, uh the long tail uh may not