Which Way will Bitcoin Go in 2024?

 

2023 rolled in on the heels of a monumental crypto disaster, when the FTX exchange went down in flames. Perhaps surprisingly, the year ended up marking a recovery for beleaguered digital assets, with Bitcoin gaining as much as 157%. Traders knew the SEC (Securities and Exchange Commission) in the US might give the green light to spot Bitcoin ETFs in the second week of 2024, which was viewed as a potential catalyst for prices. They also knew that the Fed couldn’t keep hiking interest rates forever, and that a looser monetary environment could offer risk assets a healthy push.

As things turned out, Fidelity Investments’ and Blackrock’s long-awaited ETFs were finally born on January 11th, 2024, immediately urging token prices towards the region of the “good old days”, at $49,021 per coin. And then, as many had predicted, prices underwent a serious correction, losing 20.5% within 12 days. “This type of correction after a significant run-up is normal for Bitcoin”, explained Greg Moritz of AltTab Capital. After all, the SEC approval had surely been baked into prices for some time before January 11th.

Was this drop in prices, then, a mere hiccup in Bitcoin’s inevitable ascent to legitimacy, institutional adoption, and ever-more-ridiculous token prices? Many people think so, for instance Polymesh’s Graeme Moore, who views SEC approval as the breaking of the dam wall that was holding back institutional funds from crypto. For Moore, it’s straightforward that the new ETFs will reinforce the powers of demand in their matchup with supply, which will propel prices higher. “$100,000 per Bitcoin by end of 2024”, pronounces Moore unflinchingly.

But is there a sound case to be made against all this bullishness, looking ahead to the new year? If you have an eye out to trade Bitcoin in CFD form, join us for a couple of minutes before doing anything drastic.

Climate Activism

The same Fidelity who are leading the charge toward a crypto utopia were targeted in April last year by Greenpeace on the score of the environmental impact of Bitcoin mining, which the company supports. Yes, it’s true that Fidelity is no more guilty of this than any other such firm or, indeed, any crypto exchange that’s operating out there, but nevertheless, Fidelity “refuse to acknowledge that they have a responsibility and the ability to fix the problem”, in the words of Greenpeace’s Rolf Skar. The rationale behind such thinking comes partly from the fact that the decentralized Bitcoin network has no single person in charge of it, leaving activists with the dilemma of where exactly they should pitch their tents.

PoW in our context stands for “proof of work”, (the consensus mechanism used to run the Bitcoin network), and not for ‘prisoner of war’, but Greenpeace indeed look keen to turn PoW, if at all possible, into some sort of prisoner in their own war to save the planet. They want Bitcoin to give up on PoW and use, instead, PoS (proof of stake) to keep the network moving because it’s less carbon-dioxide intensive. This is not so simple to do, however, as NYU’s (New York University’s) Dr. Hanna Halaburda makes clear: “Any big changes to Bitcoin protocol have been very unsuccessful because you need to get all the miners to agree to that”, she says. In the meantime, it remains to be seen what sorts of impact climate activists are going to be able to make this year. They do have like-minded people to turn to in the US government, where a bill has been put forward to slap a 30% tax on Bitcoin miners because of the greenhouse gases associated with their work.

The Halving

The Bitcoin halving event scheduled for April 2024 will cut the inflation rate of the token from 1.75% down to 0.85%. Putting aside the fact these events have been known, apparently, to spur price surges, analysts point out something unique about this year’s event: This time, supply of the coin is falling significantly behind demand. With most Bitcoin owners hoarding their assets for the long term, there are only about 2.3 million of them available for purchase. Consequently, the upcoming event may work to pressure prices upwards more than has historically been the case.

However, “The jury is still out on how priced-in the halving is, or how important the event is in the grand scheme of Bitcoin’s price trajectory”, says Nicholas Sciberras of Collective Shift. Indeed, some strategists believe the idea that halvings lift up token prices is actually a fallacy.

Sailing On

It’s worth mentioning that one of the key factors setting a foundation for a crypto growth spurt this year is the expectation of dovish Fed policy, but Fed Chair Jerome Powell has said that he may have to hike rates again – if he sees the PCE (personal consumption expenditures) inflation index go up. The questions of how much and when interest rates will be cut are, as yet, unanswered. It also remains unclear what pent-up effects of the year-and-a-half of persistent Fed hikes will show their ugly faces in the economy.

For those who trade Bitcoin in CFD form with iFOREX Europe, it’s immaterial whether prices are shooting to the stars of falling into the gutter. If you believe their trajectory is upward, choose a “buy” deal, while a “sell” deal would be the thing to do when prices are dropping.

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