- Notably there was the conviction of FTX CEO Sam Bankman-Fried for fraud.
- Viewed as a test case for the majority of cryptocurrencies, the US Securities Exchange Commission (SEC) is currently appealing.
- While all this was happening, the bitcoin price rose away from the lows of late 2022.
1. ETFs
- ETFs already exist for everything from oil to the FTSE 100 to even regions and countries.
- Until now, the only ETFs permitted for crypto in the US have been for the futures markets.
- There are various reasons why many commentators think the SEC may now end its opposition to such an ETF.
- Further, Hong Kong’s regulatory authority has announced it is open to spot bitcoin ETF applications and has laid down guidelines permitting several varieties.
- As well as the basic model that we may soon see in the US, where investors would buy into bitcoin ETFs with dollars, Hong Kong is open to a second variety known as “in-kind”.
2. Interest rates
- Jerome Powell, chair of US central bank the Federal Reserve, has indicated that interest rates may have peaked, and that the Fed is likely to cut them during 2024.
- If interest rates are cut or even stabilise in 2024, it could make bitcoin (and other digital assets) more attractive to investors, since its limited supply makes it a hedge against traditional currencies losing value over time.
In addition, the US and other economies may enter a recession in the later half of 2024 due to the lagged effects of the interest rate hikes. Equally, we saw a number of bank failures in 2023, predominantly in the US. In the event of a recession or more bank problems, governments may be forced to provide stimulus packages and print more money. This would further devalue currencies and make bitcoin still more attractive.
3. The halving
- Bitcoin runs on an online ledger known as a blockchain, in which entries are validated by “miners” using arrays of computers to solve complex mathematical puzzles.
- The reward began at 50 bitcoin in 2009 and is expected to fall from 6.25 bitcoin to 3.125 bitcoin around the middle of April 2024.
- Halving effects
4. Blockchain developments
- Until now, NFTs and new cryptocurrencies have mostly been issued on other blockchains such as ethereum.
- We are also seeing growing adoption of the Lightning network, a layer above the bitcoin blockchain that enables much faster transactions.
- All these changes are resulting in increased demand for bitcoin, which in turn may lead to higher prices.
Andrew Urquhart owns some cryptocurrencies. Hossein Jahanshahloo does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
