Bitcoin’s journey started in 2009, with the release of the bitcoin white paper by creator Satoshi Nakamoto. In its early days, BTC was valued at less than a cent.
The early years of bitcoin were marked by steady growth and periods of rapid price appreciation, known as ‘bull runs’. One of the greatest bull runs saw the price of BTC run from $US4,000 to $US69,000 in November, 2021. Over the past 18 months, BTC has risen from $US16,000 to a new all time high of $US73,000.
However, there were also periods of uncertainty, as Sciberras points out.
“During 2014 and 2017 we saw many bitcoin ‘forks’ proposed that split the bitcoin community,” he says. Hard forks are changes to the underlying protocol of the blockchain network that essentially splits a cryptocurrency into two.These forks represented crucial junctures in bitcoin’s history, with various factions in the community attempting to change BTC’s direction. Despite heated debates, and a number of forks, bitcoin has persisted in its current format.
“Bitcoin surviving these attempts to change it is a core contributor to where BTC is now, increasing its confidence and resilience,” Sciberras says.
“It has weathered many storms and attempts to change it, with bitcoin forks now a distant memory, combining for less than 1% of bitcoin’s total market cap.”
In June of 2023, BlackRock, the world’s largest asset manager, filed plans to start an exchange-traded fund (ETF) specifically for BTC. Multiple other institutions followed suit, with WisdomTree, ARK Invest and others lodging their first application or updating existing applications shortly after BlackRock’s announcement. In January this year, 11 of the ETF applications were approved for trade in the US, pushing the price of bitcoin to reach a new all-time high of over $US73,000. Since their inception, these ETFs have seen some of the largest inflows of any ETF in history, marking them as one of the most successful ETF launches ever.
Another 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 Bitcoin halving occurred on April 20, 2024, as the bitcoin blockchain ticked over the 840,000 block. The issuance rate for bitcoin is now down to 3.125 BTC per block, taking bitcoin’s annual inflation well below 1%.
“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 circumspect.
“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.”
How Will Bitcoin Perform in 2024?
Bitcoin’s performance in 2024 depends on a variety of potential bullish and bearish catalysts. Numerous factors, such as institutional adoption, the halving, regulatory changes, and macroeconomic trends will influence the price of bitcoin in 2024.
During 2023, the crypto industry was rocked by a series of enforcements that shook confidence in the sector. The US Commodity Futures Trading Commission (CFTC) filed civil enforcement action against crypto exchange, Binance, and its founder and CEO Changpeng Zhao (CZ).
However, in November last year, Binance settled with the US Treasury and Department of Justice (DoJ), with CZ agreeing to step down and hand over the reins as part of the deal.
Sciberras notes that, most importantly Binance was not accused of misusing customer funds and “did not see a bank run on the exchange”.
“This was one of the best outcomes the market could’ve hoped for, and crypto prices rallied as a result,” he says.
“Binance was a massive grey cloud hovering over crypto, and the settlement is a huge green flag heading into 2024.”
Furthermore, chairman of the US 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. According to CME Group’s FedWatch tool, as of June 9, there was a 49% chance of an interest rate cut in September and a 85.5% chance of at least one rate cut before the end of the year.
However, the most recent US consumer price index (CPI) data suggests that inflation is still yet to be tamed. Sciberras recommends investors keep an eye on personal consumption expenditures (PCE) inflation, as Powell has left the door open for further rate rises if it begins to creep back up.
When interest rates stabilise or fall, cryptocurrencies such as bitcoin can offer an attractive place for investors to park capital due to its perceived hedge against traditional financial systems and increasing scarcity—especially now the halving has occurred for the fourth time.
Furthermore, now that 11 spot bitcoin ETFs have been approved for trade, there have been significant inflows of capital into BTC as the managing institutions gather bitcoin to hold as backing for ETF shares. Since launch in early January, BlackRock’s BTC has seen almost $US15 billion in inflows, with a further $US6 billion flowing into the other ETFs.
