Bitcoin Crosses $45,000. Will it Soar Higher in 2024? There are two main events that can drive the Bitcoin prices up: BTC's fourth halving event, and the US Security Exchange Commission's (SEC) decision for spot BTC ETFs in the US
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If 2022 was the year that almost wrote off cryptos, 2023 saw them bouncing back. This is despite a churn of technological innovation, market fluctuations, regulatory changes, and fall of titans (Both Sam Bankman-Fried of FTX, and Changpeng Zhao, CZ of Binance, pleaded guilty of violating money laundering rules). The most popular cryptocurrency Bitcoin saw a whopping 154% surge in 2023. From around $17,000 at the start of the year, BTC went up to $44,000. Of this, however, much of the gains came later in the year. The overall crypto market cap also swelled to $1.62 trillion from $831.8 billion at the beginning of the year.
Says Parth Chaturvedi, Investments Lead, CoinSwitch, "BTC has recorded a substantial price surge and has been breaking past crucial resis- tance levels with healthy volume. Various narratives have influenced this price action, with investor sentiment undeniably strengthening." According to Rahul Pagidipati, CEO, ZebPay, this growth can broadly be attributed to increasing interest in the crypto market by both retail and institutional investors. "Global macroeconomic factors have also contributed to this growth with countries coming together to decide the future roadmap of crypto assets through regulatory frameworks," says Pagidipati.
BITCOIN IN 2024
So what does 2024 look like for Bitcoin? The cryptocurrency started the year with a bang. On January 2, 2024, the Bitcoin crossed past $45,000. The big question is: Will it soar even higher during the year? There are two main events that can drive the Bitcoin prices up in 2024: BTC's fourth halving event, and the US Security Exchange Commission's (SEC) decision for spot BTC ETFs in the US.
THE HALVING EVENT
The Bitcoin halving event occurs every four years and reduces the supply of Bitcoins by half which means there are less Bitcoins to buy in the market after that. The most direct way the Bitcoin halving impacts price comes down to simple supply and demand. If there are fewer Bitcoins being made available, the price ought to rise, assuming demand remains constant or increases. In addition, miners only have half as much Bitcoin available to sell to cover their operational expenses, reducing overall selling pressure in the market.
PAST HALVING EVENTS AND THEIR IMPACT ON THE BTC PRICE
The first halving occurred on November 28, 2012, and reduced the block reward to 25 BTC from 50 BTC. Price at the time of halving was $13. However, the following year it reached a peak of $1,152. Prior to the first halving, Bitcoin was unknown to almost everyone but when the price in dollars ballooned from double digits to over $1,000, Bitcoin started making some headlines. The second halving occurred on July 16, 2016, and reduced the block reward to 12.5 BTC. Price at time of halving was $664.However, the following year it peaked to $17,760. The third halving occurred on May 11, 2020, and reduced the block reward to 6.25 BTC. At that time the price of Bitcoin stood at $9,734. Following year it touched a peak of $67,549. The third halving was different in the sense that it occurred during the COVID-19 pandemic of 2020, when most of the global economy had been shut down. Despite this, the price pattern for BTC/USD mostly held true to previous cycles. The next halving event will reduce the block reward from 6.25 to 3.125 BTC.
Another major driver that can lead price of Bitcoin further is Bitcoin ETFs. Asset management giants like BlackRock and Fidelity are among the 13 companies that have submitted applications to the US SEC for it. Such a fund is expected to pull in as much as $3 billion from investors in the first few days of trading and billions more thereafter. "The chatter surrounding a potential Bitcoin ETF in 2024 excites me. If approved, it could unlock a flood of institutional capital, potentially trillions of dollars, propelling the market to new heights. This potential influx is what makes me bullish on the entire crypto space, and I see current price movements as early signs of this shift," says Minal Thukral, EVP(Growth & Strategy), CoinDCX.
SOARING TO $100000 IN 2024?
While analysts at Standard Chartered Bank have projected that Bitcoin's value could soar to $100,000 by the end of 2024, the views of industry insiders differ. Says Shivam Thakral, CEO of BuyUcoin, "Crypto market may suffer a supply shock after Bitcoin halving and the price of Bitcoin may surge to $50,000-$55,000 after the event and may touch $65000 by the end of 2024 without factoring the impact of Bitcoin halving." Adds Thukral, "Predicting Bitcoin's 2024 price is intri- cate, even with the forth- coming halving. While the event likely contributes to the current price, its full impact remains uncertain. His- torical associations between halvings and price surges exist, but market complexities make precise predictions challenging. Investors should recognize that the market efficiently absorbs information, potentially factoring in anticipated events.
