What Family Offices Should Know About Digital Assets Going Into 2024

Next year will mark fifteen years since the launch of Bitcoin, and the original cryptocurrency has had a rather wild ride in that time, much like the entire digital assets industry itself. It only crossed the $1 value two years after it launched, which is hard to imagine considering its peak value of over $68,000 just a few years ago.

At the end of an inauspicious year that brought us the rapid demise of NFT valuations, a guilty verdict and potential 110-year prison sentence for the former CEO of one of the top three largest cryptocurrency exchanges and a guilty admission, $4.3 billion in fines and resignation from the CEO at the largest cryptocurrency exchange, it’s surprising to see the original cryptocurrency is sitting at a current eighteen month high of over $39,000.

But there has simultaneously been a significant amount of evolution that also occurred in the digital assets industry during this time, and looked at from a broader perspective, there is certainly a fair point that like any rapidly developed ecosystem it will need to be shaped by some of its failures on its way towards mass adoption.

Finding Mainstream Utility

“The current state of the crypto market is one of transition,” says Coindesk’s Todd Groth, who is Head of Index Research at CoinDesk Indices, adding the explanation, “The leverage and excesses of the previous market cycle have been mostly cleared and new products push towards developing greater real-world utility and catering towards regulated institutional investors.“

One of the more trusted crypto media and data providers, Coindesk made the news itself recently after being acquired by Bullish, a regulated and audited crypto exchange. Run by former New York Stock Exchange President, Tom Farley, Bullish was created with the long-term institutionalization of digital assets in mind, something that Groth believes is in gaining rapid momentum.

“This institutional ‘coming of age’ for the market comes alongside a good year of Bitcoin and Ethereum performance, despite the ending stages of a U.S. interest rate hiking cycle,” says Groth, adding that, “The performance during the bond bear market helps support the narrative of Bitcoin and Ethereum as real assets, similar to digital gold and oil respectively.”

The acquisition puts Coindesk on a good path but also sends a message of optimism to companies that provide digital assets solutions to investors. Benaiah Capital is a boutique investment firm that focuses exclusively on digital assets and emerging blockchain technology, and CEO Ben Wiener believes activity like the Coindesk acquisition benefits the entire market.

“Additional investment has a multiplying effect as it recruits top talent which further expands the space and queues up the next round of investment,” Wiener notes, adding, “I’m optimistic that this will lead to improved coverage, analysis, and education about digital assets.”

Certainly necessary in an evolving space like digital assets, and no doubt useful to Benaiah, which Wiener notes takes an educational approach first and spends a significant amount of resources keeping their family office clients updated on the shifting market.

“We’ve witnessed a notable shift in sentiment among family offices in the last 6 months,” he adds, “Many of them have moved from cautious observers to actively exploring and investing in this space, which suggests it’s highly likely to continue into 2024.”

Easier Access, Tighter Regulations

Something destined to make headlines in the new year and perhaps behind some of the current increasing value in Bitcoin is the impending January approval of spot Bitcoin Exchange Traded Funds. Another step towards accessibility to the digital asset pool for institutional investors and sure to see large amount of capital deployed, it does come with some in the industry cautioning that it could result in lesser-established cryptocurrencies slipping further off the radar, and the potential for a sudden dip in valuation on the day of launch.

As part of the institutionalization, a more solid framework of regulations is emerging which looks set to address some of the volatility and cautious sentiment. This might also help prevent some of the recent turmoil and scandals related to exchanges such as FTX and more recently Binance.

Wiener believes this may be the transformation that digital assets need to shed the often speculative perception, and should open the market to new investors. “In 2024 we anticipate a maturation of the market with clearer regulations and a broader range of investment options,” Wiener says, “This belief in shift is one of the reasons we’re seeing family offices…