After the explosive resurgence of markets in the first few months of the year, growth in cryptocurrency markets slowed and entered a period of consolidation. Geopolitical concerns and fears of a slowing economy drove much of the narrative, as the Federal Reserve attempted to navigate a “soft landing” in its efforts to control inflation without causing a recession. During this period, crypto markets experienced significant volatility, with Bitcoin falling from its March highs of $73k to below $50k. Ethereum and Solana saw similar declines, dropping from $4,080 to $2,120 and $209 to $110, respectively. Despite this pullback, crypto markets have since recovered substantially, though not yet enough to reclaim the previous highs. Nevertheless, institutional interest continues to grow, and regulatory developments have laid the groundwork for broader adoption of digital assets.
Looking ahead to the final quarter of the year, several key catalysts are set to drive the next phase of growth. In this update, we will discuss the ongoing conflict in the Middle East and its effects on global markets, as well as the Federal Reserve’s stance and how anticipated rate cuts could further support risk assets like crypto. We will also explore the approval of the Ethereum ETF in May, which has enhanced institutional access, and consider the potential implications of the upcoming U.S. presidential election on crypto markets and the broader economy. Finally, we will provide our outlook on the crypto market and how these developments could pave the way for new all-time highs in the coming quarters.
With these catalysts in view, we believe the market is well-positioned for continued recovery and potential growth, offering promising opportunities in the months ahead.
Geopolitical Concerns: Israel-Iran Conflict and Its Market Impact
One of the most significant geopolitical developments this year was the dramatic escalation of the long-standing conflict between Israel and Iran, which rippled through global markets, including the cryptocurrency sector. On April 13, 2024, Iran launched a large-scale military strike against Israel, deploying over 300 drones and missiles, including ballistic and cruise missiles. This was a retaliatory action in response to Israeli airstrikes on Iranian military installations just weeks earlier. Israel’s defense systems, bolstered by support from international allies like the United States, managed to intercept most of the projectiles. Nevertheless, the attack heightened fears of broader regional instability and further retaliation.
Israel’s military responded swiftly, targeting key Iranian infrastructure, including an air defense radar site near Isfahan. This measured retaliation was designed to neutralize specific threats without escalating the conflict into a full-scale war, but it left markets on edge.
Further tensions resurfaced in early October 2024, with another series of skirmishes between Israel and Iran. This second incident once again rattled markets, driving another round of volatility across both traditional and cryptocurrency markets. Initially, prices were hit hard, but markets have since begun to stabilize and recover as fears of broader escalation have subsided. The ongoing geopolitical instability remains a critical factor for market sentiment heading into the final months of the year.
Market Reaction: Initial Shock and Measured Recovery
As is often the case during geopolitical crises, the immediate market response was one of fear and risk aversion. Cryptocurrencies, like other risk assets, saw a sharp sell-off in the days following the initial strikes.
The sell-off was exacerbated by uncertainty surrounding the potential for wider regional involvement in the conflict. Investors feared that any prolonged disruption in the Middle East could impact oil prices and global supply chains, further dampening economic growth and market confidence. As a result, total crypto market capitalization fell by approximately 15% in a matter of days, with Bitcoin dipping to just below $50,000.
However, while tensions between Israel and Iran eventually de-escalated and the prospect of broader regional involvement diminished, the cryptocurrency market struggled to fully recover to pre-crisis levels. The conflict highlighted that while Bitcoin may serve as a relative safe haven within the crypto market, the entire asset class remains vulnerable to broader geopolitical and macroeconomic factors. The measured recovery reflected ongoing investor caution in a volatile macro environment.
Bitcoin Dominance: Navigating Volatile Markets
During periods of market stress, Bitcoin tends to perform relatively better than other digital assets, and this year has been no different. In the past several months, Bitcoin’s dominance rose significantly, climbing above 50%, as investors sought refuge in the more established asset amid broader market uncertainty. Meanwhile, altcoins underperformed, reflecting their higher volatility in challenging conditions.
While at Parkour Ventures we maintained some exposure to Bitcoin, our portfolio has experienced more volatility overall. The fund outperformed Bitcoin during the strong rally in Q1 but underperformed in Q2 as Bitcoin held up better amid market sell-offs. As Bitcoin has shown resilience, we recognize its stability during downturns, but we are also preparing for what comes next.
Historically, Bitcoin dominance tends to decline in more bullish cycles, when more agile projects typically outperform. As we move forward, we expect a strong resurgence in select altcoins as the market stabilizes and broader economic conditions improve. We remain optimistic about the future potential of the entire crypto market and will be looking for strategic opportunities to increase exposure in the coming quarters.
