Bitcoin has rocketed to its highest value ever, reaching a landmark figure of nearly $73,000 on 12th of March, having already smashed through previous all-time highs before the weekend. These significant gains (over 67% since the beginning of February) are particularly striking considering the tumultuous period that preceded it, characterised by significant financial losses across the crypto industry and high-profile legal downfalls of figures such as Sam Bankman-Fried and Changpeng Zhao following the FTX saga in November 2022. Despite facing challenges with trust and Bitcoin’s value plummeting to below $17,000, recent events are once again showcasing the resilience of this budding asset class. In the face of the extreme volatility that has come to characterise this sector of the market, the hype cycle seems to be spurring up anew for Bitcoin and the ‘alts’ trying to make a name for themselves on its coattails. 

This resurgence of digital currencies has elicited a mixed response from the financial community; with some understandably more sceptical than others on how sustainable these new price levels are. Proponents of Bitcoin argue that this surge underscores its maturing position of long-term value and increasing acceptance as a legitimate financial instrument. On the other hand, sceptics caution against overly optimistic interpretations, suggesting that the lack of fundamental value behind Bitcoin’s rise could indicate it’s merely riding the wave of broader economic trends.  

In this article we will explore and unpack the key drivers behind the latest crypto bull run, as well as offer some insight into what this might mean for the future of the digital currency.    

Regulatory Developments and Shifting Institutional Attitudes  

At the top of the list of contributing factors towards Bitcoin’s surge in 2024 are recent successes in navigating the regulatory landscape, particularly in the United States. Legal victories against the SEC, which had historically adopted a stringent stance towards cryptocurrencies, are significant achievements along the road of legitimacy and acceptance. Most notably, the approval of Bitcoin spot ETFs has played a crucial role in attracting institutional and retail investors. 

Attitude shifts from institutional investors toward crypto have introduced a new dimension into the cryptocurrency market and one with deep pockets behind it. “Traditional institutions were once sitting out; today, they are here in full force as the principal drivers of the crypto bull market,” said Nathan McCauley, CEO of Anchorage Digital, a crypto platform. Bitwise CIO Matt Hougan commented; “The introduction of Bitcoin ETFs was heralded as a bridge for professional investors to enter the Bitcoin market. Our experience over the past seven weeks emphatically confirms this.” Software company MicroStrategy (MSTR.O) announced its purchase of approximately 3,000 Bitcoins at a cost of $155 million in February. Journalist and whistle-blower Edward Snowden predicts, “A national government will be revealed this year (2024) to have been buying Bitcoin – the modern replacement for monetary gold, without having disclosed that fact publicly”. For one, the president of El Salvador has stated that they have no intentions to liquidate the country’s extensive Bitcoin assets; even though it has appreciated in value by more than 50 percent (since it became the first country in the world to adopt Bitcoin as an official currency in 2021). 

With entities like BlackRock leading the charge with its spot ETF for Bitcoin there is an air of legitimacy for the leading cryptocurrency that we haven’t seen up until this point. Although Bitcoin remains highly speculative it seems that it is no longer just hopeful early adopters willing to ‘buy in’.  

The Much-Anticipated Bitcoin ‘Halving’

Another key factor in the early 2024 rises in Bitcoin price is the market anticipation of another Bitcoin ‘halving’. The Bitcoin halving is a critical event that fundamentally impacts the supply and, potentially, the price of Bitcoin. The Bitcoin halving is when the reward for Bitcoin mining is cut in half, a process that occurs approximately every four years. This mechanism is embedded within Bitcoin‘s mining algorithm, serving as a countermeasure against inflation by preserving the digital currency’s scarcity. By design, this event reduces the pace at which new Bitcoins are introduced to the system.

Chris Kline, COO of Bitcoin IRA, emphasizes the significance of this scarcity, stating, “Bitcoin’s production scarcity is what defines its finiteness, and when reward goes down, supply is constrained.” The total number of Bitcoins that can ever exist is 21 million. With over 19 million already mined, the window for new Bitcoins is narrowing, intensifying interest and speculation around each halving event. The halving directly influences the miners’ rewards, cutting them by half, which reduces the new supply entering the market. Initially, miners received 50 BTC per block, but this figure has sequentially decreased with each halving. As we approach another halving, anticipated in April 2024, the reward will drop further, making Bitcoin even scarcer. 

This in-built scarcity, coupled with sustained or increasing demand, has historically led to significant price increases for Bitcoin. As the market has learned from historical price rises associated with previous halving, investors are understandably being drawn to Bitcoin as they anticipate the effects of the next one. This anticipation contributes to a rise in Bitcoin’s price as the market prepares for a reduced supply inflow. Halving events are not just technical milestones but pivotal moments that attract attention, speculation, and investment, underpinning Bitcoin’s growing value proposition as a scarce digital asset. 

Conclusion 

The impending Bitcoin halving paired with growing institutional support has been integral to the recent price spikes of this preeminent cryptocurrency. With industry stalwarts doubling down on their Bitcoin strategies and the crypto market’s infrastructure evolving, the confidence within the sector has seen a considerable boost. This, however, does not negate the inherently speculative nature of Bitcoin. While the price ascends to new heights, drawing in a mix of seasoned investors and newcomers, the market’s unpredictability and volatility is not something that should be taken lightly. Traders must maintain a cautious approach, carefully considering the risks alongside the potential rewards. Investors will be wise to remember that despite the allure of rapid gains, the cryptocurrency market is still a complex and high-risk environment and come with significant losses as well. 

Reference:

Bitcoin hits record above $72,000 as demand frenzy intensifies | Reuters

SEC.gov | Statement on the Approval of Spot Bitcoin Exchange-Traded Products

What Is Bitcoin Halving? – Forbes Advisor

Bitcoin Halving 2024 – What You Need To Know – Forbes Advisor UK

Zachariah Walker

Content Writer at Finalto

All opinions, news, research, analysis, prices or other information is provided as general market commentary and not as investment advice and all potential results discussed are not guaranteed to be achieved. The information may have been derived from publicly available sources, company reports, personal research, or surveys. Past performance is not indicative of future performance. Trading carries risk of capital loss. Service available to professional clients only.