Bitcoin's price skyrockets in 2024, fueled by a perfect storm of bullish catalysts.
Take that, bears!
Rising from the breadlines to once again making headlines, Bitcoin hit another all-time high (ATH) this week after spending more than 2 years in the crypto doldrums.
The world's largest cryptocurrency by market cap clocked a new ATH record of $73,750.05 on CoinMarketCap.
Celebrations were short-lived however, as Satoshi Nakamoto’s brainchild struggled to break through resistance, plummeting to a support level just above $65,700 at the time of writing.
Opinions are divided regarding Bitcoin's immediate short-term trajectory, with numerous analysts sounding the alarm bells following classic top signals such as the explosive growth of memecoin prices, sky-high open interest levels, and a CMC Fear & Greed Index score of 71. Despite these concerns, the long-term prognosis for BTC remains resoundingly optimistic.
So what's fueling this parabolic price surge? Is the hype real or are we just repeating the same mistakes from 2021 and 2017? Apart from the obvious candidates, several key factors have come together to light a fire under Bitcoin's latest bull run.
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Bitcoin Spot ETF Demand Dwarfs Available Supply
The most significant catalyst behind Bitcoin's latest surge has undoubtedly been the recent debut of spot Bitcoin ETFs in the United States. The influx of capital into these spot ETFs has generated relentless buy pressure in the Bitcoin spot markets, as the funds are compelled to continuously accumulate actual BTC to underpin the ETF demand. This price-agnostic demand from ETFs has charged Bitcoin's latest rally, pushing it to new heights.
After years of rejecting proposals for a spot Bitcoin ETF that would hold actual BTC, the SEC finally greenlighted several offerings from both TradFi heavyweights and crypto-focused funds in January 2024.
Major players like BlackRock, Fidelity, Grayscale and Ark Invest have launched their own spot Bitcoin funds, making it easier than ever for institutional investors to gain exposure to BTC.
This regulatory green-ish light from the SEC has brought much-needed respectability back to crypto markets following the 2022 custodial collapses, most notably FTX, that dumped Bitcoin’s price by 65%. It also opened access to trillions of mainstream investor dollars via these spot ETFs without the need to self-custody or put your trust in increasingly scrutinized centralized exchanges or the commission-heavy Grayscale Trust.
With most of the bull market pieces now in play - rumors of an imminent Ethereum spot ETF approval in May, and other bullish factors like the supply-crunching 4th Bitcoin Halving, better financial reporting rules, and a long-awaited reversal in US interest rate policy - the floodgates are open for surprisingly robust institutional demand who now don’t need to venture off the TradFi reserve to acquire and HODL some satoshis.
By March 4th, only 2 months after the launch of the Bitcoin spot ETFs, they collectively accumulated just under $45 billion in assets under management (AUM), a total of 684,000 BTC, and they’re not slowing down. On the same day, they saw a net inflow of $562 million, outstripping current market supply 10x.
BlackRock's iShares Bitcoin Trust crossed the $10 billion AUM mark in only 7 weeks - a staggering pace compared to the first U.S. gold ETF which took 2 years to reach that milestone. It now accounts for over 40% of all spot ETF volume, followed by Fidelity at roughly 20%.
According to CryptoQuant, 75% of new Bitcoin investments are coming in via ETFs. Bloomberg ETF analyst Eric Balchunas predicts that Bitcoin ETFs could flip gold ETFs in assets under management within the next couple of years given their blistering pace of growth. If this trend of non-stop buying were to continue, Bitcoin’s entire liquid supply of 1.3 million BTC could be managed by ETFs by September 2024!
Of course, survivors from the 2021 bull market cycle say it’s nothing new, and point to Bitcoin’s breathtaking first ascent from under $4,000 to $69,000, driven by factors such as the Covid pandemic stimulus handouts, Elon Musk’s (temporary) patronage, Coinbase’s Nasdaq listing and nation states like El Salvador declaring Bitcoin legal tender. They point to crypto’s biggest cyclical catalyst the Bitcoin Halving, which is coming in hot after its latest 4 year orbit.
Bitcoin Halving, Baby!
After ETFs, the upcoming Bitcoin halving event expected in April 2024 has been the biggest hail-mary narrative for crypto’s redemption. The halving is a pre-programmed event that occurs every four years which cuts the block reward for miners in half.
Previous halvings in 2012, 2016 and 2020 saw mining block rewards drop from 50 BTC to 25 BTC to 12.5 BTC to the current 6.25 BTC mark. After April, only 3.125 BTC will be emitted with each block.
This has created a predictable deflationary pressure that has historically preceded huge Bitcoin price rallies. Past halvings in 2012 and 2016 were followed by Bitcoin's price reaching new all-time highs within 12-18 months.
Anticipation of decreased supply from the halving hitting in April has driven increased demand from investors who expect BTC's price to rise significantly post-halving, as has happened in previous cycles.
Many analysts are projecting BTC to hit $100,000 or higher after the halving based on historical patterns. And with good reason, as supply pressure following previous halving events culminated within 12 months in 10x or higher Bitcoin price increases.
New DeFi and Ordinals Narratives
Another bullish factor to consider is Bitcoin’s rebranding as a new home for DeFi and NFTs, thanks to the exploding ecosystems of BRC20 tokens, those pesky network-clogging Ordinals and DeFi layer-2 networks such as Stacks.
