The future looks bright for bitcoin in 2024.
Once considered financial curiosities useful only for proof-of-concept transactions like buying pizza, bitcoin and other cryptocurrencies are now on the verge of mainstream legitimacy. Analysts expect three major developments in 2024: A major bitcoin milestone, dubbed "The Halvening," is set to make supply more scarce. they see a more aggressive bid to drive bad actors out of the industry, and major institutions are readying ETFs for approval by regulators.
That institutional support is one of the largest bull factors for bitcoin in 2024, says Will Clemente, Reflexivity Research founder and a notable bitcoin bull. "The most interesting trend throughout the year has been the rise of a U.S.-based institutional type of buyer, whereas historically the crypto market's been primarily driven by retail (investors)," Clemente tells Investor's Business Daily.
Meanwhile, bitcoin in 2024 could become what it's always been designed to be: digital money, in all its investable, transaction-able glory. The big question is: Will this be enough to overcome its reputation for volatility, seediness and lack of stability?
1. The Halvening Shocks Supply Of Bitcoin In 2024
One of the most surefire events to catalyze bitcoin in 2024 is The Halvening, a portmanteau of "halving" and "happening." That's when the reward for bitcoin miners will be cut in half, or halved, in predictable increments.
Satoshi Nakamoto, the cryptocurrency's mythical creator, introduced the idea in the original bitcoin white paper published in 2008. Bitcoin "miners" get rewards for verifying its transactions, which incentivizes them to contribute to the network. But because the supply of bitcoin is fixed (a measure intended to fight inflation), that reward halves after a set number of transactions.
That halvening is likely to occur in April 2024. Clemente points to previous halvening events for what to expect in markets. "It's essentially a kind of supply shock on the market where the total amount of supply that's coming on is cut in half," he said.
However, a smaller reward creates less incentive for miners. That means adding bitcoins to the blockchain at a slower pace. Eventually, transaction fees will outpace mining as a way to profit from bitcoin. "Just from a raw supply-demand standpoint, you have less supply coming onto the market," Clemente said. "Even if demand stays the same, price starts to drift upwards."
We potentially could witness a repeat for bitcoin in 2024. "We'll see a similar price action following this upcoming halvening," said Clemente.
2. Bad Actors Booted From Crypto As Regulation Looms
Cryptocurrency continued to make headlines throughout 2023 as former titans continued to fall. Changpeng Zhao stepped down as CEO of crypto exchange Binance after pleading guilty to criminal charges. In November, Sam Bankman-Fried, founder of crypto exchange FTX, was found guilty of fraud by a New York federal jury. He awaits sentencing in March 2024.
Additionally, arrests and convictions followed the stunning collapse of the crypto hedge fund Three Arrows Capital in 2022. The collapse triggered more instability in crypto. It also turned the spotlight on allegations that many of crypto's biggest players engage in fraudulent schemes and misuse their customer's assets.
Crypto's nature as an anonymous, irreversible method of payment also opens investors to fraud and schemes.
Cryptos act like bearer bonds. Crypto transactions are supposed to be secure and irreversible — whoever holds the cryptocurrency key is effectively the owner. But this design meant investors who used exchanges like FTX or hedge funds like Three Arrows lost their holdings with little available recourse.
Clemente says crypto's reputation is likely to incentivize U.S. regulation of crypto and bitcoin in 2024. "I do feel favorably about regulation coming into the space … I think it's necessary," he said. "Regulation will continue to clam down and I think it's a positive for us to move forward and mature as an industry."
3. U.S. Institutions Loom Over Bitcoin In 2024
And like in any economic system, prices rise where there's increased demand. U.S. financial institutions are set to take even bigger steps into crypto and bitcoin in 2024.
One of the most notable developments is the rise of bitcoin ETF applications. The Securities and Exchange Commission and companies like BlackRock and Fidelity are discussing proposals for ETFs that track the price of bitcoin. There are reportedly up to 13 firms with pending applications for bitcoin-tracking ETFs, according to Reuters.
Investors looking to gain exposure to bitcoin and other cryptocurrencies will likely drive this trend in 2024. Clemente sees a rise in bitcoin trading during U.S. hours versus trading during European and Asia-Pacific hours. Meanwhile, interest in bitcoin futures is rising on regulated exchanges like the Chicago Mercantile Exchange.
U.S. A Leader In Bitcoin
"The U.S. has really been driving this thing up," Clemente said. "BlackRock, Fidelity and some of these very large institutional firms are putting a stamp of approval (on bitcoin), saying 'look, we feel comfortable offering this to our clients.' "
Institutional support could mean more stability for bitcoin in 2024, and a reduction of the trademark volatility that has plagued the cryptocurrency. "They're able to get money into the asset in a way that they feel comfortable doing so for the first time," said Clemente.
While the fundamental story for bitcoin in 2024 looks promising, investors need to remember that an analysis of what the actual charts are saying is of paramount importance. Look for proper entries, avoid buying extended and always make sure to manage risk by sidestepping big losses.
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage
