Since its inception in 2009, Bitcoin, the world’s oldest cryptocurrency, has attracted the attention of fans, investors, scammers and more recently, regulators.
For many of its acolytes, Bitcoin is not just a new form of currency but a groundbreaking technology that introduced the world to the concept of decentralized currencies and established the bedrock for an entirely new type of economy—the cryptocurrency market.
For others, it was a way to make a quick buck, and while some of these early investors did manage to join the coterie of Bitcoin millionaires, many more lost hundreds or even thousands of dollars trying to predict its price movements.
Bitcoin’s Price History
Bitcoin has been the subject of many price predictions, some of them extreme.
Notably, Cathie Wood, CEO of Ark Invest, predicted that Bitcoin could reach an astounding $1.48 million by 2030. Senior analyst Nicholas Sciberras from Collective Shift points out that this prediction reflects widespread surprise at Bitcoin’s meteoric rise.
“It’s difficult to put any price target out there, as the sky could become the limit depending on the level of adoption and external factors in the market,” he says.
Bitcoin has come a long way since its first recorded price of less than a cent. As of December 20, 2023, one Bitcoin was worth roughly $42,000. The idea that Bitcoin could one day be worth a million dollars per unit, as Sciberras points out, “really shows how far we’ve come”.
However, while great highs are possible, so too are catastrophic lows.
Forks
Bitcoin’s journey started in 2009, with the release of the Bitcoin white paper by creator Satoshi Nakamoto.
The early years of Bitcoin were marked by steady growth and periods of rapid price appreciation, known as “bull runs.” One of the greatest bull runs saw the price of BTC reach $69,000 in November 2021. However, there were also periods of uncertainty, as Sciberras points out.
“During 2014 and 2017 we saw many Bitcoin ‘forks’ proposed that split the Bitcoin community,” he says. Hard forks are changes to the underlying protocol of the blockchain network that split a cryptocurrency into two.
These forks represented crucial junctures in Bitcoin’s history, with various factions in the community attempting to change BTC’s direction. Despite heated debates, and a number of forks, Bitcoin has persisted in its current format.
“Bitcoin surviving these attempts to change it is a core contributor to where BTC is now, increasing its confidence and resilience,” Sciberras says.
“It has weathered many storms and attempts to change it, with Bitcoin forks now a distant memory, combining for less than 1% of Bitcoin’s total market cap.”
Bitcoin Halving
Another defining feature of Bitcoin’s price history is the halving event, which happens roughly every four years and reduces the rate at which new coins are created. The next halving is expected to occur sometime in early to mid-2024.
“We’ve seen Bitcoin’s price significantly increase a year before the halving and a year after,” Sciberras says.
Many investors view the halving event as one of the most significant factors that affects Bitcoin’s price. However, Sciberras is circumspect.
“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,” he says.
“There is a theory that the four-year halving event is not as significant as many think and that, instead, its alignment with external liquidity cycles is what makes it appear like a trigger for upward price movement.”
How Will Bitcoin Perform in 2024?
Bitcoin’s performance in 2024 depends on a variety of potential bullish and bearish catalysts. Numerous factors, such as institutional adoption, the halving, regulatory changes and macroeconomic trends will influence the price of Bitcoin in 2024.
During 2023, the crypto industry was rocked by a series of enforcements that shook confidence in the sector. The U.S. Commodity Futures Trading Commission filed civil enforcement action against crypto exchange, Binance, and its founder and CEO Changpeng “CZ” Zhao.
However, in November, Binance settled with the U.S. Treasury and Department of Justice, with CZ agreeing to step down and hand over the reins as part of the deal.
Sciberras notes that, most importantly Binance was not accused of misusing customer funds and “did not see a bank run on the exchange.”
“This was one of the best outcomes the market could’ve hoped for, and crypto prices rallied as a result,” he says.
“Binance was a massive gray cloud hovering over crypto, and the settlement is a huge green flag heading into 2024.”
Interest Rates and Bitcoin
Chair of the U.S. Federal Reserve, Jerome Powell, has indicated that the central bank may have reached the peak of its rate hike cycle, which Sciberras thinks could be a catalyst for a Bitcoin rally in 2024.
When interest rates stabilize or fall, cryptocurrencies such as Bitcoin can offer an attractive place for investors to park capital due to its perceived hedge against traditional financial systems and increasing scarcity—especially as the halving approaches in May.
“Estimates forecast three 25-basis-point rate cuts in 2024, a more aggressive outlook than what they have previously signaled,” Sciberras says.
Sciberras recommends investors keep an eye on inflation from the personal consumption expenditures (PCE) price index, as Powell has left the door open for further rate rises if it begins to creep back up.
What Does the Future Hold for Bitcoin?
When it comes to predicting the future of Bitcoin, there are two potential outcomes to consider: the bull and the bear case.
The Bull Case
Sciberras says a bullish future for Bitcoin may depend on the sturdiness, or lack thereof, of traditional banking frameworks.
“There are serious issues in the global economy, with the U.S. facing a banking crisis and growing debt obligations,” Sciberras says.
“There were multiple bank failures in 2023, but many forget the underlying problem of these failures still exists.”
If bank failures continue in 2024, the government may be forced to step in to provide stimulus or print more money. This would further devalue the U.S. dollar, similar to what occurred during the Covid-19 pandemic.
“In this scenario, Bitcoin’s role as a known, fair and resilient asset with a fixed supply where the rules of the game are not easily changed could become attractive,” Sciberras says.
