Key points
- Bitcoin is entering 2024 with bullish momentum.
- Experts anticipate the SEC will approve the first spot bitcoin ETF in the near future.
- The original crypto is on track for its next halving in April 2024.
Bitcoin prices have drifted to their highest levels in over a year as 2023 comes to a close, and much of that positive momentum has come from investors anticipating the first U.S.-listed spot bitcoin exchange-traded funds.
But it’s not just the possibility of spot ETFs acting as a catalyst for bitcoin prices in 2024.
The Federal Reserve is expected to begin cutting interest rates from 22-year highs in the first half of 2024, potentially creating a tailwind for bitcoin and other risky assets.
Bitcoin will also likely undergo its next halving event in April 2024, a catalyst that some experts claim can push bitcoin prices even higher.
Will bitcoin rise in 2024?
Grayscale recently scored a major courtroom victory over the U.S. Securities and Exchange Commission for a crypto spot ETF. The victory comes on the heels of the SEC repeatedly rejecting spot bitcoin ETFs in recent years, as the agency has balked at the idea of an ETF that directly holds crypto itself rather than just crypto futures contracts.
In its rejections, the SEC has cited concerns over investor safety and potential manipulation of the cryptocurrency market. But now it seems increasingly likely that the first batch of spot bitcoin ETFs will trade on a major U.S. exchange in 2024.
Grayscale is one of many applicants seeking approval to launch spot bitcoin ETFs, including BlackRock, VanEck, WisdomTree, Fidelity, Bitwise and Invesco. Bitcoin bulls say an SEC-approved spot bitcoin ETF would make it easier for institutional and retail investors to access bitcoin, potentially opening the floodgates for cryptocurrency to become a mainstream asset class.
“Bitcoin ETFs will create much greater access to bitcoin for a wider array of retail and institutional investors, providing an opportunity for exposure to the digital asset,” said Zac Townsend, co-founder and CEO of Meanwhile. “A spot bitcoin ETF — as a more traditionally accepted investment vehicle — would represent a means for any investor to incorporate bitcoin into their diversified portfolio.”
Bitcoin price history
Bitcoin began trading on online exchanges in 2010 and crossed over a dollar in value for the first time in April 2011.
As its popularity and visibility rose, bitcoin’s volatility and unique blockchain-based design gained the attention of investors and tech enthusiasts alike. Bitcoin prices reached $1,000 for the first time in 2013. But crypto garnered significant mainstream awareness when its prices surged to nearly $20,000 in December 2017.
One of the biggest driving forces behind the 2017 crypto bubble was CME Group’s decision to launch crypto futures contracts in late 2017, a mainstream financial institution’s first bitcoin-related financial products.
After the crypto market frenzy died in 2018, bitcoin prices plummeted to less than $4,000.
When stock and crypto trading became trendy again during the COVID-19 pandemic in late 2020, bitcoin prices again soared to new all-time highs. Following a string of bitcoin futures ETF launches in late 2020, bitcoin hit its all-time high of nearly $69,000 in November 2021.
Rising interest rates triggered a sell-off in bitcoin and other risk assets in 2022, and bitcoin prices dropped nearly 65% that year. The sell-off was further compounded by Luna and its associated stablecoin tTerraUSD’s collapse in May 2022 and multiple crypto firm bankruptcies.
Monetary policy tightening successfully reigned in inflation throughout 2023, and investor appetite for crypto has returned.
While bitcoin hit its 2022 bottom at less than $16,000 in November, the original crypto reached more than $20,000 by January 2023.
Bitcoin prices remained remarkably resilient even as crypto-focused banks Silvergate Bank and Signature Bank collapsed during a U.S. regional banking crisis in early 2023.
Fears over crypto market contagion died following the banking crisis, and investors shifted their focus from 2022’s crypto winter to the possibility that the SEC could soon approve the first spot bitcoin ETF.
Bitcoin investor sentiment is bullish and pricing momentum is positive heading into 2024. But long-time crypto investors know gains and losses can go as quickly as they come. The last time bitcoin completed a calendar year with a gain or loss of less than 60% was in 2015.
Bitcoin price stats
Heading into 2024, bitcoin prices are up more than 160% year over year, as of Dec. 5. But bitcoin still has a long way to go to get back to its all-time high of nearly $69,000 in November 2021.
