While several events over the past years, like the collapse of the major crypto project Terra ($LUNA) and the bankruptcy of the former Top 2 crypto exchange FTX, caused a wave of negative sentiment over the markets, there may still be some hope. Bitcoin and the crypto market have recently been rallying, and some fundamental metrics coming into next year show that there may still be more gains to come. Let's dive into the bullish catalysts for Bitcoin in 2024!

Disclaimer

I am not a financial advisor. The content is for informational purposes only. You should not construe such information or other material as legal, tax, investment, financial, or other advice. Nothing in this report constitutes a solicitation, recommendation, endorsement, or offer by any entity to buy or sell any securities or other financial instruments in this or any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Bitcoin Spot ETF Decision 

The approval of a Bitcoin Spot Exchange Traded-Fund (ETF) in the US has been "rocky" to say the least. US Securities and Exchange Commission (SEC) chairman Gary Gensler has delayed the approval of one for quite some time, citing security concerns with the crypto markets being prone to manipulation and fraud. Others also speculate that his delay may be due to personal political ambitions. Nevertheless, in a CNBC interview last December 14, Gensler and the SEC appear to be renewing their stance by reassessing previous court rulings on past denied ETF applications. 

Gary is currently facing a deadline of around a dozen Bitcoin Spot ETF applications to be given a decision in January 2024. Notable applications include ARK and 21 shares, Grayscale, and Blackrock, the world's largest asset manager, with a nearly 100% ETF approval rate. With this many large institutions expressing interest in the crypto markets and several recent application amendments in cooperation with regulators, most already see an SEC approval as a given. 

An approved US Bitcoin Spot ETF would be highly bullish for the crypto markets. It would make Bitcoin more accessible to a broader range of investors, such as those who don't want to engage in the complicated technical aspect of self-custody. Moreover, it gives better regulatory clarity for institutional investors hesitant to engage with crypto. Inflows of new capital are sure to arrive should a Bitcoin Spot ETF be approved. 

Bitcoin Halving 

Another bullish factor for Bitcoin in the coming year would be the Bitcoin Halving taking place this April 2024. The Bitcoin Halving reduces the block reward for miners by half, approximately every 210,000 blocks, which occurs roughly every four years. Reducing the mining reward reduces the influx of new Bitcoin supply. Following the Law of Supply and Demand, a reduced supply with equal or higher demand tends to lead to an increase in price. Bitcoin halving even kicks off the bull market for cryptocurrencies because Bitcoin prices usually go up in anticipation of the halving and continue to reach new highs afterward. 

The Stock-to-Flow (S2F) model can also capture the effects of the Bitcoin Halving. It is a quantitative method used to estimate the price of an asset based on its scarcity. Essentially, the S2F model compares the asset's existing stock (total supply) to the flow (rate of new production) over a specific period. Since Bitcoin has a maximum supply of 21 million and a predictable flow due to the Bitcoin Halving, the S2F estimates the relative value Bitcoin should have over the years. As the asset's scarcity keeps increasing every halving, Bitcoin's price can also be expected to increase. 

This coming halving is no different. The markets have increased significantly this 2023, with Bitcoin soaring back to around $44k from its lows of about $15k, anticipating the halving showing substantial results. The supply shock from the next halving will surely make Bitcoin even more scarce, which could drive investors to stock up more.

Possible Interest Rate Cuts  

Furthermore, even monetary policy is on the side of Bitcoin and all markets. For context, Bitcoin and the crypto market peaked last November 2021 following the announcement of US Federal Reserve (FED) Chairman Jerome Powell that they would be hiking interest rates. This was done primarily to combat the rising inflation in the country caused by massive money printing. Risk assets like stocks and cryptocurrency tend to have an inverse relationship with interest rates, so Jerome Powell's announcement led to markets taking a downturn. 

Recently, though, inflation in the US has been more under control, with the country finally starting to feel the effects of the interest rate hikes. With the FED approaching its target of 2% headline inflation, Jerome Powell is taking a more dovish (bullish for risk assets)  stance with his monetary policy. With the recent lack of interest rate hikes, Powell strongly suggested last December 14 that the FED is also looking to start cutting interest rates next year. With an expected 3-quarter point cuts as early as next summer, investors are more likely to return to "risk-on mode" and begin to put back money in risk assets like Bitcoin and the rest of the crypto market.

Afterword 

Although there are many bullish triggers for Bitcoin and the cryptocurrency market, we should remember to be responsible traders and investors. We should only risk what we can afford to lose, do proper research, and never expect everything to go our way. Even if we think the market can only go up, there can always be another Black Swan event (an unpredictable event with severe consequences), such as a new COVID-19 variant or international conflicts that could dampen prices. Always being prepared for any scenario makes us better market participants overall!