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Bitcoin surge

Finance

Bitcoin’s comeback: Does the crypto bull market have further to run?

Published 11 March 2024 in Finance • 6 min read

As the bellwether digital coin reaches a record high of $69,000, why a spring event known as “the halving” is expected to propel prices higher still in the broader crypto universe.

In a stunning turn of events, Bitcoin has staged a remarkable comeback after weathering two tumultuous years in the cryptocurrency market. Surging past all expectations, on 5 March, the price of Bitcoin reached a record high, surpassing $69,000.

This resurgence comes on the heels of a challenging period in 2022 when Bitcoin’s value plummeted during a widespread market meltdown. Since November 2022, Bitcoin has defied expectations, enjoying a price surge of more than 300% and lifting the value of other cryptocurrencies too. The question is: how much further does the crypto bull market have to run?

Institutional investment drives Bitcoin’s recovery

Bitcoin’s recent surge has been buoyed by an influx of institutional investors entering the crypto market. That has played a significant role in supporting Bitcoin’s price at its current levels. Moreover, the passage of time seems to work in Bitcoin’s favor as it becomes increasingly accepted as an alternative asset. This is consistent with the so-called Lindy Effect – the theorized phenomenon by which the life expectancy of non-perishable things, like a technology or an idea, is proportional to their current age.

In January, regulators in the US gave the green light for Bitcoin exchange-traded funds (ETFs) issued by major financial institutions such as Fidelity and BlackRock. Since their debut earlier this year, these newly sanctioned Bitcoin ETFs have attracted over $7.5bn in capital inflows, according to crypto investment group CoinShares.

The rise in institutional interest can also be attributed to a deeper understanding of the technical intricacies of Bitcoin, particularly its “proof of work” protocol. This is where participants, known as miners, compete in a process that enables them to gain new Bitcoins while they validate transactions and add them to the blockchain, a decentralized, distributed ledger that records transactions.

Blockchain proof of work crypto bitcoin
Proof of work is a blockchain consensus mechanism used by cryptocurrencies to ensure the integrity of new data

While not without flaws, this protocol remains unparalleled in the currency world. As institutional investors gain a more comprehensive understanding of Bitcoin’s mechanics and unique value proposition, they are more inclined to view it as an asset.

Bitcoin’s latest resurgence above $69,000 holds significant implications for the broader cryptocurrency ecosystem, with Ethereum also experiencing a surge in value by over 50% this year, reaching about $3,800 this week.

The prices of cryptocurrencies are highly correlated, with Bitcoin commanding more than 50% of the total market capitalization. As Bitcoin serves as a bellwether for the industry, its current dominance signals a shift in the dynamics of the crypto market compared to the previous all-time high in November 2021, when Bitcoin’s weight was around 40%.

Regulatory challenges pose threat to crypto market

However, the crypto industry is currently grappling with many challenges, particularly legal issues and regulatory scrutiny, which could exert downward pressure on prices. The SEC, the primary regulatory body overseeing securities markets in the US, has initiated legal proceedings against several crypto firms such as the Coinbase exchange, accusing them of offering unregistered securities.

Increased regulatory oversight may lead some investors to perceive Bitcoin as less useful, prompting them to sell their holdings and consequently negatively impacting the price. In the short term, regulatory hurdles seem to be the industry’s predominant challenge.

Nevertheless, Bitcoin’s recent milestone is a significant moment for cryptocurrency. In 2022, during a profound market crisis, Bitcoin traded as low as $16,000. That crash had a notable impact on the crypto industry, but its lasting effects appear minimal.

Sentiment surrounding Bitcoin has improved, with fluctuations and downturns less severe than those witnessed in its early years. For instance, in 2018, Bitcoin experienced a 70% loss; in 2022, it underwent a 60% decline.

Overall, the trajectory is positive, with increased adoption expected to reduce volatility over time. There was a significant amount of Bitcoin being sold once it reached its fresh high above $69,000 this week, followed by a sharp decline to around $61,000, and then a subsequent recovery. This reflects individuals cashing in on their investments.

mint currencies money
“Bitcoin, and the ideas behind it, will be a disrupter to the traditional notions of currency. In the end, currency will be better for it.”
- Edmund Moy, 38th Director of the United States Mint

Bitcoin halving: Anticipation drives momentum in the market

The token’s price is also being influenced by an imminent change in the amount of Bitcoin with which miners are rewarded. This change, known as the Bitcoin halving and scheduled for April this year, will reduce the rate at which new coins are generated, impacting the circulation of available coins.

Logically, if the demand for Bitcoin remains growing at the same rate, Bitcoin price should increase due to this reduction in the supply. Anticipation of this event is driving momentum and optimism, supporting the current price.

Interestingly, the previous all-time highs (ATH) happened 101, 204, and 241 days after the halving (2013, 2013, and 2017 respectively). However, this ATH happened 47 days before the halving. This is an interesting fact. However, there are plenty of detractors of Bitcoin and other cryptocurrencies.

Skeptics often argue that they lack intrinsic value or that their worth is solely determined by subjective perception. However, this argument applies equally to fiat currencies like the Euro, Pound, or USD, which derive value from societal trust and government backing. Of course, these currencies are much more widely accepted and, therefore, perceived as being much more valuable. Moreover, fiat currencies hold the advantage of being accepted as legal tender for tax payments, a privilege that – while granted to Bitcoin and other cryptocurrencies in some jurisdictions – remains anecdotal.

How much further does the crypto bull market have to run? 
Since November 2022, Bitcoin has defied expectations, enjoying a price surge of more than 300% and lifting the value of other cryptocurrencies too. How much further does the crypto bull market have to run? 

The evolution of cryptocurrency: From skepticism to mainstream acceptance

The perception of cryptocurrencies has undergone significant evolution since their inception. Bitcoin was created following the 2008 financial crisis by an enigmatic developer (or group of developers) who operated under the pseudonym Satoshi Nakamoto. In the early days, there was widespread skepticism and even disdain toward cryptocurrencies, which were often associated with illicit activities.

While there was some truth to these perceptions, the narrative began to shift as people started to differentiate between cryptocurrencies like Bitcoin and the underlying technology, blockchain. Blockchain technology garnered attention and praise for its potential applications beyond cryptocurrencies, leading to a shift in perception where blockchain was considered innovative and promising while Bitcoin remained stigmatized.

However, as blockchain technology keeps searching for a problem to solve, Bitcoin remains here. The digital coin’s recent resurgence and impact on the broader cryptocurrency market reflect the ongoing evolution of the digital asset landscape. While challenges such as regulatory scrutiny and legal complexities persist, the increasing acceptance of Bitcoin underscores its growing significance in the financial world. And while the future remains uncertain, the Bitcoin saga continues.

This article is not investment advice.

Authors

José Parra-Moyano

José Parra-Moyano

Professor of Digital Strategy

José Parra-Moyano is Professor of Digital Strategy. He focuses on the management and economics of data and privacy and how firms can create sustainable value in the digital economy. An award-winning teacher, he also founded his own successful startup, was appointed to the World Economic Forum’s Global Shapers Community of young people driving change, and was named on the Forbes ‘30 under 30’ list of outstanding young entrepreneurs in Switzerland. At IMD, he teaches in a variety of programs, such as the MBA and Strategic Finance programs, on the topic of AI, strategy, and Innovation.

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