Anchorage Digital's head of research, David Lawant, believes the cryptocurrency market will continue to perform well this year; however, the three pending IPO's from SpaceX, OpenAI, and Anthropic will likely have some impact on the crypto market given the size of their collective valuations.
"The amount of capital that we're talking about here will probably suck air from a lot of the rooms. That's another non-industry-related but also non-macro factor that I think is very important to watch," Lawant told Benzinga in an interview.
Bitcoin Price Action
Bitcoin's (CRYPTO: BTC) recent price action has largely been driven by institutional flows, shifting from treasury companies to ETFs over the last two months.
Lawant identified three core drivers supporting Bitcoin's positive trend: improving macro risk sentiment, light investor positioning, and growing industry fundamentals.
While Bitcoin's volatility has been structurally lower amid recent geopolitical stress due to mechanical factors and market positioning, Lawant cautioned that this low-volatility environment is unlikely to persist indefinitely.
"I don’t think this is going to be the case forever, though. I would expect Bitcoin’s volatility to come back at some point, but it might take a while," he said.
"Pretty much everyone who wanted to sell Bitcoin probably sold it by April," he added.
Despite this, industry optimism is rising due to potential regulatory milestones like the market structure bill and increasing institutional interest in stablecoins and DeFi.
"The caliber of institutions that we are seeing engage with the industry right now is absolutely off the charts. Everybody's seeing the long-term potential for crypto as a technology and in a big way, as an asset class too," Lawant said.
Crypto Adoption In 401ks
When asked about how crypto adoption will play out in 401k plans, Lawant stated that he believes it will be a massive trend, but different from what the market saw with the early adoption of ETFs.
"ETFs opened a whole new client access to the asset class, but it happened basically all at once. A lot of them came out with billions of dollars right off the bat. On the 401k side, I think it’s going to be a much slower rollout," he said.
Lawan explained that there is a whole network of fund sponsors, consultants and fund administrators that need to get on board with understanding the market.
"I think it's probably going to take a while, but maybe a couple of years from now we'll look back and realize this was a massive wave that not everybody saw coming because it was rolling out so gradually," he said.
What the market should be keeping an eye on, Lawant added, is how companies such as Mercer, Tower Willis, and 401 (k) sponsors will issue their opinions on crypto.
"If you see one of these firms starting to issue positive reports about crypto either as a technology or the role it can have in a portfolio, I think that will be one early signal that things are moving in a significant way," he said.
Outlook
For the second half of the year, Lawant noted that macroeconomic factors will continue to play a part in the sector’s growth.
"I would expect to see themes related to U.S. monetary policy now that we’re going to have a new Fed chairman. Questions around the outlook for inflation and growth, even the political environment with the midterms. All these things, they impact markets, and they can impact crypto as well. That’s one thing that I believe will continue to be a big driver in terms of industry," Lawant said.
He also added that regulatory developments within the industry, such as the Clarity Act and the Market Structure Bill, could unlock significant opportunities for the sector.
In the long term, typical industry topics such as upgrades to Ethereum and the exploration of new use cases will affect the market, even if they don't impact short-term price movements, he said.
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