Bitcoin 2024 Mid-year Review: the Great Comeback

05 Jul, 2024

Bitcoin (BTC) has had a wild ride so far in 2024. The world's first cryptocurrency started the year at $42,258 before reaching a historic high of $73,787 in March 2024. The new record was influenced by major events such as the approval of Bitcoin spot ETFs by the United States. Securities and Exchange Commission (SEC) and the scheduling halving of Bitcoin mining block rewards.

However, Bitcoin's price has since corrected and is currently trading at just over $60,800 at the time of writing on 3 July, 2024. Despite its struggles to push back to $70K and beyond, anyone who bought BTC at the start of the year should be smiling—Bitcoin's overall increase was 48.46% in the first half of 2024. Let's take a look back at how we got here, and what could be in store for the second half of the year.

Major events in Bitcoin 2024

Mirroring the buoyancy of global stock markets, Bitcoin has emerged as a key trendsetter in 2024, reminiscent of its post-pandemic surge in 2021. Exactly one year ago, Bitcoin was trading at just under $30K, registering over 100% year-to-date gains. The time of big, exciting numbers for Bitcoin is back, with the caveat that it comes with the typical volatility and fluctuations of the crypto market. These are the factors that have influenced the BTC price in the year so far:

Spot Bitcoin ETFs

2024 was the year that the long-awaited spot Bitcoin ETFs were finally approved by the SEC, profoundly impacting BTC's price trajectory. This move has allowed Bitcoin to compete with traditional financial instruments, resulting in significant capital inflows from conventional finance to the digital asset realm.

This shift has not only influenced Bitcoin's valuation but has also reinforced its position in the financial markets as it sheds its former reputation as a niche asset for hackers and tech enthusiasts and enters the 'mainstream'. This might be disappointing for the old-school true believers who hope that one day Bitcoin will replace fiat currency, but good news for investors, as it makes BTC and other digital assets safer in the long term.

The involvement of financial powerhouses like BlackRock and Fidelity in the cryptocurrency space has strengthened the argument that cryptocurrency represents the future of finance. These financial institutions are now focusing on the tokenization of funds and view blockchain technology not as a threat, but as a profitable technology to be adopted and exploited.

Bitcoin halving 2024

Bitcoin halving is a predetermined event that occurs approximately every four years, cutting the reward for mining new blocks by 50% and slowing down the rate at which the supply increases. The halving process is built into Bitcoin's protocol to ensure a finite supply of 21 million Bitcoins. Historically, halving events have consistently led to substantial surges in Bitcoin's value, making it a critical factor for investors.

The latest Bitcoin halving occurred on April 19, 2024, and it did not lead to new records highs for Bitcoin. In fact, BTC hit its most recent all-time high price in March, before the halving. This suggests that the anticipation of the halving had already been priced into the market to some extent before it started.

So, why did the halving have such a muted effect on Bitcoin’s price this time? One explanation for this relatively calm post-mining period is the opposing pressures from miners and investors:

Miner adjustments: Post halving, Bitcoin miners began to sell more of their Bitcoin holdings to compensate for the 50% reduction in their rewards. This sell-off contributed to the downward pressure on Bitcoin's price, causing some volatility in the weeks following the halving.
Increased institutional interest: In 2024, the broader adoption of Bitcoin, particularly through spot Bitcoin ETFs, helped absorb the selling pressure from miners. The steady inflow of funds into these ETFs provided a stabilizing effect on the market.

However, it's important to note that the halving effects on Bitcoin's price are far from over, and will continue to ripple into the second half of 2024. Historical data suggests that the full effects of a halving can take several months to materialize. For instance, after the May 2020 halving, Bitcoin's price took several months to start its significant upward trajectory. By October 2020, Bitcoin began a rapid ascent, culminating in a peak at the end of the year.

As the market adjusted to the new supply dynamics, the increasing scarcity of new Bitcoin, coupled with rising demand from institutional and retail investors, set the stage for potential price appreciation in the latter half of the year.

Correlation with the stock market

Throughout 2024, cryptocurrency has increasingly become a mainstream macroeconomic factor. As inflation eased, tech stocks rallied, and the crypto market mirrored this trend due to their shared tech-savvy and youth-oriented nature. Additionally, the growing correlation between the S&P 500 and Bitcoin suggests that the stock and crypto markets are now moving in sync. This convergence of cryptocurrency with traditional financial markets is set to expand further this year, especially as Bitcoin spot ETFs become established in the mainstream finance sector.

