(Kitco news) - 2023 was a breakout year for Bitcoin (BTC) and the cryptocurrency market as BTC started off trading around $16,500 and has since climbed 155% to hit a high near $42,150 on December 4.
There have been a variety of catalysts behind the surging price of BTC in 2023, from its initial burst early in the year amid the largest banking crisis since 2008 to excitement about some of the world’s largest asset managers – including BlackRock – filing spot Bitcoin exchange-traded fund (ETF) applications with the U.S. Securities and Exchange Commission (SEC).
The year end-rally was largely driven by speculation that the first spot BTC ETF would launch, and while such a product has yet to be approved, analysts at Bloomberg now give a 90% chance that multiple applications will be authorized by Jan. 10. This has supported the price of Bitcoin at higher levels and has many analysts also expecting a Santa Claus rally in the market.
“Markets have a way of trending into year-end,” and the current streak of gains “sets the stage for continued upside throughout December that could translate to Bitcoin closing out the year around $50k,” said Joel Kruger, FX Strategy Consultant at LMAX Group.
“The primary catalysts come from momentum on the back of an already stellar year of performance, anticipation around the approval of the Bitcoin spot ETFs in early 2024, and anticipation ahead of the Bitcoin halving event,” he said. “As far as headwinds go, we believe the biggest risk comes from any further delay from the SEC or any other regulatory/ governmental roadblocks in the US.”
“We believe we are coming out of an important year in which Bitcoin not only turned heads by way of its stellar outperformance but also by the way in which it achieved this feat,” Kruger said. “Indeed, Bitcoin is up over 150% year-to-date. But perhaps more impressively, Bitcoin has been one of the best-performing assets on a risk-adjusted basis. Bitcoin has also shown its potential as an uncorrelated asset, making it that much more attractive for portfolio diversification.”
“Bitcoin has surged from a low of $16,000 to a high of $45,000 in the past 12 months (Dec 2022 - Dec 2023), which is a gain of 180%,” said Pelli Wang, co-founder and COO of Bracket Labs. “This would put it on par with some of the best performing large-cap stocks in 2023, such as Coinbase (267%), NVIDIA (215%), and Facebook (165%).”
“The main catalyst for the BTC’s performance is undoubtedly the impending ETF approval coupled with the BTC halving event anticipated to happen around April 2024,” Wang said. “I predict that by the end of 2024, BTC could reach a high of $100,000.”
“What’s most unique about this market cycle is that it’s the first in Bitcoin’s history that comes accompanied by real-world use cases and global acknowledgment,” said Solo Ceesay, co-founder and CEO at Calaxy. “Several cryptocurrency and blockchain companies have gone public, Fortune 500 brands have started accepting Bitcoin and other cryptocurrencies as payment, and regulatory clarity appears to be on the way.”
“All of these factors acting in concert might make this moment in time an inflection point (for the better) of no return for Bitcoin,” he said. “Ultimately, I think all of these features will pave the way for another Top Shot-esque consumer use case around social money and payments to materialize.”
As for where Bitcoin price is headed in 2024, Ceesay said he thinks “it’s relatively inevitable that Bitcoin will reach $100,000.”
“For me, it’s a matter of when,” he said. “In terms of assets an agnostic investor can get their hands on, Bitcoin, and many other cryptocurrencies, trade incomprehensibly cheap relative to traditional investments like stocks or real estate - both of which have traded to all-time highs despite pervasive economic turmoil. In terms of asymmetric upside, it’s a hard asset to beat.”
“The price of Bitcoin should continue to rise beyond Q4 2023 levels throughout 2024 as long as bullish conditions remain intact,” said Liam Hunt, director at GoldIRAGuide.com. “Namely, that the first U.S.-based spot ETFs receive SEC approval in the first quarter of 2024 and, second, that Bitcoin's halving event successfully takes place by April.”
“With the momentum of a successful halving event and fresh capital injections from newly listed cryptocurrency ETFs, market conditions would be ripe for Bitcoin to eclipse its all-time high price point set in 2021,” Hunt said, before noting that “monetary policy conditions differ starkly between then and now.”
“Interest rates are far higher, and speculative investment classes are struggling compared to even a couple of years ago,” he said. “A conservative estimate, however, would place Bitcoin's price target for 2024 above the $50,000 per token mark. The upside potential for Bitcoin next year is indeed above $100,000.”
David Waugh, lead analyst at Coinbits, sees several reasons that Bitcoin’s price will continue to rise through the end of 2023 and into 2024.