Recession Fears: Economic Slowdown
Throughout Q2 and Q3 of 2024, fears of an impending recession weighed heavily on global financial markets, including cryptocurrencies. Persistent inflation had been the primary concern of the Federal Reserve for the past several years causing the Fed Funds rate to remain at 5.5% since 2022. However, tightening monetary policy and slowing growth shifted this concern from inflation to concerns of recession.
One of the most significant drivers of these recession fears has been the labor market. The U.S. labor market remained resilient longer than expected. However, in recent months, signs of softening have emerged with job reports revealing slower hiring and a modest rise in unemployment, sparking volatility in the markets as investors reassessed the broader economic outlook.
By Q3, the narrative had shifted to one of increasing concern. The August jobs report showed a notable uptick in unemployment, rising to 4.3%, its highest level in over a year. This signaled that the broader economy might be losing steam faster than previously expected. The rise in unemployment, combined with persistent inflation and slow wage growth, triggered another wave of risk-off sentiment across financial markets.
In response to these developments, inflation has finally begun to ease, with the U.S. inflation rate dropping to around 3.2% by September, down from its peak of 9.1% in mid-2022. With inflation cooling, the Federal Reserve took its first steps towards rate cuts, lowering interest rates by 50 basis points in September 2024. This marks a significant policy shift as the Fed begins to unwind the tight monetary stance it has maintained since the inflation surge.
Impact on Crypto Markets
For the crypto market, the anticipation of a potential recession has created a challenging environment. As labor market data and inflation reports continued to drive expectations around monetary policy, cryptocurrencies saw significant volatility. During the August job report sell-off, Bitcoin dropped nearly 10% over a single week, reflecting how closely tied crypto remains to broader market sentiment and monetary policy expectations.
While recession fears have weighed heavily on risk assets, the commencement of the Federal Reserve’s rate cut cycle is a strong positive signal. Historically, rate cuts have injected liquidity back into financial markets, providing relief to risk assets like Bitcoin and Ethereum.
As inflation eases and interest rates come down, investor sentiment could shift toward renewed optimism, potentially sparking a recovery in crypto prices. Though near-term volatility persists due to macroeconomic concerns, the shift in monetary policy may create more favorable conditions for crypto growth in the coming quarters. Investors are now watching for further rate cuts, which could help drive a more sustained recovery across the digital asset space.
Positive Catalysts on the Horizon
Despite difficult market conditions for the past several months, we see several key catalysts that could reignite the crypto market and drive renewed momentum as we head into the final months of 2024. These developments, from political shifts to monetary policy changes, present promising opportunities for recovery and growth.
Ethereum ETF Approval and Rapid ETF Adoption: A Turning Point for Institutional Investment
One significant development in the cryptocurrency market this year was the approval of the Ethereum ETF in May 2024. This milestone further expanded institutional access to the digital asset space, providing a regulated and streamlined way for investors to gain exposure to Ethereum, the second-largest cryptocurrency by market capitalization. The approval followed in the footsteps of the successful Bitcoin ETFs, signaling a broader acceptance of digital assets within traditional finance. Since its approval, the Ethereum ETF has seen strong inflows, reflecting the rising demand for Ethereum among institutional investors. However, the momentum surrounding crypto ETFs extends beyond Ethereum. The rapid adoption of Bitcoin ETFs, in particular, has been unprecedented, and this surge in interest underscores a critical shift in how traditional financial players view cryptocurrencies.
Wealth Advisers Rapidly Embrace Bitcoin ETFs
Despite initial skepticism from some sectors, wealth advisers have embraced Crypto ETFs at an astonishing pace. Of the $20 billion flowing into crypto ETFs, $1.45 billion has come from wealth advisers channeled into BlackRock’s iShares Bitcoin Trust ETF alone. This rapid uptake is historic, making Bitcoin ETFs one of the fastest-adopted financial products in history. Major financial institutions like Morgan Stanley have played a pivotal role in this shift, recently allowing their 15,000 advisers to recommend Bitcoin ETFs to their clients, providing a powerful endorsement of cryptocurrency.
The success of Bitcoin ETFs has had a ripple effect, signaling that cryptocurrencies are gaining a foothold in mainstream portfolios. Wealth advisers, traditionally cautious about recommending digital assets, are increasingly recognizing the potential of Bitcoin as a reliable investment vehicle, particularly as institutional infrastructure around crypto continues to solidify.
Institutional Adoption Driving Crypto Growth
This surge of interest from traditional wealth managers is part of a broader movement towards the institutionalization of digital assets. Major financial players, including BlackRock, are vocal about the growing role of cryptocurrency in the digital economy. BlackRock has even noted that crypto adoption is happening faster than the internet and mobile phones, as Gen Z and Millennials—digitally native generations—drive the shift. With these generations entering peak earning years, their openness to digital assets like Bitcoin and Ethereum is helping fuel mainstream adoption.