US inflation and presidential elections

Continuing the theme of Bitcoin's deepening dependency on macroeconomic factors, US economic data releases have been correlated with Bitcoin price movements. These include:

Interest rates set by the Federal Reserve. Bitcoin prices tend to fall with higher interest rates, which indicate a stronger US dollar. When interest rates are cut, the dollar appears weaker and the BTC price tends to increase or stabilize as investors seek an alternative store of value.
The consumer price index (CPI), a grouping of products intended to reflect the cost of living for the average American. High inflation (as indicated by a rising CPI) supports Bitcoin prices, while low or stabilizing inflation can lead to price stabilization or slight declines.
Employment statistics. Strong employment data can have mixed effects, often depending on the accompanying monetary policy expectations, while weak employment data tends to support Bitcoin prices through expectations of looser monetary policy.

One of the most fascinating developments in late 2024 is the emergence of cryptocurrency as a significant political tool in the presidential election. But it's not as simple as one side being pro-crypto and the other being against it. Instead, both major parties appear to be courting the votes of crypto investors.

Donald Trump, the presumptive Republican presidential nominee, has embraced this trend by declaring himself the candidate for cryptocurrency at a Mar-a-Lago gala, accepting Bitcoin and other cryptocurrencies as donations.

This stance marks a notable shift for Trump, who once criticized Bitcoin as "a scam against the US dollar" and labeled cryptocurrency "a disaster waiting to happen". Now, however, he is apparently "good" with cryptocurrencies.

Similarly, President Biden's re-election campaign team is considering accepting Bitcoin and cryptocurrency donations, following Trump's lead. Additionally, Democrats have shown a more accommodating attitude toward crypto by supporting the Republican-led crypto bill this year.

Mt. Gox repayments, selling pressure, and the drop to $60K

Since early June, Bitcoin has been on a downward trend, struggling to maintain upward momentum despite positive ETF inflows. On 3 July, Bitcoin fell below the critical $60,000 mark, driven by concerns over potential repayments from the defunct Mt. Gox exchange. The potential release of $9 billion worth of Bitcoin to Mt. Gox creditors, who have been waiting for over a decade, has created apprehension in the market, contributing to the recent decline. Despite this, the substantial inflows into US-based spot Bitcoin ETFs, which have accumulated over $52.5 billion since January, might help absorb some of the selling pressure from these repayments.

Additionally, large-scale Bitcoin transactions by whales have exacerbated the price drop. On 3 July, an unknown entity sold $180 million worth of Bitcoin within a span of three minutes, significantly impacting market value. Another whale transferred 1,723 BTC worth over $168 million to an exchange indicating their intention to sell and lock in profits. These sizable transactions, combined with the potential Mt. Gox repayments have contributed to Bitcoin's struggle to regain stability above $60,000, raising concerns about a prolonged price correction.

Bitcoin's technical innovations

Beyond its role as an investment vehicle, Bitcoin is evolving into a multifaceted ecosystem. More than just a value exchange medium; it's becoming a robust platform that supports various applications. Innovations such as smart contracts and layer 2 networks are expanding Bitcoin's capabilities, fostering a dynamic environment for growth.

In April 2024, the introduction of Runes, a protocol for issuing fungible tokens (i.e., new cryptocurrencies) directly on Bitcoin's blockchain, marked a significant enhancement in Bitcoin's functionality. This innovation, simpler and more efficient than 2023's Ordinals protocol, has boosted Bitcoin's appeal among developers and can drive up demand and its market price, positioning Bitcoin to rival established networks like Ethereum. Despite never having lost the top spot as the world's most valuable cryptocurrency, the Bitcoin blockchain's lack of functionality compared to newer networks like Ethereum (ETH) has always been a point of criticism. With innovations such as Runes, the number one crypto can prove its worth as a technological platform as well as an investment asset.

What's next for Bitcoin in 2024?

The first half of 2024 has highlighted Bitcoin's enduring appeal and resilience. With groundbreaking developments introducing new utilities and applications, along with increased public adoption, Bitcoin continues to dominate the digital currency landscape. Even as the price fluctuates, major players such as Microstrategy and Tesla continue to accumulate Bitcoin, expressing faith in the digital asset's long-term viability.

Despite recent volatility, the upcoming months of 2024 promise to further establish Bitcoin as a significant asset in the wider economy, with historical data pointing towards a potential upturn this summer.

July has historically been a strong month for Bitcoin, and institutional investors remain optimistic. On the first day of July, US-listed ETFs recorded nearly $130 million in inflows, the highest since early June. Singapore-based crypto asset trading firm QCP Capital noted in a recent broadcast that Bitcoin typically sees a median return of 9.6% in July, often rebounding strongly after a negative June.

Over the past decade, Bitcoin has averaged over an 11% gain in July, with positive returns in 7 out of 10 years. Reports from the Matrixport crypto fund highlighted substantial July returns of 27%, 20%, and 24% from 2019 to 2022, respectively, underscoring the month’s bullish potential.

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