Bitcoin predictions
Bitcoin price movements are notoriously difficult to predict, especially over weeks or months at a time. But momentum seems bullish heading into 2024, and there is at least some evidence that the 2023 bitcoin rally still has legs.
Bitcoin stock-to-flow
One model used to predict bitcoin’s price movement is stock-to-flow. It’s a methodology typically used to value commodities.
In stock-to-flow, a commodity’s stock is its total existing supply and its flow is the total new supply created in a year. Because bitcoin’s new supply is constant regardless of the price of the asset or its market demand, stock-to-flow has been used by some investors to predict future prices.
Currently, bitcoin’s stock-to-flow ratio is about 55.3, slightly below gold’s 62.3 ratio, assuming 3,000 tonnes of gold is mined annually. Bitcoin is uniquely designed for its flow to decrease as more bitcoins are mined and as the original coin periodically undergoes so-called halvings.
As bitcoin’s flow drops, its stock-to-flow ratio rises. Some investors have used bitcoin’s historical stock-to-flow ratio as a model for its future price.
But the model has its shortcomings. For example, stock-to-flow does not consider basic pricing factors, such as investor demand, macroeconomic conditions or regulatory restrictions. As a result, bitcoin prices plummeted in 2022 after the stock-to-flow model predicted prices would hit $100,000.
Bitcoin futures
Bitcoin bulls who are confident the crypto is headed higher can leverage their bets by buying bitcoin futures contracts.
Futures contracts are agreements to buy or sell an asset at a specific price at a future date, and they can provide a high degree of leverage that can supercharge investor returns. But that leverage could also add a layer of risk on top of an already volatile, high-risk investment like bitcoin.
Bitcoin traders can also use the bitcoin futures market as an indicator of when to buy and sell the cryptocurrency.
Historically, spikes in the open interest in CME’s standard bitcoin futures contract have corresponded to tops or bottoms in bitcoin prices. That open interest jumped 35% in just four weeks in October and November 2023, a potential red flag that the end-of-year bitcoin rally may soon run out of steam.
Will bitcoin reach $100,000?
In addition to spot bitcoin ETF approval, another major factor in bitcoin’s 2024 performance will be its halving event, which is expected in April.
Bitcoin halving is the process by which bitcoin cuts the rewards paid out to miners for each block of transactions added to the blockchain.
Halving is intended to maintain the scarcity of bitcoin and support its price. Bitcoin halving occurs after every 210,000 blocks on the bitcoin blockchain, roughly once every four years. Bitcoin miners currently earn 6.25 BTC in rewards per block. But that reward will be cut to 3.125 BTC starting at block 740,000.
Historically, bitcoin prices have reached a cyclical bottom a little over a year before a halving and have rallied for more than a year following a halving. If bitcoin were to repeat this trend in 2024, its price could reach $148,000 by the first half of 2025.
“BTC reached nearly $70,000 during the previous bull market cycle, so $100,000 is a possibility as more institutional investors look to purchase BTC,” said Kadan Stadelmann, chief technology officer at Komodo Platform.
Experts echo that an approval of a spot bitcoin ETF could easily trigger a major bitcoin rally in 2024.
Should you buy bitcoin?
Bitcoin can be an appropriate investment for short-term traders looking to speculate on a volatile asset or long-term investors with extreme tolerance for risk and volatility. But bitcoin has an unproven long-term track record relative to commodities like gold and silver.
Investors shouldn’t be focused on where bitcoin’s price is headed in 2024 and should start to think about cryptocurrency as a long-term investment that can diversify a portfolio.
“It will ultimately reach well over $100,000 and is most likely to be in the $500,000 to $1 million range in 10 years. What nobody knows is exactly when and the volatility it will have along the way, which is why, as an asset, it needs to be held long term, not traded,” said Seamus Rocca, CEO of Xapo Bank.
Because bitcoin has a fixed supply, does not generate cash flow, revenue or earnings, and is not backed by an asset that holds intrinsic value, its price is determined largely by investor sentiment and demand.
If bitcoin’s popularity and demand continue to rise over time, nothing is stopping its price from hitting $1 million. But it’s extremely difficult to predict investor sentiment and long-term future demand.
