Gemini's latest Institutional Insights report, released on Thursday, forecasts continued expansion for the crypto market over the next two years. Despite recent market volatility, the report cites several factors that will drive asset class growth.

Favorable Monetary Policy

One of the primary drivers identified in the report is the shifting stance of global monetary policy. After over two years of persistent tightening, central banks like the European Central Bank and the Bank of Canada have begun cutting interest rates.

Reducing rates could bolster risk assets, including crypto, as borrowing becomes cheaper. In the U.S., although short-term interest rates remain elevated, expectations for future rate cuts have risen. Projections tipped for the first cut in two years to occur next month, according to CME's FedWatch Tool.

"As interest rate risks skew to the downside, this may translate into depreciation pressures for the U.S. dollar. If a broad weakening of the dollar occurs, crypto prices should also rise," Gemini stated in the report.

Regulatory Shifts

Regulatory developments are also expected to be crucial to the market's expansion. Gemini points to a potential shift in the U.S. regulatory landscape, with the upcoming Presidential election seen as a deciding factor for future industry growth.

Prediction markets at the end of July favored the Republican party to win the White House and Senate, with the party platform promising to support an individual's right to self-custody digital assets and mine Bitcoin.

"The headwinds created by the enforcement approach from U.S. regulators to the crypto industry may continue to abate in the years to come," Gemini said in the report.

Infrastructure Development

Meanwhile, infrastructure development within the crypto space is poised to enhance market growth. Despite concerns about the current focus on scaling solutions over end-user applications, the report suggests this phase is necessary for future development within the sector.

The rapid growth of stablecoins and the increasing traction of prediction markets were potential growth drivers.

The past three months have seen significant crypto trades, with Bitcoin and Ethereum fluctuating within a broad range. Bitcoin's price has oscillated between $53,550 and $72,000, while Ethereum's price has oscillated between $2,800 and $3,970.

This follows significant price surges earlier in the year, driven by the launch of Bitcoin and Ethereum exchange-traded funds (ETFs). Bitcoin breached a new all-time high above $73,000 in March.

Prices have since cooled, with Ethereum down about 22% from its March all-time high of $4,090, while Bitcoin has slumped by roughly 12%.

This has baffled some analysts who expected Bitcoin's price to resume its northward journey towards a $70,000 price tag by now. While a narrative suggests a long-term cyclical peak occurred in the first half of 2024, Gemini said the broader outlook remains positive.

"Factors external to crypto as well as idiosyncratic to the asset class point the way to continued growth for the industry and its market capitalization," the report reads.