The fourth Bitcoin halving in April saw the rate of new Bitcoin issuance reduced to 3.125 BTC every 10 minutes, sparking great interest and speculation. Since then, Bitcoin has fallen from its highs, leading some investors to worry that higher prices are a long way off.
We believe March's new high (over $70,000) was a “head fake” by the new Spot Bitcoin ETF. However, given the halving event and ongoing supply and demand issues, we expect the future for BTC and cryptocurrencies to become brighter as the year progresses.
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Why do some experts think Bitcoin has surpassed its all-time high? And why did the crash occur? Unlike past halvings, on March 14, one month before the halving, Bitcoin's price rose to a new high of $73,750 with a market cap of $1.44 trillion. The rapid rise since the beginning of the year from a low of $39,000 has scared speculative investors and their associates into “halving trades,'' prompting them to cash out.
However, this pullback is likely due to macro factors, particularly the Fed's hawkish comments. These have fueled a “risk-off” mentality, increasing the likelihood of a rate cut in 2024 and raising the possibility of a rate hike. Since then, economic data has been weaker than expected, making a rate hike highly unlikely at this point. This change led to a resumption of risk trading and BTC price set a lower bound for the time being before rallying above $60,000. It also signals a return to Bitcoin's supply and demand factors, which appear to favor price increases.
There are several reasons to be bullish on Bitcoin and cryptocurrencies.
First, the past three halvings have consistently driven Bitcoin prices to new all-time highs in the months following the event. We believe this trend will accelerate as more institutional investors include BTC in their portfolios and supply becomes even tighter. This “rising tide” in BTC should lift all cryptocurrency boats.
Second, the launch of the Spot Bitcoin ETF in January 2024 is a pivotal event. These ETFs allow investors to trade stocks through their existing personal brokerage accounts, and promise wider availability through financial advisors. Companies such as Merrill Lynch, Morgan Stanley, and LPL are conducting due diligence on platform availability. The approval of these platforms seems inevitable, increasing accessibility and simplifying the process of investing in Bitcoin, which could further increase demand.
Third, regulatory trends in the global cryptocurrency market will have a significant impact on Bitcoin price trends.Potential passage of US bill establishing European regulatory framework for cryptocurrencies Crypto Asset Market (MiCA) Regulation It is important. These help dispel the notion that BTC and cryptocurrencies are just “pet stones” and see them as stores of value with technical utility. This change in perception could transform Bitcoin and cryptocurrencies from a speculative vehicle to a strategic investment and potentially a flight to quality.
Remember that a complex interplay of market dynamics, investor psychology, technological advances, and macroeconomic events influence the price of Bitcoin. I am bullish on BTC and cryptocurrencies and will be closely monitoring whether the market holds up post-halving.
Note: The views expressed in this column are those of the author and do not necessarily reflect the views of CoinDesk, Inc. or its owners and affiliates.