“First, the expected approval of spot Bitcoin ETFs in January will likely result in billions of dollars of inflows into such products,” Waugh said. “Galaxy Research analysts estimate a $14.4 billion inflow in the first year, which will continue to increase annually – resulting in upward price pressure.”
“Second, Congress, led by Rep. Patrick McHenry, is working on passing comprehensive crypto legislation by the end of the year,” he said. “If successful, this would provide Bitcoin entrepreneurs with regulatory clarity and make the sector more appealing to banks hesitant to work with Bitcoin companies, which currently limits the services Bitcoin companies can offer consumers.”
“The industry has been struggling in the United States due to a lack of regulatory clarity and hostility for years,” he noted. “Comprehensive legislation would allow companies and investors to grow and invest without fearing being shut down.”
“Third, the upcoming halving this April, which upward price movements have previously followed, is another catalyst,” Waugh said. “In addition to the halving, a credit event or recession may cause Fed rate cuts and more liquidity that could spur positive BTC price movements.”
He added that nation-state adoption could also be a significant factor in 2024. “For instance, Javier Milei in Argentina is Bitcoin-friendly, and many leaders in the Global South are looking at Nayib Bukele's success as a model to follow,” Waugh said. “For example, Samson Mow from Jan3 met with the President of Colombia and the President of Suriname to discuss Bitcoin. The Kingdom of Bhutan's sovereign investment fund also confirmed owning multiple Bitcoin mining facilities this year.”
“Finally, entrepreneurs and developers continuously innovating leads to more Bitcoin adoption,” he said. “As a result, more people use Bitcoin as a store of value and a medium of exchange, positively impacting its price.”
“There have been numerous improvements in custody and payments in 2023, which many expect to continue in 2024,” Waugh said. “These reasons, among others, explain why 55% of investors recently surveyed by Unchained believe that BTC will reach new all-time highs in 2024.”
Peter Eberle, president at Castle Funds, also sees “multiple tailwinds that could propel BTC to new all-time highs in 2024.”
“Currently investors are enjoying a nearly risk-free 5% return in money market accounts,” Eberle said. “As these interest rates decline investors will seek out riskier assets with higher return potential and this will include BTC.”
Another positive is that “Regulations are becoming increasingly clear,” he said. “The SEC has made it clear that BTC is not a security. This together with a spot ETF approval will give institutional investors the confidence to invest in this asset class.”
Eberle also pointed to Bitcoin’s halving, predicted to occur in late April, which will cut the block reward from 6.25 Bitcoin currently to 3.125 Bitcoin. “As we know from economics class, if demand stays the same, but the new supply is cut in half, then the price needs to rise to find equilibrium,” he said. “These developments might finally push BTC to $100,000.”
For Daniel Krupka, head of research at Coin Bureau, the halving and the approval of a spot Bitcoin ETF will greatly affect Bitcoin’s price at the end of 2024, along with several macroeconomic factors.
“The overall health of the global economy will also play a role in Bitcoin's price performance,” Krupka said. “In favorable economic conditions, investors tend to allocate more capital to riskier assets like Bitcoin. Conversely, during periods of economic uncertainty, investors often seek refuge in safe-haven assets like gold.”
He also sees a change coming in how traditional finance (TradFi) investors view BTC. “If TradFi investors view Bitcoin as a safe haven asset like gold, it could experience significant price appreciation. However, if they continue to see it as a volatile tech stock, its price may be more subdued,” he said.
“Based on these considerations, I believe Bitcoin's price could range from $40,000 to $80,000 by the end of 2024,” Krupka said. “Past cycles suggest that Bitcoin should be towards the upper end of that range, assuming favorable macro conditions and TradFi investors' recognition of its safe-haven potential.”
He noted that this broad range “reflects the uncertainties inherent in the cryptocurrency market,” but believes that “Bitcoin has the potential to become a mainstream asset class in the coming years,” and is “confident that its long-term outlook remains positive.”
Anthony Rousseau, head of brokerage solutions at TradeStation, said that multiple factors are leading to the expectation “for a positive return year with a potential to reach previous all-time highs to test and possibly move to new highs.”
Along with the approval of a spot BTC ETF and the Bitcoin halving, Rousseau highlighted the FASB rule change for valuing crypto assets, policy changes by global central banks, and the election year in the U.S. as factors that will influence BTC price in 2024.
The FASB rule change for valuing crypto assets is a “significant change [that] involves the adoption of ‘fair value’ accounting for crypto assets held on corporate balance sheets,” he said. “This opens the door for corporates now to have a path to add Bitcoin to the balance sheet as a reserve asset, as MicroStrategy has adopted. These new account rules are mandatory after December 15th, 2024. This would be considered a net positive for corporates and the asset class with the opportunity of inflows from this segment.”
