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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.
Obviously, the world’s oldest cryptocurrency has come a long way since its first recorded price of less than a cent. In March 2024, BTC set a new all-time intraday trading high by breaking through the $69,000 level and even topping out at $73,000 before declining in price.
Nicholas Sciberras, senior analyst at Collective Shift, points out that the idea that bitcoin could one day be worth a million dollars per unit “really shows how far we’ve come.”
However, while great highs are possible, so too are catastrophic lows.
By May 9, less than two months after reaching new highs for the first time in over two years, BTC was trading below $63,000 once again.
How Will Bitcoin Perform in 2024?
Bitcoin’s performance in 2024 depends on a variety of potential catalysts.
Numerous factors, such as institutional adoption, the most recent halving event, regulatory changes and macroeconomic trends, will influence the price of Bitcoin in 2024.
When it comes to predicting the future, there are two potential outcomes to consider: the bull case and the bear case.
The Bull Case
Sciberras points to the increased demand for block space on bitcoin’s network due to new “inscriptions” as a positive development. Inscriptions are recent innovations on the bitcoin blockchain such as ordinals and BRC-20 tokens.
These inscriptions might wind up supporting the adoption of bitcoin’s Lightning Network, which enables faster transactions and 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.”
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.
However, after three meetings of the Federal Open Market Committee thus far in 2024, the Fed has not yet chosen to lower the federal funds rate.
According to CME Group’s FedWatch tool, as of May 9, there is a 97% chance of no rate cut at the Fed’s next meeting on June 11-12.
At the same time, CME Group is forecasting an 87% chance of an interest rate cut in September and a 100% chance of at least one rate cut before the end of the year.
Sciberras recommends investors keep an eye on inflation from the core personal consumption expenditures price index, or core PCE, which is the Fed’s preferred measure of inflation. Powell has left the door open for further rate increases if core PCE begins creeping back up.
Bitcoin Halving 2024
One 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 most recent halving occurred on April 19, when the reward for mining a block of bitcoin decreased from 6.25 BTC per block to 3.125 BTC per block.
“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 circ*mspect.
“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.”
Institutional Adoption
On January 10, the SEC approved 11 new spot bitcoin ETFs, including applications filed by financial giants BlackRock, WisdomTree and ARK. Spot bitcoin ETFs trade bitcoin at its current, or spot, price.
Prior to the SEC’s January decision, the only bitcoin ETFs approved for trading in the U.S. traded bitcoin futures. Futures are complex derivative instruments based on the future price of an asset.
Sciberras says spot bitcoin ETF approval could be a key factor influencing bitcoin’s price in 2024. According to Sciberas, these approvals would not only necessitate physical bitcoin purchases—which would lift prices—but it would also add a considerable air of legitimacy to cryptocurrency more broadly.
This appears to be precisely what has happened. Bitcoin’s price skyrocketed to new all-time highs above $73,000 in the two months following the SEC’s announcement.
However, the excitement surrounding spot bitcoin ETFs quickly faded. By May, BTC’s price had dropped back down below $63,000.
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.
Then there is the contentious debate about inscriptions on the bitcoin blockchain.
While Sciberras acknowledges inscriptions’ 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’ monopolies on money due to widespread adoption, governments could move to restrict it.
Sciberras points to a 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, or AML, laws and Know Your Customer, or 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.
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Is Bitcoin a Worthwhile Investment?
Investing in bitcoin comes with its share of risks and rewards, and understanding these is key to making an informed decision.
“Looking into 2024 and beyond, I’m personally very long-term bullish on bitcoin,” Sciberras says, citing the macroeconomic backdrop, April’s halving event and the improved development of scalability within the Lightning network as well as BTC spot ETFs.
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.