Factors like market sentiment, regulatory changes, and technological advancements could influence outcomes."
Says Chaturvedi, "Past Bitcoin 'halving events' have ushered in a bull run in prices. In-built in the Bitcoin network's algorithm is the halving of miner rewards after every 210,000 blocks, with the next halving scheduled for around April 2024. This 'supply shock' will be met with massive institutional demand if the submission of spot BTC ETF applications gets approved by the SEC. These demand and supply factors, coupled with decreasing interest rates, could send BTC prices higher and the markets already seem to be reacting in anticipation of the same. Says Rajagopal Menon, Vice President, WazirX, "Analysts point out that Bitcoin often sees a rally around 60 days before a halving, followed by a "pre-halving retrace" around the time of the event. Investors often use this pre-halving retracement as an opportunity to reaccumulate or "stack Sats." However, it's also a period where some investors might exit due to impatience or disappointment from the lack of immediate significant returns post-halving. After the halving and reaccumulation phase, Bitcoin has historically entered a phase of parabolic price increases. For example, months following each of the previous halvings, Bitcoin reached new all-time highs, with the last significant peak being around $69,000 in late 2021, following the May 2020 halving."
However, experts also point out towards focusing on fundamentals. Says Pagidipati, "The growing interest in Bitcoin and the increased participation of institutional investors could coincide with the Bitcoin halving event. 2024 is going to be a very important year for crypto and could set the tone for the next market cycle."
FATE OF OTHER CRYPTOS
Bitcoin is often seen as a bellwether for the entire cryptocurrency market. Take for instance, Etherium, the second most popular currency. It has already crossed the level of $2200 as of Dec 14, 2023, which is a whopping 80% rise from what it was trading at the beginning of the year. According to experts, Bitcoin's performance can set the tone for the broader market. "This is followed by an Ethereum rally. After Bitcoin and Ethereum, attention turns to various altcoins in the market. Altcoin season typically involves a surge in the prices of alternative cryptocurrencies. This phenomenon can lead to a decline in Bitcoin dominance,"ādds Menon.
"For the broader markets, the typical cycle follows a set pattern with capital first heading towards BTC increasing its market capitalization dominance, which has already surpassed 50%. This is followed by the rotation of capital into Ethereum's ETH and finally the peak 'bull-run' gains steam as the capital rotates into 'riskier' alt-coins. We are still in the first phase of the capital rotation cycle and there's a lot of steam for growth in broader crypto prices. It is worth highlighting that several token-specific developments are playing out as well, that will impact individual token prices based on their respective narratives," adds Chaturvedi.
"We have seen in the past that Bitcoin mostly leads the market rally followed by Ethereum and other altcoins. Most of the digital assets have touched year highs which gives us a glimpse of positive 2024 market trends," adds Thakral.
"Historically, surges in prices have served as leading indicators, sparking increased developer activity and funding for new projects. This positive momentum creates a ripple effect, fostering more innovation and growth within the crypto ecosystem. Furthermore, the ongoing technological advancements, such as L2 solutions and zero-knowledge proofs, add another layer of optimism. These developments pave the way for a multitude of new applications, driving real adoption in the coming years," says Thukral.
TAKE AN SIP APPROACH
According to industry insiders, SIP (Systematic Investment Planning) or DCA (Dollar-Cost Averaging) are widely recommended strategies for investing in volatile assets like Bitcoin. "These methods involve investing a fixed amount regularly, regardless of market conditions, which can mitigate the impact of volatility. A disciplined investment approach, considering a time horizon of 3-5 years, can be sensible. However, it's essential to tailor the strategy to individual risk tolerances and financial goals."
Agrees Chaturvedi, "The best way to mitigate volatility risks is by systematically investing over a longer timeframe, using a SIP-type investment strategy. As per industry experts, a 2-5% allocation of your portfolio into crypto, can help boost risk-adjusted returns over longer duration time frames. So don't put all your eggs in one basket and diversify your allocation."
According to Pagidipati, focusing on fundamentals is crucial, "Historically, we did see the price take a bullish turn after the halving event. But one should focus on the fundamentals and understand the underlying economics without getting carried away by the possibility that the price could rise." Thukral insist on diversification, "While Bitcoin is a prominent player, diversifying your portfolio can help manage overall risk exposure. Bitcoin's historical performance suggests that patient investors tend to fare better."