Regarding central bank policies, Rousseau noted that “The Federal Reserve has paused its rate hiking cycle, and central banks around the world are following.”
“It’s plausible to believe we have reached the heights of this tightening cycle,” he said. “For risk assets to get a sustained bid we will need to see a path forward with lower rates and an end to Quantitative Tightening. We are potentially entering an opportunity for net positive liquidity for the markets in 2024. Bitcoin is a pure reflection of net liquidity in the markets, and we would need to see positive liquidity to support any substantial bullish activity.”
Rousseau said that while there is limited data, Bitcoin has historically performed positively during election years in the U.S. BTC “In 2012 achieved approximately 160% returns, in 2016 achieved approximately 123%, and in 2020 achieved approximately 303%,” he said. “In general, looking at risk assets including the stock market, it achieved positive returns in 17 of the past 23 elections. It’s plausible to see market drivers that could drive a positive outcome for risk assets in 2024.”
“With Bitcoin breaking $40k recently, the upcoming halving quickly approaching, and growing optimism surrounding Bitcoin ETFs, I'm bullish BTC can reach over $45k by the end of the year, and based on Standard Chartered's analysis, into the six-figures by the end of 2024,” said Ben Weiss, co-founder and CEO of CoinFlip.
“Looking ahead to 2024, I’m optimistic about BTC’s price potential given catalysts such as the upcoming halving, potential Bitcoin ETF approvals, increased adoption, and positive sentiment from leading institutions such as the asset manager Blackrock to the nation of El Salvador,” Weiss said. “Potential headwinds are regulatory uncertainty and potential macro events such as increased interest rates, decreased consumer disposable income, or a recession that reduces asset prices across the board.”
Sam Callahan, lead market analyst at Swan Bitcoin, said that while “increased institutional adoption, the possibility of a Spot Bitcoin ETF approval, the upcoming halving event, and rising investor awareness around the unsustainable nature of the US's fiscal position and Bitcoin's potential as a hedge against reckless monetary and fiscal policies” will continue to drive BTC’s price higher, “there are also headwinds facing Bitcoin's price.”
“These include the risk of a recession and the potential denial of a Spot Bitcoin ETF,” he said. “The market seems to be pricing in a high probability of approval for a Spot Bitcoin ETF in early 2024, so a failure to secure this approval could be a shock to the market and negatively impact Bitcoin's price in the short term."
Strong likelihood that a spot BTC ETF will be approved shortly
Addressing the speculation around a spot Bitcoin ETF directly, Lucas Kiely, chief investment officer at Yield App, said there is a chance the first approval could come before Christmas.
“Bitcoin is enjoying significant upward momentum from the impending approval of a spot ETF,” Kiely said. “While we know that Chairman of the US Securities and Exchange Commission, Gary Gensler, is no fan of cryptocurrency, he’s going to find it very difficult to deny all of the applications in the growing pile on his desk.”
Kiely noted that the speculation around a spot BTC ETF “has seen Bitcoin increase by more than 60% over the last three months, and 20% over the last month alone. While it’s looking increasingly unlikely that we will see approval before Christmas, we probably will continue to see BTC trend upwards as long as US economic data continues to come in on the soft side,” he said.
“U.S. inflation seems to be coming under control and expectations are that the Fed will continue to hold if not begin to cut rates fairly soon,” he said. “This is giving traders across the board some cheer. Like his counterpart at the SEC, though, Federal Reserve Chairman Jerome Powell enjoys keeping the market on its toes, so that’s by no means a sure bet.”
“However, Bitcoin is enjoying a general return of positive sentiment to digital assets, with cryptocurrency funds recording $1.8 billion of inflows last week - the highest level since the bull market of 2021,” Kiely said. “As long as this continues, economic data doesn’t surprise on the upside, and we see nothing to suggest that a spot ETF will be denied, there is no reason to think that Bitcoin won’t continue to climb.”
Alan Scott, a contributor at RAILGUN, said he “thinks we’re going to see Spot ETFs come to fruition in the U.S., which will unlock a whole new market of very deep liquidity.”
“From a builder's perspective, I think we’ll continue to see pushes that will attempt to drive utility to the Bitcoin blockchain,” he added. “Some notable teams like Chainway, ZeroSync, Sovereign Labs, etc. are working on projects to grow utility around Bitcoin and this will garner a lot of attention over the next cycle.”