Bitcoin was one of the best-performing assets of 2023. And as we head into the new year, this cryptocurrency’s future looks bright. Here are four big catalysts we’re watching for Bitcoin.
A Bitcoin ETF
ETA: Estimated January 5-10
A Bitcoin ETF would open the door for a wider swath of would-be crypto customers to buy the coin.
Many investors haven’t felt comfortable investing in pure crypto, but an ETF could be a familiar enough wrapper to entice skeptics in. Wall Street’s adoption of Bitcoin could further cement it as the blue chip protocol of crypto.
Plus, a Bitcoin ETF could also pave the way to include crypto in retirement accounts. There are 12 Bitcoin-backed ETF proposals awaiting a decision from the SEC — including proposals from big institutions such as Blackrock, Fidelity, and WisdomTree — that could get waved through as soon as early January. Higher demand equals higher prices, all else being equal.
These ETFs could increase demand over time, but crypto’s initial excitement over the possibility of a Bitcoin ETF may have already been factored into Bitcoin’s price — the asset has rallied 60% since Grayscale’s court victory on August 30, and crypto funds attracted 11 straight weeks of inflows from the beginning of October to the middle of December.
Is the prospect of a Bitcoin ETF changing your crypto investment plans?
The Bitcoin halving
ETA: April
The Bitcoin halving is a pre-programmed event that happens roughly every four years. It essentially cuts miner rewards in half, which can curb the supply of Bitcoin in the market.
Markets move on supply and demand, so it’s possible that the halving could boost prices if demand simply stays healthy. And with Bitcoin ETFs slated to hit the market then, higher demand could intersect with tapering supply at the right time.
History also shows us that the halving could be significant. Bitcoin tends to rally into the halving, especially in the month before. Our data also shows that Bitcoin tends to do well in the year following the halving. But remember, Bitcoin can move wildly in both directions. And as Bitcoin climbs back to the highs, it could become more sensitive to bad news.
Is your portfolio prepared for the bitcoin halving?
Lower rates
ETA: The first half of 2024
Rates have been historically high for a while, but the expectation is that the Fed will cut rates in a matter of months.
Bitcoin — and crypto in general — could be a big beneficiary from this shift. Bitcoin is a young, risky investment, and the fear of higher rates hammered prices in 2022. We may be seeing the opposite reaction happen now.
Bitcoin’s performance — like any investment — depends on how willing people are to buy into it. Interest rates are the main lever for risk appetite, whether you realize it or not. High rates make borrowing money more expensive and saving money more attractive, while lower rates make spending and investing more appealing.
But before you dive head-first back into crypto, remember that interest rates could stay high even if they move lower. The crypto-focused investor could see Bitcoin as a stable store of value as other protocols struggle to digest high rates and slowing growth.
Are you factoring interest rate changes into your crypto investment plans?
Clearer accounting rules for Bitcoin
ETA: 2024
New guidelines will allow companies to treat crypto as investments versus intangible assets.
Bitcoin could also get a hand from Uncle Sam. New FASB accounting rules published this month could allow any crypto-holding company to mark their Bitcoin and Ethereum investments at fair value.
Cryptocurrencies’ odd accounting treatment has often dissuaded companies from holding Bitcoin. Under the current roles, companies must treat crypto like intangible assets. If the value of their crypto declines, they record an impairment charge, which weighs on earnings.
The new accounting rules could encourage companies to explore Bitcoin as a financing strategy, which could open up another vein of demand for crypto. They’re scheduled to go into effect in fiscal year 2025, although companies can choose to follow them beforehand. But it’s important to note that Bitcoin and Ethereum are still risky, so mainstream balance sheet adoption could still be far off.
Does your Bitcoin strategy take into account potential business investments?
The TL;DR:
Bitcoin’s price moves on headlines and technicals on a day-to-day basis. But over time, young markets mature through mainstream adoption. If you’re optimistic about crypto and decentralization’s chances of changing the world, then you have a reason to feel excited for next year.