Grayscale Report: Cryptocurrencies Will Outperform Global Inflation-Linked Bond Markets in Q4 2024

by
Victoria d’Este

Posted: January 1, 2025 2:55 AM Updated: January 1, 2025 2:55 AM

by well

Correction and fact check date: January 1, 2025, 2:55 a.m.

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The cryptocurrency industry is at a tipping point, with its overall market value set to surpass that of the global inflation-linked bond market by the end of 2024, according to new analysis from Grayscale Research. The unprecedented shift in how digital assets are positioned within the global financial landscape is highlighted by the expected increase.

Cryptocurrency market growth and comparison

According to the analysis, by the fourth quarter of 2024, the market value of cryptocurrencies is expected to increase from $1 trillion at the start of the year to more than $3 trillion. As a result of this surge, cryptocurrencies have now established themselves as significant competitors in the larger financial ecosystem, reflecting growing acceptance and institutional interest. As of December 31, 2024, the cryptocurrency’s market capitalization reached nearly $3.3 trillion, surpassing the market capitalization of the global inflation-linked bond market.

Despite this notable milestone, cryptocurrencies are still very small compared to other financial sectors. For example, both the Japanese stock market and the global hedge fund business are valued at more than $4.5 trillion. Moreover, the market capitalization of cryptocurrencies is currently much smaller than the global stock or government bond markets combined, highlighting the limited, albeit evolving, importance of cryptocurrencies in the global economy.

Key growth drivers for Q4 2024

Grayscale attributes much of the cryptocurrency industry’s growth in late 2024 to political and economic events. Donald Trump’s November election victory is one of the main reasons given, as it appears to have reignited investor interest in alternative assets, including cryptocurrencies. As doubts about traditional economic strategies surface, market sentiment has shifted in favor of decentralized financial products.

The development of scalability solutions and widespread acceptance of blockchain technology were other important factors. These technological advancements have increased the security and efficiency of transactions, allowing more players to participate in the cryptocurrency industry. Institutional investors also continued to diversify their holdings by increasing the proportion of digital assets, further accelerating market expansion.

Although the cryptocurrency market has surpassed the global inflation-linked bond market, it is still small compared to the traditional financial sector. For comparison, Grayscale’s research shows that the market value of the cryptocurrency market could be three times that of the U.S. high-yield bond market at its peak. However, this contrast highlights its rapid expansion and significant separation from the major players in international finance.

The survey also found that despite the popularity of cryptocurrencies, they continue to be volatile and unknown from a regulatory perspective. These characteristics set them apart from more traditional financial instruments such as stocks and bonds, which are often thought of as more stable and stable.