Bitcoin Innovations
Sciberras also points to the increased demand for block space on Bitcoin’s network due to recent innovations, such as ordinals and BRC-20 tokens, as positive developments.
The higher demand, utility and fees for miners could help alleviate concerns over Bitcoin’s long-term security budget. The growing adoption of the Lightning Network, a layer on Bitcoin that enables faster transactions, could result in Bitcoin becoming more of a payment method rather than just a store of value.
“If Bitcoin can continue making progress and adoption in the payment front, it could increase its overall utility and become more ‘money’ like—helping it reach those lofty price targets,” Sciberras adds.
“We are seeing early signs of Lightning adoption. Lightning Network’s total payments grew 1,212% over the past two years. We are also seeing Lightning overcoming distribution hurdles with increased support.”
Institutional Adoption
In June of 2023, BlackRock, the world’s largest asset manager, filed plans to start a spot exchange-traded fund (ETF) for BTC. Multiple other institutions followed suit, with WisdomTree, ARK Invest and others lodging their first application or updating existing applications shortly after BlackRock’s announcement.
These applications were part of greater institutional adoption of Bitcoin throughout the remainder of 2023, driving the price to a high of almost $45,000 in December.
There are now almost 10 applications with the SEC, and there is a limited amount of time before a decision must be made to either approve or deny them. January 10, 2024, is listed as the decision date for BlackRock’s application.
Currently, the only Bitcoin ETFs approved for trading in the U.S. trade in Bitcoin futures. Futures are a complex derivative instrument based on the future price of an asset.
Sciberras lists a spot Bitcoin ETF approval as a key factor influencing Bitcoin’s price in 2024. It would not only necessitate physical Bitcoin purchases—which would potentially lift prices—but it would also add a considerable air of legitimacy to cryptocurrency more broadly.
“The (approval) could funnel between $30 billion to $300 billion into Bitcoin,” he says.
Sciberras also cites the Financial Accounting Standards Board’s (FASB) new digital asset reporting rules, set to take effect in December 2024, which will ease rules around the reporting and holding of cryptocurrencies for companies. These new standards remove a significant obstacle for companies holding Bitcoin on their balance sheet.
The Bear Case
Every investment has potential downsides, and Bitcoin is no exception.
Sciberras says on the negative side of the ledger, there are concerns over Bitcoin’s long-term security, given the block reward will continue to decrease. He adds that the spot Bitcoin ETF applications also pose a potential risk if they are rejected, creating a short-term sell-off of BTC.
Then there is the contentious debate about ‘inscriptions’ on the Bitcoin blockchain. While Sciberras acknowledges their potential in generating sustainable fees for the protocol in the long-term, especially as more Bitcoins circulate and miner reliance on fees increases, he also notes the divided opinions within the community regarding their impact on the network’s functionality.
Notably, a respected original Bitcoin developer, Luke Dashjr, labels inscriptions as “spam.” He argues that they congest the network, complicating the mining process and the network’s overall support. This difference in perspective sets the stage for a potential ideological clash within the Bitcoin community.
Environmental Considerations
Environmental fall-out is another concern.
“There are continued attacks on Bitcoin’s environmental impacts, with the White House proposing a tax of up to 30% on Bitcoin miners in the U.S.,” Sciberras says.
If Bitcoin continues to be criticized due to its energy consumption, it could threaten its price action.
“The worst-case scenario is we see Europe try to reintroduce a ban on (proof of work), which was tried in 2022 but was swiftly struck down.”
Bitcoin uses a proof of work validation system. Proof of work—as opposed to proof of stake—is the most energy intensive validation system that cryptocurrencies can use.
Political Issues
A swing in sentiment against Bitcoin and cryptocurrency by governments could also decrease prices.
“The U.S. is becoming incredibly hostile towards cryptocurrency and Bitcoin,” Sciberras says.
Additionally, if Bitcoin threatens countries’ monopoly on money due to widespread adoption, governments could move to restrict it.
Sciberras points to a recent bill introduced in the U.S. to expand the Bank Secrecy Act and impose more stringent reporting requirements for digital currency transactions, including those with unhosted wallets, as an area for concern.
“In its current form, this legislation would cripple the U.S. crypto industry,” he says.
The implications of anti-money laundering (AML) and Know Your Customer (KYC) laws also worry investors. Sciberras singles out the specific challenges of enforcing high reporting requirements on transfers to private, self-hosted wallets.
“AML laws remain a big battleground and could threaten the industry as compliance could be extremely difficult,” Sciberras says.
Is Bitcoin a Worthwhile Investment?
Investing in Bitcoin comes with its share of rewards and risks, and understanding these is key to making an informed decision.
Overall, Sciberras is optimistic about Bitcoin’s future.
“Looking into 2024 and beyond, I’m personally very long-term bullish on Bitcoin,” he says, citing the macroeconomic backdrop, the upcoming halving in May, the improved development of scalability within the Lightning network and the potential BTC ETF.
However, Bitcoin’s future isn’t without potential hurdles.
“If Bitcoin continues to be targeted by governments and its energy consumption is further politicized, then it could put pressure on Bitcoin’s long-term sustainability,” Sciberras says.
One of the significant long-term concerns for Bitcoin is its security in the face of a decreasing block reward.
“If there is lackluster adoption and demand for Bitcoin, or fee revenue is inadequate to incentivize miners to upgrade their hardware and mine new Bitcoins, security could decrease and threaten the network,” he says.
Tags: Cryptocurrency, Insights