In recent years, digital currencies have been all the rave. However, the idea that digital assets are exclusively some form of currency is slowly falling by the wayside as different use cases are emerging and being rapidly adopted. This May, The Fintech Times is looking to showcase some of these new methods and explore how the digital asset ecosystem is evolving.
For better or for worse, when you think of cryptocurrencies, it is very likely you think of Bitcoin. Against all the odds and the negative press Bitcoin receives; be it facilitating illegal trade transactions or having a massive negative impact on the environment, crypto’s poster boy continues to remain in the limelight. One major reason for this is the price points it has achieved.
Bitcoin helped feed the crypto hype during the pandemic, which in turn led to the digital asset reaching all-new heights. Since then, it seemed like Bitcoin’s heyday was in the rearview mirror, but once again, the asset’s price shot up and broke its record once again in March 2024.
As we look to the future, we set out to find out what will need to happen for Bitcoin to break its all-time high once again.
Bitcoin’s halving is a pillar in price change
Bitcoin is an extremely volatile asset, as its values soar and plummet in the blink of an eye. One factor that comes along every four years that has historically impacted its value is the Bitcoin halving. This event reduces the reward for each Bitcoin block mined by 50 per cent. The purpose of the halving is to counteract inflation and maintain scarcity.
Professor Andrew Urquhart – head of the ICMA Centre
Commenting on how the recent halving will impact the sphere, Professor Andrew Urquhart – head of the ICMA Centre and professor of finance and financial technology said: “I believe Bitcoin will again reach an all-time high in 2024 given the halving in April which involved a decrease in the amount of new Bitcoin created every 10 minutes.
“This decrease in the increase in the supply of Bitcoin should cause a supply squeeze, putting upward pressure on prices. Regulation may help, but also hinder price prospects so it depends on the level, scope and purpose of the regulations.”
James Sullivan, group general counsel and UK general manager of Bitstamp
James Sullivan, group general counsel and UK general manager of Bitstamp, the crypto exchange, added: “Bitcoin has, as a result of the Bitcoin halving event and growing institutional interest, been under some pressure for increased demand.
“As a result, we may see Bitcoin reach a new all-time high in later in the cycle. Additionally, we will also need to see the continued development of regulatory frameworks that place trust and security at the forefront for investors, giving institutions the confidence to treat it like traditional finance.”
Beyond the halving
Lars Holst, founder and CEO, GCEX
While the halving has acted as a big catalyst for change in the past, Lars Holst, founder and CEO, GCEX, the digital assets and FX brokerage, also notes the importance of other factors.
“Beyond greater institutional adoption and after the Bitcoin-Halving event, a combination of factors could contribute to this event. Positive macroeconomic conditions may encourage further interest in risk assets, such as Bitcoin. Additionally, regulatory clarity is crucial for wider adoption, providing a stable framework that gives confidence among investors and businesses alike.
“These factors, coupled with ongoing technological advancements and growing mainstream acceptance, have the potential to propel Bitcoin to new records.”
Impact of politics
Lukman Otunuga, senior market analyst at FXTM
Lukman Otunuga, senior market analyst at FXTM, the online trading broker, 5 November 2024 will be a pivotal moment for the future of Bitcoin and its possible all time record break. On this day, the US election will take place.
“Bitcoin remains under pressure with the scales of power seemingly shifting in favour of bears. The cryptocurrency ended April over 15 per cent lower and extended losses into the new month despite the halving event two weeks ago.
“Investor appetite for the crypto has been hit by the prospects of ‘higher for longer’ US interest rates with ETF outflows fuelling the downside pressure. According to Bloomberg, a group of almost a dozen US spot Bitcoin ETFs saw outflows of $564million on Wednesday – the biggest seen they launched in January. With Bitcoin trading roughly 20 per cent away from its all-time and currently weighed by fundamentals, bulls have a steep hill to climb.
“Nevertheless, the cryptocurrency is still up almost 40 per cent year-to-date and could remain influenced by US rate cut expectations. Looking ahead, the next major event that could rock Bitcoin is likely to be the US presidential elections. Biden‘s opposition, Trump could be the next catalyst. His pro stance towards cryptocurrencies may boost sentiment towards Bitcoin should he triumph.
“To be clear, determining what influence Trump could have on the SEC is uncertain – but the idea of a pro-crypto US president may translate to fresh upside gains across the crypto space.”
Short term volatility
Nick Merritt, executive director, Designit
“The prospect of Bitcoin surpassing its previous all-time high (ATH) requires a confluence of factors to align,” explains Nick Merritt, executive director, Designit, the experience innovation company.
“Institutional adoption plays a pivotal role, with continued investment from corporations, asset managers, and hedge funds driving demand and price appreciation. Market sentiment, influenced by macroeconomic factors, inflation concerns, and technological advancements, can sway investor behaviour towards bullish trends. Regulatory developments that provide clear and favourable frameworks can mitigate uncertainty and foster investor confidence.
“Halving events, which reduce the rate of new coin creation, historically coincide with bull markets and ATHs, potentially influencing price movements. Additionally, market dynamics, including supply and demand dynamics and investor sentiment, contribute significantly to Bitcoin’s price trajectory.
“However, the relationship between the halving and price movement is nuanced. Market sentiment, investor behaviour, and external factors also influence Bitcoin’s price dynamics. Speculative activity leading up to the event can contribute to short-term volatility.”
At the end of the day, it’s a waiting game
Both Jonathan Dixon, head of trade surveillance at eflow Global, the workflow and regulatory software provider and Edan Yago, CEO of Sovryn the crypto trading platform, shared similar views that ultimately, we would have to wait and see
Jonathan Dixon, head of trade surveillance at eflow Global
Dixon noted: “The halving of BTC and the adoption of ETFs is one way this could happen. The halving reduces the supply of new Bitcoin, while ETF adoption increases demand by facilitating broader market participation.
“The change of ‘whales’—entities that hold large amounts of Bitcoin—being individual high-net-worth investors to nation-states and institutional firms, is also important. All of these players can afford to take long positions and ride out price volatility. As more people hold, price moves rely less and less on retail and more on the demand of providers of ETFs and cash rich firms.
Edan Yago, CEO of Sovryn
“Finally, time is required. Historically, Bitcoin has outperformed traditional finance when viewed over extended periods. Given time, one would expect Bitcoin to organically achieve several new all-time highs throughout its cycles over the next decade. In other words, patience is a virtue.”
Yago said time will be key factor in determining if Bitcoin can break its record: “While Bitcoin’s price is volatile in the medium term, it has maintained a rapid growth trajectory. More users, more integration with legacy financial systems and improved technology mean that Bitcoin’s rise remains as robust and inevitable as it has been at any point in its almost 15 year history.”
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