“Brief 2023 market recap, brief insight into the AI space in 2024, Ripple and Ethereum blockchain innovations to lookout for.”
TradFi & Global Market News
Global Market: S&P 500 & NASDAQ
US markets have seen an overall resurgence as interest rates have fallen to 3.2% from 9% in June 2022, signalling market recovery. Contrary to trends, the markets opened 2024 with a shaky start as the S&P 500 and Nasdaq both experienced slight dips in price since the turn of the new year, the former falling to a low of 4688.68 from 4742.83 while the latter dipped from 14765.94 to 14510.30. Recapping 2023 briefly, tech investors will be heavily encouraged by the performance of the Nasdaq as they have seen a 43% increase in valuation over the past year. The biggest winner from the past year is NVIDIA, which has seen overall revenue double in value due to its focus on graphics processing unit chips, an essential infrastructure to support the AI boom in 2023, specifically in machine learning. Besides AI, NVIDIA also dominates the space for processors used in data transfer within data centres. Given the boom of digital transformation efforts from global corporate entities, investors should be encouraged by their well-diversified product portfolio. Furthermore, concerns of inflated valuation are quelled as their price-to-earnings-to-growth falls less than one, suggesting that when the company’s growth potential is considered, the stocks are actually undervalued.
Technology News: Artificial Intelligence (AI)
AI’s development for 2024 is now at the forefront of business leaders’ minds, not just NVIDIA’s. Business analysts have projected a 34% CAGR for the industry over the next 10 years, while financial analysts have pointed out that the tech-heavy indices, like Nasdaq, have traditionally gained around 19% in valuation after a bear market year, suggesting that there is more room for growth. If 2023 was a year of AI hype, then 2024 should solidify AI’s legitimacy as a paradigm shift towards a new technology revolution. This means that companies that are merely jumping on the momentum of digital transformation without measuring the practical steps to leverage AI for their business, some analysts predict around 50% of business owners will fail to implement GenAI capabilities effectively. Some trends to look for in the coming year will be the concurrent establishment of AI and sustainability regulatory frameworks that may mute the development of AI companies in Europe. Investors could also turn their eyes towards emerging markets like Asia. Their historic emphasis on digital capabilities in recent years could make them a sleeping giant for technology acquisitions since their businesses can be built entirely on next-generation infrastructures while Western markets may struggle to balance the transition.
Global Market: FTSE100
Over in the UK, 2023 was less favourable compared to economies across the Pacific Ocean. The FTSE100 opened at 7682.33, which was slightly below the previous years valuation. The prices were volatile throughout the year leaving many analysts uncertain about the UK’s business environment heading into the New Year. While inflation has cooled from 10% to 3.9% over 2023, their persistent inflation rate still exceeds what was anticipated. More concerningly, as of October 2023, the UK’s GDP shrunk, and its growth rate is expected to flatline at 0.7% this coming year. Calls for a recession are still on the cards, as unemployment is expected to peak as late as 2025. All eyes will be on their political situation to see if a ruling party can guide the country through this difficult year ahead.
DeFi & Digital Assets News
Cryptocurrency Market: Bitcoin & Ethereum
It was an excellent year for cryptocurrencies as the two biggest coins, Bitcoin and Ethereum, saw their valuation jump by 2.5x and 1.8x, respectively. Bitcoin’s valuation tethers closely to the 45000 valuation, which is expected to be broken amidst the Bitcoin halving and the expected approval of the spot ETFs. The SEC has also pushed back its decision on the Ethereum spot ETFs until May 2024, but investors are anticipating an approval. The year started with a slight scare that the Bitcoin spot ETF would not gain approval, leading to over $400 million of digital assets being liquidated in two hours. Since then, most cryptocurrencies are back on an upward trajectory, and investors are awaiting the result on Jan 10. An approval status on this day will open the floodgates for traditional investors to increase their exposure to cryptocurrencies, thus raising market demand. However, a survey by Bitwise has shown that only 39% of financial advisors believe this will go through in 2024.
Innovation News: Modular Blockchain
Ethereum is expected to undergo its “Dencun” upgrade on Jan 17, meaning that various upgrades are being made to its technology that could decrease platform costs by incorporating a temporary space for data storage to separate the job of processing and verifying transactions on layer 2.
As shown above, modular blockchains are one of the newest blockchain innovations that are expected to be highlighted in 2024. Traditional monolithic blockchain architecture is structured such that the base layer handles all components of the functionality on the blockchain, which are execution, settlement, consensus and data availability. This hinders scalability as the blockchain can only handle more transactions by increasing block sizes, which causes network centralisation since hardware requirements increase, or by moving transactions off-chain, which hinders security. Modular blockchains will enable each functionality to be run as individual layers as the core functionalities on the base layer are disaggregated. One example of a modular method is a validium, which processes transactions off-chain, uploads the data onto the layer one network as an execution layer and then uses proof of stake validators to store data off-chain.
Token News: Ripple
Ripple is not a traditional cryptocurrency investment. Their XRP tokens are a long-term project to transform the payments industry by increasing the efficacy of global monetary transfers. Although their valuation is at a 2-month low, XRP enthusiasts believe it is one of the few tokens with an underlying value as a real-world use case besides a financial instrument. Additionally, the token has won partial battles against the SEC in recent months, generating more positivity for the token. Looking at the technology in its totality, Ripple as a payment service does not leverage XRP for its functionality, meaning that XRP’s value has no purpose to the use-case of the product at this time, inhibiting any incentive for price action to be taken.
In Other News…
Short Updates:
SpaceX – On 1st December 2023, South Korea launched its first military spy satellite from the Vandenberg US Space Force Base using a SpaceX Falcon 9 rocket to monitor North Korean activity. This act reignites tensions between the two Koreas, straining geopolitical tensions again.
Opportunity Spotlight
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