The COVID-19 pandemic, rampant inflation, and regional conflicts have had a direct impact on the decline in the value of Bitcoin (BTC) over the past two years. But according to Blockstream CEO Adam Back, 2024 promises to be a time of resurgence.
A cryptocurrency expert who pioneered the proof-of-work algorithm applied to the Bitcoin protocol tells Cointelegraph that the prominent cryptocurrency is falling below the historical price trend line of the previous mining reward halving event.
A “biblical” event harmed Bitcoin.
White weighed in on Bitcoin’s potential price movement as the next halving approaches, when Bitcoin miners’ block rewards will decline from 6.25 BTC to 3.125 BTC. Block reward halving is programmatically built into the Bitcoin code and occurs every 210,000 blocks.
The superimposed average of previous market cycles and halvings indicates that Bitcoin’s relative value lags widely accepted predictions. Various events have played a role in lowering the price of BTC, and this has also been seen in traditional financial markets.
“The last few years have been like the plagues and pestilences in the Bible. COVID-19, quantitative easing, and war affected electricity prices. “Inflation causes people to increase and businesses to go bankrupt.”
According to Back, this has had a major impact on markets and portfolio management. Investment managers have had to manage risk and losses over the past few years, which has forced them to sell more liquid assets.
“They need to raise cash and sometimes they will sell good stuff because there is liquidity and Bitcoin is very liquid. This used to happen with gold as well, and I think this has been a factor for Bitcoin over the last few years,” explains Back.
Bitcoin may have already reached $100,000.
As 2023 approaches, many of these macro events Back cited have tapered off, and more industry-specific failures have also been addressed. This is reflected in Bitcoin’s recent price surge since November 2023.
“Companies that went bankrupt due to exposure to the wave of contagion, Three Arrows Capital, Chelsea, BlockFi and FTX are mostly done. We don’t think there will be a bigger surprise than this,” Back said.
Related: Blockstream Continues Targeting Bitcoin Miner Surplus with Series 2 BASIC Note
The Blockstream CEO previously predicted that Bitcoin would reach $100,000 in the next market cycle and reiterated this point. He believes that BTC would have already reached this level if not for the macro factors highlighted earlier.
Baek also cited Bitcoin’s “stock-to-flow” model created by PlanB, an unnamed former institutional investor, as a benchmark for Bitcoin’s potential upside in 2024.
If you want to know more about Bitcoin Stock-to-Flow:
* Original article from 2019: https://t.co/n5P5uMCKHT
* Or watch this YouTube video: https://t.co/3SGMU1Ln00 pic.twitter.com/Qp8SjqtXIB— Plan B (@100trillionUSD) December 5, 2023
Back explains that PlanB’s model and heuristics suggest that historically smart Bitcoin investors bought BTC six months before the halving and sold on significant price spikes in the 18 months following the decline in mining rewards.
“People thought it was a slightly crazy claim that we could reach a pre-halving of $100,000 because I said it when the price was around $20,000.”
He added that the Bitcoin price reaching $44,000 multiple times in December 2023 suggests his previous prediction may not be so far-fetched.
Bitcoin ETF Effect
Prominent investors and market analysts have also highlighted that the U.S. Securities and Exchange Commission (SEC) is likely to approve applications for several spot Bitcoin exchange-traded funds (ETFs).
People ask whether we have changed the odds. No, we still have a 90% chance of approval until January 10th (also known as this cycle). These are the same odds we had for months (before it was cool and safe). What we’re watching right now: More amendments/final filings and creating clarity on spot vs. cash https://t.co/uiWgfxOfzz
— Eric Balchunas (@EricBalchunas) November 29, 2023
Senior ETF analysts Eric Balchunas and James Seyffart touted that these applications could be approved in early 2024. Galaxy Digital co-founder Michael Novogratz also predicted a massive influx of institutional investment into BTC-backed products, which Back noted:
“I think Bitcoin could reach $100,000 before ETFs and even before halving. But I don’t think the impact of ETFs should be underestimated.”
The main reason cited by Bitcoin advocates is that entire sectors of the traditional market, including major fund managers such as BlackRock and Fidelity, are not permitted to invest directly in assets such as Bitcoin.
Related: Bitcoin ETFs Will Drive Institutional Adoption in 2024 — Mike Novogratz of Galaxy Digital
“If you manage a mutual fund, there is a rule that you can only purchase products such as public stocks and ETFs, either externally charged or as part of the fund. They can’t buy startups and they can’t physically buy precious metals. They can’t do that,” Back said.
This makes sense for spot Bitcoin ETFs to attract significant capital inflows into the sector. Back added that the investment vehicle provides access to Bitcoin exposure for various types of funds, especially in the U.S., which tend to do so through Fidelity or BlackRock rather than through cryptocurrency exchanges.
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