Cryptocurrencies have had a solid run throughout the fourth quarter of 2023, and have stayed relatively stable into 2024. Bitcoin came from a local low of around $25,000 in September up to a high of just over $46,000 in December. Year to date, Bitcoin is down ~2% and hovers around $43,000. The bulls and the bears have been battling it out in the market, and as big news for Bitcoin has investors wondering whether to sell the news or to pump the exchanges in anticipation of a new bull market.
2024 marks another year of the BTC halving. Bitcoin is a proof of work network. What this means is that, like gold, people have to mine for Bitcoin. Bitcoin miners use complex computer algorithms to solve very difficult problems and build blocks on the blockchain. In return, they are rewarded with payment in the form of Bitcoin. The first halving took place in 2012, where instead of being paid 50 BTC for the creation of a block, miners instead would be paid 25 BTC. This year, the reward for mining will drop from 6.25 BTC to 3.125 BTC/block.
This seems like foreign concept when compared to traditional financial resources. However, this proof of work concept creates a currency that will become more and more scarce each year, ideally boosting the price up for miners and investors alike. The last halving will be in the year 2140, marking the year of the last Bitcoin being mined. At that point, it is expected that people will use their BTC to make purchases, using it in a way similar to cash, and less as an investment.
In the past the Bitcoin halving marked a bullish signal to the market, and previous data indicates that the price usually increases during or soon after the halving occurs. This year, it is expected to happen in March or April. However, this is not the only bullish indicator for Bitcoin this year, as some of the biggest news in the crypto-sphere has been released. On January 10th, The Securities and Exchange Commission approved the first exchange-traded funds (ETFs) that hold bitcoin.
This is good news for crypto investors and Wall Street alike, both of which have been pushing for the SEC to make Bitcoin easier to get a hold of. A Bitcoin ETF makes it possible for many (predominantly older) investors to get their hands on the notoriously volatile asset. With the spot ETF approval, investors will not have to take the extra steps traditionally taken to buy Bitcoin, which includes either setting up an account on exchanges such as Binance or Coinbase, or learning how to use a cold wallet; steps that many do not want to take. This increases the potential trading volume for Bitcoin, and as regulators are opening their minds, the markets could flood with old money trying to diversify their portfolio.
This news, however, did not spark the market into a bullish frenzy. Instead, the bears showed their power as the price fell from about $46,000 to just over $39,000 over the course of the next 12 days, over a 15% decrease. The bulls have held the line so far, keeping the price hovering in the low forty-thousands as of January 29th.
Nonetheless, Bitcoin and other crypto currencies are a highly speculative asset, and regulatory bodies seem to agree that there needs to be more regulation in order to fully move Bitcoin into the public sphere. If one follows the money however, it is estimated that the biggest conglomerates of all, BlackRock, Vanguard, and State Street, indirectly or directly own about 1-2% of all Bitcoin in circulation. BlackRock, with over $10 Trillion (with a T) in assets, is one of the biggest movers of the market. Their Bitcoin ETF, IBIT, accumulated over $1 Billion in less than 2 weeks after its release.
Personally, as someone young and willing to take the risk, I see Bitcoin as a no-brainer buy in my portfolio. I have been slowly accumulating what I can since 2020, experiencing my first bull market bust in 2021. I haven’t sold anything yet, and don’t plan to take profits anytime soon. None of this is financial advice, as I am not an advisor, but I think it could be worth doing some research if you have never heard of Bitcoin before. As for me, I’ll stick with my plan of dollar cost averaging over time, and looking for a discount if the bears insist!
