April 2024: Crypto Tailwinds, Macro Headwinds
Research Team
Last Updated: 5/1/2024 | 13 min. read
Crypto valuations pulled back in April 2024 as the macro outlook turned less favorable. In particular, strong growth and high inflation in the United States reduced the probability of Federal Reserve rate cuts this year.
At the same time, industry trends remained broadly favorable. Highlights included the Bitcoin halving, rising activity throughout the Ethereum ecosystem, and potential progress on stablecoin legislation in the US.
Grayscale Research believes token valuations can move higher again through the remainder of 2024, as long as the macro markets backdrop remains broadly supportive.
On a risk-adjusted basis (i.e., accounting for each asset’s volatility), returns for Bitcoin and Ether were in the middle of the range among traditional assets (Exhibit 1). Gold and oil prices gained during the month, likely in part reflecting the increase in tensions in the Middle East, while most other major asset classes declined. Long-maturity Treasury bonds performed especially poorly as markets discounted higher inflation and a higher path for real (inflation-adjusted) interest rates. Global equity indexes declined, and volatility in both equity and bond markets increased.
Exhibit 1: Worsening macro backdrop weighed on many assets in April
Exhibit 2: Markets now see relatively few Fed rate cuts
Exhibit 3: Bitcoin’s inflation rate now lower than gold
Exhibit 4: Bitcoin fees surged around the halving
Total stablecoin market capitalization has increased significantly in 2024, growing from $130bn in January to $160bn today (23% in just five months). Notably, in early 2023, Tether (USDT) pulled away as the dominant stablecoin option and currently accounts for 69% of the total stablecoin market cap (Exhibit 6). Although Tether widened its lead in 2023, US-centric Circle’s USDC has shown impressive growth in 2024 thus far, increasing its market cap by 36% compared to Tether’s 20%.
Exhibit 6: Continued growth in stablecoin market capitalization
Exhibit 7: Weakness across all five Crypto Sectors in April
[1] Source: Artemis; data as of April 30, 2024.
[2] The “core” CPI excludes volatile food and energy prices.
[3] 60,000 as of April 30, 2024.
[10] Crypto Sectors excludes stablecoins. Including USDT and USDC, Toncoin would be the ninth largest crypto asset.
[12] Market Value to Realized Value (MVRV) is the ratio of market capitalization to “realized” capitalization. In contrast to market cap, realized cap values each Bitcoin at the time it was last moved on-chain.
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