A year ago the crypto world was in shambles. Now it’s back, riding a new rally that supporters predict will surge even higher in 2024.

The price of bitcoin (BTC-USD), the world’s largest cryptocurrency, is up more than 160% this year after topping $44,000 for the first time since early 2022. The stock of cryptocurrency exchange Coinbase (COIN) has more than tripled, while the total market value of all crypto assets has nearly doubled.

“I think what people are reacting to this year is crypto is here to stay,” Coinbase CEO Brian Armstrong told Yahoo Finance.

The industry’s comeback was one of the more surprising market stories of 2023, following an epic 2022 collapse that burned many investors and took down some of the industry’s biggest names.

The bull case for 2024 is that many of crypto’s biggest problems are now officially in the rear-view mirror after the criminal conviction of FTX founder Sam Bankman-Fried and a guilty plea from Binance CEO Changpeng Zhao.

Investors are optimistic the industry is poised for wider acceptance and regulatory clarity from Washington. They expect regulators to grant approval in January for a series of spot bitcoin ETFs that would allow everyday people to get exposure to the cryptocurrency without having to own it.

Investors are also excited about bitcoin’s “halving” in April, a once-in-every-four-years event that reduces the daily issuance of the cryptocurrency by half — and typically results in another bull run.

“There’s really this perfect storm of positive tailwinds heading into next year,” Sean Farrell, Fundstrat Global Advisors vice president of digital asset strategy, told Yahoo Finance.

The crypto market “has been positioned for perfection over the next six months,” added Rich Rosenblum, founder and CEO of crypto market maker GSR.

The industry still faces plenty of risks, however. One worry is that US regulators could make it much harder for digital-asset firms to thrive as they did during the last boom. Another is that extreme risk takers in the industry could take things too far, as they did in the run-up to 2022.

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“If prices go back up, I think we could see a very similar landscape to what happened before,” Molly White, a crypto researcher and critic, told Yahoo Finance.

A third potential problem is that Congress won’t clarify how the industry is regulated, making it more difficult for the industry to achieve mainstream acceptance. Democrats and Republicans in Washington currently disagree about whether cryptocurrencies are a threat to the financial system or a source of innovation.

JPMorgan Chase (JPM) CEO Jamie Dimon told US lawmakers earlier this month that he would put an end to crypto if he had the power to do so.

“If I was the government, I’d close it down,” he said in response to a question from Sen. Elizabeth Warren (D-Mass.), who is pushing a new bill that would force crypto providers to comply with anti-money laundering safeguards.

‘Here to stay’

If there is one firm that stands the most to either benefit or lose from the industry’s next steps, it is Coinbase, the largest crypto exchange in the US. Its stock has surged 375% so far this year.

It benefitted from the fall of FTX and the humbling of Binance, its two biggest rivals, while introducing a raft of new products ranging from a US regulated futures exchange to a Layer 2 blockchain scaling solution. It also stands to become the custodian for many of the spot bitcoin ETFs that hope to launch early next year.

Coinbase did post its seventh consecutive quarterly loss in the third quarter, but it was the closest it has come to a positive earnings result since the fourth quarter of 2021, when the last crypto boom was still raging.

Its future earnings remain at risk from a legal fight with the Securities and Exchange Commission, which sued the exchange in June for allegedly operating an unlicensed crypto securities exchange, broker and clearing agency.

The company is choosing to defend itself in court and its CEO Brian Armstrong has been vocal about his disagreements with the SEC.

“There’s a lot of short-term bumps, twists, episodes,” Coinbase Chief Financial Officer Alesia Haas told Yahoo Finance earlier this month. “The longer you are in crypto the more you have to realize that you have to see through the noise,” she added.

The SEC remains the biggest threat looming over much of the industry. It took more than 32 actions against crypto-related actors in 2023, a 28% increase compared to the 25 in 2022. Those charges, which targeted many of the industry’s biggest players, were still a small part of more than 300 overall actions taken by the regulator against a variety of companies.

Its core claim is that many crypto assets should be considered securities, thereby requiring more onerous oversight from the SEC.

Judges offered differing opinions on that subject in 2023 in cases brought by the SEC, adding to the confusion. One ruled that a digital coin called XRP was a security only when sold to institutional investors but not when sold on public exchange to retail customers.

Another judge in a separate case involving the Terra USD token said that digital currencies can be considered securities when sold to the general public, contradicting the earlier ruling.

Coinbase has separately asked the SEC to come up with a new framework to oversee crypto, but the agency denied that petition this month.

In doing so, SEC Chair Gary Gensler cited the SEC’s limited resources and a quote from the SEC’s head of enforcement stating that “you simply can’t ignore the rules because you don’t like them or because you’d prefer different ones.” Coinbase is appealing the decision.

While it wages war with the SEC, Coinbase is also actively lobbying Washington for more clarity around how the crypto world is regulated.

To that end, Coinbase and other crypto backers announced this month that three super PACs have raised $78 million to back candidates in 2024 who favor crypto-friendly policies.

“There’s going to be ups and downs but this movement is here to stay and we need to send that message to Washington,” Armstrong added.

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.

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