These capital flows could provide steady buy pressure for BTC as capital continues to flow into the ETFs, potentially driving the price of bitcoin up even higher throughout the year.
What Does the Future Hold for Bitcoin?
When it comes to predicting the future of bitcoin, there are two potential outcomes to consider: the bull and the bear case.
The Bull Case
Sciberras says a bullish future for bitcoin may depend on the sturdiness, or lack thereof, of traditional banking frameworks.
“There are serious issues in the global economy, with the US facing a banking crisis and growing debt obligations,” Sciberras says.
“There were multiple bank failures in 2023, but many forget the underlying problem of these failures still exists.”
If bank failures continue in 2024, the government may be forced to step in to provide stimulus or print more money. This would further devalue the US dollar, similar to what occurred during the Covid-19 pandemic.
“In this scenario, bitcoin’s role as a known, fair and resilient asset with a fixed supply where the rules of the game are not easily changed could become attractive,” Sciberras says.
Sciberras also points to the increased demand for block space on bitcoin’s network due to recent innovations, such as ordinals Sciberras also points to the increased demand for block space on bitcoin’s network due to recent innovations, such as ordinals, BRC-20 tokens and Runes, as positive developments. The higher demand, utility, and fees for miners could help alleviate concerns over bitcoin’s long-term security budget. The growing adoption of the Lightning Network, a layer on bitcoin that enables faster transactions, 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.”
Further, Sciberras cites the approval of spot bitcoin ETFs as a key factor influencing bitcoin’s price in 2024. It has not only necessitated physical bitcoin purchases—which has lifted prices—but they have also added a considerable air of legitimacy to cryptocurrency more broadly.
“The (approval) could funnel between $US30 billion to $US300 billion into bitcoin,” he says. As of June 2024, the new ETFs have already amassed $US40 billion worth of the world’s largest crypto asset.
Finally, Sciberras cites the Financial Accounting Standards Board’s (FASB) new digital asset reporting rules, set to take effect in December 2024, which will ease rules around the reporting and holding of cryptocurrencies for companies. These new standards remove a significant obstacle for companies holding bitcoin on their balance sheet.
The Bear Case
However, 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.
Additionally, short-term sell pressure could also negatively impact bitcoin’s price.
Then there is the contentious debate about ‘inscriptions’ on the bitcoin blockchain, which are stores of data, such as videos, audio, and text files. While Sciberras acknowledges their 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, regards 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 and political fall-outs are another concern—despite the fact it derives its power from renewable sources.
“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 US,” Sciberras says.
If bitcoin mining operations continue to face pressure from governments globally, it could threaten bitcoin’s price.
“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.”
A swing in sentiment against bitcoin and cryptocurrency by governments could also decrease prices.
“The US is becoming incredibly hostile towards cryptocurrency and Bitcoin,” Sciberras says.
Additionally, if bitcoin threatens countries’ monopoly on money due to widespread adoption, governments could move to restrict it.
Sciberras points to a recent bill introduced in the US 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 US crypto industry,” he says.
The implications of anti-money laundering (AML) and Know Your Customer (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.
Is Bitcoin a Worthwhile Investment?
Investing in bitcoin comes with its share of rewards and risks, and understanding these is key to making an informed decision.
Overall, Sciberras is optimistic about bitcoin’s future.
“Looking into 2024 and beyond, I’m personally very long-term bullish on bitcoin,” he says citing the improved economic backdrop, the halving event, the improved development of scalability within the Lightning network, and the BTC ETFs.
However, bitcoin’s future isn’t without potential hurdles.
“If bitcoin continues to be targeted by governments and its energy consumption is further politicised, 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 lacklustre adoption and demand for bitcoin, or fee revenue is inadequate to incentivise miners to upgrade their hardware and mine new bitcoins, security could decrease and threaten the network,” he says
Bottom Line
While Bitcoin holds considerable potential, it also comes with significant risks. Investors should carefully consider their risk tolerance and investment goals before diving into the world of Bitcoin. As with all investments, it’s wise to do your own research and, if possible, consult with a tradefxpro Advisor.