can Bitcoin lead the charge in 2024?

• Crypto surges in 2024, led by Bitcoin crossing US$45,000.
• Upcoming halving event expectations boost the industry.
• Bitcoin’s rise over $45,000 drives 2024’s crypto growth.

2024 has just begun, and the cryptocurrency sector is already energized – especially by Bitcoin, the preeminent cryptocurrency, surpassing the US$45,000 threshold, a first since April 2022. This surge is driven by expectations of the possible endorsement of exchange-traded spot bitcoin funds.

Bitcoin recently achieved a 21-month peak at US$45,922, recording a notable 156% growth from last year, and the most significant since 2020. Although its current price exceeds US$45,500, it hasn’t yet reclaimed its highest point of US$69,000, set in November 2021. Concurrently, Ethereum, ranking second in the cryptocurrency market, witnessed a 1.2% rise to US$2,386.50, demonstrating a 91% upsurge in 2023.

Commentators from both within and outside the cryptocurrency world have told CNBC they expect Bitcoin’s upward trajectory to continue.

Overcoming past challenges: the cryptocurrency sector’s journey

2022 marked a period of instability for Bitcoin, plagued by notable collapses, liquidity issues, and bankruptcies within the sector. That all came to a head in the collapse of FTX, a significant cryptocurrency exchange, leading to its bankruptcy. The following year, 2023, witnessed the conviction of FTX’s founder, Sam Bankman-Fried, on numerous federal criminal charges in the US. Similarly, Changpeng Zhao of Binance admitted to criminal charges, stepping down as CEO following a costly US$4.3 billion settlement with the US Department of Justice.

With these significant legal cases concluded, cryptocurrency sector leaders view this year as an opportunity to progress and distance themselves from the misdeeds of these industry figureheads.

Reflecting Bitcoin’s price movements, cryptocurrency stocks experienced an upswing. Notably, Riot Platforms, Marathon Digital, and CleanSpark recorded increases ranging from 7% to 10%, rebounding from a sharp downturn at the end of 2023. MicroStrategy, engaged in software and Bitcoin investment, enjoyed a 13.4% rise, paralleled by a 7.8% growth in the ProShares Bitcoin Strategy ETF, tied to Bitcoin futures. The investor community eagerly anticipates the SEC’s decision to authorize a spot Bitcoin ETF, which could significantly expand the market and attract considerable investments.

Despite rejecting several applications for spot Bitcoin ETFs in the past, citing concerns over market manipulation, the SEC has shown signs of potentially approving some of the 13 proposed ETFs, with a decision expected in early January.

Matteo Greco, an analyst at Fineqia International, anticipates a positive approval and believes there might be a temporary price drop before another increase. He notes that an approved spot Bitcoin ETF would significantly enhance market liquidity by attracting new investors.

The prospect of major central banks reducing interest rates this year is also seen as beneficial for cryptocurrencies, helping to dispel the negative sentiment following the collapse of FTX and other crypto businesses in 2022.

The crypto market might see further growth in 2024, as Bitcoin has historically performed well in US election years and aligned with Bitcoin halving cycles. Markus Thielen, founder of 10x Research, notes this pattern, observing the halving cycles in 2012, 2016, and 2020.

Industry experts are predicting a new bull market in cryptocurrencies, primarily based on the upcoming Bitcoin halving and the potential US approval of a Bitcoin ETF.

The halving event, which occurs every four years as per Bitcoin’s code, reduces the rewards for mining Bitcoin by half, limiting the total supply of Bitcoin to 21 million. Historically, these halving events have led to a rise in Bitcoin’s price.

Additionally, the potential SEC approval of a Bitcoin ETF is generating excitement. This would allow investors to track Bitcoin’s price through a financial product, without directly purchasing or holding the digital currency. The industry hopes this will attract a broader range of investors, especially large institutional ones.

Mining in the spotlight: adapting to bitcoin’s halving event

Cointelegraph reports that leading Bitcoin mining companies are emphasizing the need for operational efficiency to remain profitable following the upcoming halving event in 2024. Insights from various mining firms indicate that the expected impact of the Bitcoin halving on the industry will be significant, particularly concerning the operational strategies of miners at different scales.

The protocol of Bitcoin requires a reduction in the mining reward every 210,000 blocks, which occurs approximately every four years. Industry leaders have noted that the effect of the halving is largely dependent on the market price of Bitcoin, influencing the operational status of numerous mining operations.

A key strategy these leaders have highlighted is the prioritization of keeping mining machines online to maximize the profitability of mining fleets. It has been observed that the success of mining operations hinges on the balance between total terahash exposure and the efficiency of the hardware employed.

Despite the possibility of some miners stopping their operations due to the halving, there’s a consensus in the industry that Bitcoin’s protocol, with its adaptive nature, ensures the sustainability of mining activities. As some miners leave, the network’s algorithm adjusts, reallocating block rewards to active participants, and so maintaining the equilibrium of the mining ecosystem.

It has also been pointed out that larger mining operators will likely continue expanding their operations, supporting the overall network. This expansion is expected to potentially yield benefits, especially if there’s an increase in Bitcoin’s price post-halving.

Experts in the industry have suggested that the mining ecosystem is well-equipped to handle the impact of the halving without significant disruptions. The built-in mining difficulty adjustment mechanism in Bitcoin’s protocol is critical in ensuring ongoing miner participation. If mining becomes less profitable for a segment of miners, they might deactivate their equipment, reducing the overall hash rate. This would trigger a difficulty adjustment, making mining more viable for the remaining miners.

Additionally, the introduction of Bitcoin Ordinals in 2023 and their effect on transaction fees and developer activity have been highlighted as positive developments. Coupled with the increased scarcity of Bitcoin post-halving, there’s a strong sentiment that 2024 could continue to be a profitable and sustainable year for Bitcoin mining.

A look ahead: predictions and expectations for crypto in 2024

Despite past challenges, the cryptocurrency industry, focusing on Bitcoin, shows signs of a strong resurgence at the beginning of 2024. The impending halving event, coupled with potential regulatory approvals and strategic adaptations within the mining sector, sets the stage for what is widely anticipated to be a significant year for Bitcoin and the broader cryptocurrency market.