The rising interest in Bitcoin ETFs, alongside Ethereum’s growing role in decentralized finance (DeFi) and smart contracts, is reshaping the landscape for digital currencies. Institutional investors now have more confidence in cryptocurrencies, as they become increasingly integrated into the traditional financial system. The rapid adoption of these ETFs is not just a sign of growing market legitimacy but also points to the potential long-term growth of both Bitcoin and Ethereum as key assets in diversified portfolios.
U.S. Presidential Election
The upcoming U.S. presidential election is a pivotal event for markets, including cryptocurrencies. Historically, election cycles bring volatility and uncertainty, followed by relief rallies once results are clear. Both major political parties have shown growing support for cryptocurrencies. While the Republican ticket was first to embrace pro-crypto stances, calling for clearer regulation and crypto-friendly policies, many Democrats have also signaled support for digital assets. Regardless of which party wins, the resolution of political uncertainty tends to positively impact markets, and the crypto sector could benefit from the resulting clarity in economic and regulatory policies.
Bitcoin Conference and Solana’s Breakpoint
Major industry events like the Bitcoin Conference and Solana’s Breakpoint have long been catalysts for innovation and market excitement. Both events, which took place recently, have historically served as platforms for important industry announcements, new project launches, and partnerships, all of which can spark renewed investor interest.
The Bitcoin Conference continues to highlight Bitcoin’s growing role in the global economy, especially with the recent surge in adoption of Bitcoin ETFs and ongoing developments in the Lightning Network. Meanwhile, Solana’s Breakpoint provided updates on the expanding Solana ecosystem, showcasing advancements in decentralized applications (dApps), NFTs, and scaling solutions. These conferences are key moments that not only inject short-term enthusiasm into the market but also reinforce long-term confidence in the underlying technologies driving blockchain adoption.
Technical Structure and Market Outlook
The current technical structure of the crypto market is signaling a potential turning point after months of consolidation. For the first time in six months, Bitcoin has made a higher low, suggesting that the worst of the downtrend may be behind us. The past seven months have been marked by a remarkable consolidation around previous all-time high monthly candle body closes, showing notable price stability despite macroeconomic and geopolitical uncertainty.
Such consolidation phases are not unusual in crypto cycles. Historically, it can take up to 500 days to break the key resistance levels from the previous bull cycle, and we are now roughly 350 days into that process. While this consolidation can be frustrating for investors, it often precedes stronger upside movements, reinforcing the need for patience and disciplined decision-making.
At Parkour Ventures, we avoid short-term, emotionally driven decisions and instead focus on a long-term, data-driven strategy. By “zooming out” to observe broader trends, we’ve identified a promising pattern: every time Bitcoin has taken out the previous candle high or low and reclaimed those levels, it has sparked a strong trend. This technical indicator historically signals the start of sustained upward momentum.
In summary, while the market has been in a prolonged consolidation phase, several technical indicators and broader macro factors are pointing toward a positive outlook. With Bitcoin’s resilience, favorable historical seasonality, and growing institutional adoption, the stage is set for renewed bullish momentum as we move into late 2024 and 2025.
Parkour’s Outlook and Moving Forward
As we move into Q4 and look ahead to 2025, we remain bullish on the long-term trajectory of the cryptocurrency market. The catalysts we’ve outlined—ranging from Federal Reserve rate cuts and the upcoming U.S. presidential election, to the rapid adoption of Bitcoin and Ethereum ETFs and technical signs of market consolidation—position the crypto market for renewed growth. These developments, combined with a favorable macroeconomic environment, create a strong foundation for the next phase of expansion in digital assets.
Looking beyond the immediate catalysts, we continue to view the broader adoption of cryptocurrency as a multi-year, transformative trend that will reshape the financial landscape. Crypto’s ability to disrupt traditional finance and impact industries from banking to supply chains is becoming increasingly apparent. We expect this adoption to accelerate in the years ahead as more institutional players, regulators, and retail investors recognize the value of digital assets and decentralized systems. The infrastructure for crypto is solidifying, and with that, we foresee a new era where blockchain technology becomes a central part of global finance.
At Parkour Ventures, our investment approach is built on a long-term perspective. We believe in the transformative potential of cryptocurrency and blockchain, and our strategy is centered on capturing the growth that will unfold over the coming years and decades. While short-term volatility will continue to be a factor, we encourage our investors to adopt a similarly long-term outlook. The crypto market, much like any other emerging asset class, will have periods of consolidation, but its potential to revolutionize financial systems is undeniable.