Bitcoin experiences a new “crypto spring” in 2023
Published: Thursday, Dec 21st 2023, 15:01
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Bitcoin celebrated a comeback in 2023. Hopes of broad acceptance among institutional investors and a more stable interest rate environment helped the blockchain currency overcome the "crypto winter" of 2022.
Once again, the "cryptocurrency" enjoyed a rebirth last year. After hitting a low of just over USD 15,000 at the end of 2022 following the collapse of the FTX crypto exchange, Bitcoin's value trended steeply upwards over the course of the year. By December 2023, the price had climbed back above the USD 40,000 mark and is currently trading at around USD 43,900.
ETF as a catalyst
The share price was driven primarily by the euphoria surrounding the possible approval of an investment instrument known as an exchange-traded fund, or ETF for short. Such an exchange-traded fund is seen by investors as a gateway for institutional investors' capital.
Experts consider the probability of approval by the US Securities and Exchange Commission (SEC) to be quite high. It is therefore hardly surprising that in view of the applicants - including the world's largest asset manager Blackrock - high hopes are being pinned on the approval of an ETF.
However, market observers are warning of a "buy the rumor - sell the news" event. In other words, if the ETF is actually approved, many speculators could dry up their profits and put pressure on the share price. And whether an ETF will contribute to a large inflow of fresh capital remains controversial among experts.
For example, the analysts at Bitcoin Suisse write in their "Crypto Outlook 2024" that the immediate impact of approval could be "moderate". In the longer term, however, a "significant" impact on demand and acceptance of the cryptocurrency is to be expected.
Better environment expected
Adrian Fritz, Head of Research at the Swiss "crypto unicorn" 21Shares, is also optimistic: "The macroeconomic environment seems to be improving significantly for 2024". Inflation is cooling and central banks are more open to possible interest rate cuts. "This would favor high-risk assets such as technology stocks and crypto assets," says Fritz.
Meanwhile, high hopes are being raised within the scene by the upcoming "halving". The "reward" that "miners" receive is expected to be halved for the fourth time around April 23, 2024. The "miners" will then only receive 3.125 Bitcoin per "mined" block for their computing power to secure and continue the Bitcoin blockchain until the next "halving" in 2028.
Halving as a price driver?
In previous years, a "halving" usually led to significant price increases in the run-up and especially in the aftermath. However, there are doubts as to whether this will happen again. The head trader at digital asset manager Terrox, for example, is cautious and warns of a "non-event".
"The market has matured significantly over the past four years," says Jannick Broering. Therefore, the halving in 2024 can hardly be compared with previous ones. In view of the ever decreasing amount of new bitcoins, he therefore expects "no major impact".
Meanwhile, Fritz from 21Shares is confident about the halving. In the past, the narrative surrounding the halving has always led to a significant rise in the price of Bitcoin in the twelve months that followed. "Taking into account the improved macroeconomic environment and increasing institutional interest, this cycle could probably repeat itself," he summarizes.
New all-time high?
Looking into the crystal ball, the Swiss crypto industry is generally very confident about the coming year. Bitcoin Suisse is forecasting a new all-time high by the end of next year: "The final peak of the next cycle is likely to be reached in mid-2025," it predicts. The Zug-based "crypto pioneer" anticipates prices of between 180,000 and 200,000 dollars.
For the time being, however, caution is still advised, the analysts warn. By the end of the first half of 2024, there are certainly signs of a recession, which could affect risk assets and therefore also cryptocurrencies. Whether the comeback continues or there is another setback, the Bitcoin year 2024 should also be exciting.
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