Bitcoin Ordinals trading volume hit $51m on March 3rd, a bullish indicator for many who view its contribution to surging mining fees as a good thing.
Record High Trading Volume, Funding Rates and Open Interest
Another indication of the strength of this rally has been the record trading volumes across Bitcoin exchanges and perpetual futures markets. On-chain data provider Glassnode reports that Bitcoin's trading volume across trusted exchanges has hit new all-time highs alongside the price. Crypto traders are feeling risk-on and rolling the dice as a result.
Open interest in Bitcoin hit $31 billion on March 4th, handily topping the $24.3 billion record set on April 14, 2021. While some of it has been flushed out during March 5th’s post-ATH drop, this enormous volume indicates there is real buy pressure and overwhelming demand from both institutional and retail investors piling into Bitcoin. It is not just artificially inflated by suspicious trading activity by the likes of FTX as per the last cycle.
As can be seen on this CoinAlyze chart, open interest is closely correlated with Bitcoin’s price action.
Bitcoin Futures ETF volume is also at record levels, as this Yahoo Finance chart shows.
Liquidation Adds Fuel to Fire
Part of what has propelled Bitcoin through key resistance levels like $60,000 has been the cascading liquidations causing short squeeze.
As Bitcoin keeps setting new highs, it triggers buy orders from traders as well as short liquidations that add compounding buy pressure. This reinforcing loop can send prices into a liquidity-fueled overshoot before any meaningful consolidation.
On February 27th alone, over $161 million in Bitcoin shorts were liquidated in a single day as BTC blasted through $57,000 and kept climbing. Since then, each push higher has added fuel to the fire by forcing even more shorts to cover - creating cascading buy pressure.
On March 5, it was time for the bulls to take a beating, with Bitcoin’s correction causing $550 million in crypto liquidations, of which $90 million were wiped through memecoin losses.
Current liquidation levels can be viewed on this CoinGlass heatmap.
Frontrunning the FED and FASB Reporting Rule
Lastly, the macro environment in 2024 has created tailwinds that are very favorable for Bitcoin's price trajectory. Inflation remains stubbornly high at over 3% annualized, despite the Federal Reserve's aggressive interest rate hikes in 2022 and 2023. This has increased demand for scarce, hard assets like Bitcoin that are viewed as inflation hedges.
Eventually, interest rates will have to come down. The Fed has also started indicating that a rate cut may be in the cards later in 2024, boosting risk appetite for speculative assets across markets. Meanwhile, geopolitical tensions in war zones and persistent instability in the global banking sector have increased the conceptual appeal of censorship-resistant, decentralized cryptocurrencies like Bitcoin.
Lastly, the vitally important new FASB reporting rule brokered by MicroStrategy will come into effect in 2025 and favorably redefine how US companies report Bitcoin’s value on their books. On December 13, 2023, the Financial Accounting Standards Board (FASB) issued a new guidance that enables businesses to appraise certain crypto assets at fair value, with changes in fair value recorded in net income in each reporting period.
Bitcoin Price Predictions Skyrocket
If (read: when) Bitcoin clears the important psychological level of $70,000 successfully and once more enters the promised land of price discovery, we can expect to see a lot of upside, with pundits calling anything from $80,000 to a new $1.5m prediction for 2030.
- Most analysts forecast a conservative price objective of $100,000-$120,000 by Q4 2024.
- Bitfinex analysts expect the cycle peak to be achieved sometime in 2025.
- The Options market for December 2024 is pricing in a range of $55,000–$85,000.
- Anthony Pompliano pointed out on CNBC that once Bitcoin breaks a high, the price usually doubles very quickly, and the halving could supercharge this.
- Bitcoin oracle Tom Lee sees a short term top of $82,000 before a peak of $150,000 by the end of 2024.
- Bitwise’s CEO believes a price tag of $250k per Bitcoin is closer than you may think.
- On Crypto Twitter, PlanB says we’ll likely never see a $40k Bitcoin again (ahem) and his Stock-to-Flow (S2F) chart for 2024-2028 predicts an average of $528k per Bitcoin.
- Willy Woo believes BTC’s price will hit a minimum of $125k before the end of 2025 just from Blackrock and Fidelity clients if they rotate 3% exposure to ETFs.
- After Fidelity recently recommended a 1-3% Bitcoin spot ETF allocation for investors, analyst Adam Cochran called for an eventual $750k Bitcoin if that came to pass.
- Gemini co-founder Tyler Winklevoss feels that at $69,000, we’re only getting started.
- Elon Musk has, thankfully, said nothing to date.
Conclusion
We’re starting to reach that overheated part of the crypto cycle where everyone has an outlandish price target that may or may not hit. Survivors of previous cycles will understandably start suffering a couple of sweaty PTSD flashbacks as they scan the horizon and try to stave off the unbridled FOMO which returns like a long-lost relative every couple of years.
As the latest rally and today’s drop showed, Bitcoin remains volatile, despite TradFi’s increasingly Wormtongue-like grip on its reign, especially when the wind’s in its sails and whales are throwing their weight around. Maybe it’s better to pipe down, zoom out, and look at Bitcoin’s greatest and most articulate advocate for inspiration.
That’s right, MicroStrategy CEO Michael Saylor announced this week that his firm bought another 3000 Bitcoin. Rain or shine, the message is clear, to paraphrase an old war-time call to arms:
Stay Calm and Keep HODLING.
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