Marcus RichardsLast year, the cryptocurrency sector successfully shook off a biting bear market and began an exciting rally. Several assets returned impressive profits to investors, ending the year with positive year-to-date (YTD) gains. For instance, CoinMarketCap data shows that Solana (SOL) returned more than 950% in 2023, while Avalanche (AVAX) brought in 262%. These figures indicated a crypto bull run as market sentiments began to improve in favor of most cryptocurrencies.
Bitcoin’s (BTC) profit for the year was not as heavy. Between January and December of 2023, the king coin pulled in gains of 160%. Despite the relatively modest gains compared to others, Bitcoin might still be one of the best cryptocurrencies to consider for investment in 2024.
Bitcoin So Far
When considering Bitcoin for investment, it is essential to ask: what is BTC, and what are the potential perks obtainable from investment? Bitcoin is the world’s first major decentralized cryptocurrency and the largest by market cap. The king coin also holds a 53.3% dominance in the crypto sector. Unsurprisingly, Bitcoin has one of the highest adoption rates as several merchants allow BTC payments for goods and services, albeit in addition to other cryptocurrencies.
In 2022, the crypto sector suffered a harsh bear market that caused Bitcoin to end the year around $16,000 after starting above $40,000. Several events led to Bitcoin’s plunge, including the FTX collapse and the Terra crash. Both events saw investors lose several billions, eventually dampening the general crypto market sentiment. However, Bitcoin was able to pull through last year, coming out of the bear market and kicking off a rally.
Bitcoin Investment: Factors to Consider in 2024
Bitcoin’s reawakening has garnered enough confidence in the asset’s potential trajectory for 2024. People looking into cryptocurrency investments may consider allocating some funds to Bitcoin this year for the following reasons:
King Coin
Bitcoin is still the world’s largest cryptocurrency and has maintained that position for a long time. Despite fluctuations, Bitcoin has also maintained its industry dominance. Except in heavy crypto bear markets, the asset has returned significant annual profits to investors over time, regardless of stiff competition in the sector.
Over the years, there have been several points of criticism levied against Bitcoin. One major criticism is the blockchain’s scalability. Compared to networks like Ethereum (ETH) and Solana (SOL), Bitcoin has a much lower capacity, with a transaction throughput of 7 transactions per second (TPS). This is well below Ethereum at 15 TPS and Solana, which handles around 4,000 TPS but has a capacity of more than 50,000. Despite Bitcoin’s scalability drawback, the asset has managed to retain its hegemony, inspiring trust in members of its community, and attracting prospective investors with its deep liquidity and potential for impressive YTD gains.
Spot Exchange-Traded Funds (ETFs)
In January 2024, the United States Securities and Exchange Commission (SEC) approved multiple spot Bitcoin ETFs after more than a decade of repeated rejections. In 2013, the Gemini Exchange’s Winklevoss twins submitted the first-ever spot ETF application to the Commission. The agency rejected it, attributing its refusal to market manipulation and fraud concerns. Since then, the SEC continuously rejected multiple applications for the same reasons.
The SEC’s January approval may have been reluctant. Following a 2022 rejection of Grayscale’s proposal to convert its Grayscale Bitcoin Trust (GBTC) to an ETF, Grayscale sued the Commission and won the case. Federal appeals court judge Neomi Rao ruled that the SEC’s decision to deny Grayscale was “arbitrary and capricious because the Commission failed to explain its different treatment of similar products.” Following the ruling, observers concluded that approval was only a matter of time.
Spot Bitcoin ETFs have been generally successful since trading began. The products drew in nearly $2 billion worth of trades in the first three days, indicating significant investor interest. Since a spot Bitcoin ETF is a regulated way for traditional investors to enter the Bitcoin market without direct exposure to the asset, the high inflows indicate that many traditional players are interested. In 2024, Bitcoin is likely to see more interest from new and existing crypto enthusiasts, as well as individual and institutional players from the traditional finance sector. As of February 27, total net inflows to spot Bitcoin ETFs had hit $6.7 billion.
All of this activity has been bullish for Bitcoin’s price. According to current CoinMarketCap data, Bitcoin is trading above $62,500 after climbing more than 21% in the last 7 days. In addition, MarketWatch data shows that Bitcoin has climbed nearly 49% YTD. The king coin is on its way to its $69,000 all-time high (ATH) and is already predicted to rise above $70,000 this year.
The Halving Event
Bitcoin’s halving is a blockchain event that reduces the reward for block mining by 50%. The event is a deflationary measure that ensures the Bitcoin market is not saturated. The halving maintains scarcity on the Bitcoin network by controlling the number of Bitcoins released into circulation.
The halving occurs after every 210,000 blocks, which takes about 4 years. After its launch in 2009, the Bitcoin network began with 50 BTC per block. As of the previous halving in May 2020, the number of Bitcoins per block was halved, from 12 BTC to 6.25 BTC. The next halving, expected in April, should crash rewards to 3.25 BTC per block.
Historically, halving events have been quite bullish for Bitcoin even though prices do not spike immediately. However, given enough time, the market scarcity causes prices to rise as there are fewer assets to meet increased demand. Historical halving data shows that after the first event in November 2012, BTC’s price jumped from $13 to $1,152. The second halving saw BTC rise from $664 to $17,760 after a year, and then hit $67,549 in 2021, following the May 2020 event when BTC traded at $9,734. While it might be difficult to predict exact price action, the market expects the price of Bitcoin to react favorably enough to the upcoming halving with enough time.
Should You Consider Bitcoin in 2024?
The above reasons are in favor of Bitcoin and the possibility of a bull run this year. It is reasonably safe to expect that the scarcity from Bitcoin’s halving and increased ETF activity will support a Bitcoin run and raise prices considerably. While the spot Bitcoin ETFs have already created demand for Bitcoin, a reduction in block rewards will add to scarcity. Consequently, Bitcoin could easily revisit its ATH and continue to spike throughout this year, save for brief moments of correction.
