Roshan Aslam
Bitcoin has been engaged in an upward spiral since February 2024, setting a new all-time high of $73,794 in March and approaching similar levels once again. The cryptocurrency is also approaching its halving event in the second half of April, which will reduce the existing block reward of 6.25 BTC to 3.125 BTC.
While halving events have historically acted as indicators of a subsequent bull run of the cryptocurrency, the surge in its price well ahead of the halving event has surprised experts around the world.
FY24 has been a productive year for Bitcoin enthusiasts, who have witnessed the world’s largest cryptocurrency growing over 150% in the last 52 weeks while outperforming crucial indices like the Nifty 50 (30%) and Gold (11%). Many experts are finding similarities in the ongoing bull run with the price-action of 2020 and 2021, as the market appears to be resilient with hyperactivity from bulls in contrast to bears.
However, the ongoing surge could prove to be much different from the prior bullish action of the past.
Factors behind Bitcoin’s surge in 2024
One of the most crucial reasons behind Bitcoin’s bullish momentum can be attributed to the approval of exchange-traded funds (ETFs) by the US Securities Regulator (SEC) on January 10. This event proved to be a milestone for Bitcoin, as the approval established BTC as a reliable asset that can be bought and sold similarly to equities on an exchange platform.
Experts have described the approval to provide institutional maturity in the market, saying it presented an added layer of reliability in the prior upward momentum. As a result, Bitcoin has witnessed over $7.5 billion in investment since the ETF approvals which has contributed to the price surge, the majority of which could be traced back to institutionalised investments.
Why is it different from the previous surges?
The very first bullish momentum in the Bitcoin market occurred in 2013, following the first halving event in 2012 when the price surged from $12 to overtake the $1,000 mark – a considerable 8,000 per cent. The reason behind this momentum was attributed to the growing demand in China. However, China later introduced a complete ban on trading in cryptocurrencies, resulting in a steep decline in the market.
The second bull run took place in 2016, when the price dynamics witnessed a similar surge, increasing over 3,000 per cent in 18 months, going from $650 to $20,000. During the third bull run in 2020, Bitcoin’s price witnessed yet another surge, overtaking the $60,000 level in 2021 from $8,000. This was driven by technological development surrounding the crypto sector, along with increased awareness.
But the present bull run is being projected to overtake the $100,000 mark, and the reason behind such predictions is majorly based on the participation of institutionalised investors. They are increasingly investing in ETFs, thus obtaining 10x more blocks compared to retail investors and driving demand. As an example, BlackRock’s Bitcoin ETF is outperforming not only retail investors but other organisations such as MicroStrategy.
The BlackRock ETF recently set a daily global record of trading volumes, at almost 100 million shares. This emphasises the renewed interest of financial institutions in Bitcoin and underlines the primary difference between previous surges with the ongoing one.
Is this surge sustainable beyond the halving event?
Experts estimate that while the ongoing surge has the potential to cross the $100,000 mark, the surge will lose its momentum at some point. Parabolic market dynamics that result in substantial gains often lose momentum as bears become hyperactive to book profits.
The upcoming halving event has the potential to add to the momentum, but if leads to additional volatility, investors might look to invest in other cryptocurrencies, which might have an inverse effect on the momentum. The fact that a portion of the investors are always willing to overpay for overpriced assets might also have a role to play in supporting the momentum, however, it will have little steam to continue following that.
Meanwhile, this will provide long-term traders with the option to accumulate more Bitcoins in their portfolios, but this will be done based on deep analysis and future scope. This might lead to a paradigm shift in investor behaviour which embraces a multi-decade strategy for profit and a prolonged bull run.
(Author Roshan Aslam is Co-founder and CEO of GoSats).
