Coinbase Predicts a Renewed Interest in DeFi

The recent approval of spot Bitcoin ETFs in the US was hailed as a watershed in the annals of the crypto industry. 

However, a new report by Coinbase warns that a laser-focus on Bitcoin ETFs could blind investors to other "opportunities and themes that could be relevant in the post spot bitcoin ETF environment". 

The report, which carries Coinbase's predictions for 2024,  states that:"....a search for yield will rejuvenate interest in decentralized finance (DeFi) in 2024", highlighting the potential for Ethereum and the DeFi space to grow stronger.

According to Coinbase analysts, the " cash and carry trade" between Bitcoin CME futures and spot have become less attractive" due to increasing ETF access, and the decision of the Central banks in many G10 economies to cut interest rates "may unlock capital that will need a new home". 

Zooming in on BTC ETF Volumes vs Total Trade

Despite over $1.4 billion flowing into US spot Bitcoin ETFs in January, the approved ETFs constitute 10-15% of the global spot trading volume.Collectively, the ETFs holding about 650,000 BTCs, represents only 3% of the total.
 

Based on its 24-hour spot volume, which is around $29.5 billion, an ETF of $1.3 billion is less than 5% of the total.

Nevertheless, though considerable, their effect so far seems restrained compared to the entire market.

Ether Strength in the Major Themes Beyond the ETF

Coinbase analysts predicted Ether's strength, a revival of DeFi and selling pressure on BTC miners as major triggers outside the ETF hype.

Ethereum hosts 58% of total value locked in DeFi protocols. An explosion in DeFi activity would elevate Ether's use case and price.

ETH was already up by 7% for 2023 as it changed hands at $2,510. Some predict that the switch to proof-of-stake could drive its price to $27,000 this cycle.

Ethereum's Value and a Potential DeFi Rebound.

With a total value above $200 billion in late 2021, the locked value in the DeFi caved below $60 billion. But it gained 18% this year, reaching $ 65 billion again.

DeFi is mainly built on Ethereum, which is why ETH will also benefit from its growth. Wider adoption of these DeFi services like lending, trading etc can also attract more users and developers to Ethereum.

Bitcoin Miners Likely To Face Post-Halving Challenges

Coinbase analysts predicted that 2024 Bitcoin halving will likely lead BTC miners to sell their coins. With 6.25 BTC block rewards falling to 3.125 BTC, this crucial event is expected to cause a slump in miners' profit. 

There will be those who will have to sell more of their newly minted coins in order to continue mining. This would drag Bitcoin price. But, this impacts will not be direct. It is yet unknown how hard the halving will hit miner’s budget.

Wrapping Up

The Coinbase's report considers a balanced approach to Bitcoin-ETF exposures and other segments of the market, highlighting the critical factors that might spur a DeFi revival in 2024.