This extremely positive article comes from today's very influential The Times of London.

The stars appear to be aligning, with the bitcoin halving due to arrive in April 2024 and exchange-traded funds (ETFs) on the horizon. Crypto is catching the eye of investors big and small once again.

That’s all combined to see the price of bitcoin rise from $16,200 on January 1, 2023, all the way to more than $44,000 in December.

Of course, nobody can tell you with certainty what the price will be next week, let alone at the peak of the next bull market, but that does not stop people having an educated guess. In this article, we cover:

Bitcoin has always had its loyal proponents who only see it rising in price over long timeframes.

These people were few in number during the early years following its 2009 beginnings. There are now many millions of people that have faith in the asset, including prominent City of London and Wall Street firms.

From the optimists’ perspective, 2024 is shaping up to be a stellar year for bitcoin and some other crypto assets. Multiple factors look like coinciding.

First there is the bitcoin halving, due in April. Once every four years, the amount of new bitcoin created to pay the miners who run the network is cut in half, known as the ‘block reward’.

Currently at 6.25 bitcoin per block, it will be cut to 3.125. This restricts the supply of new coins that could be sold. On each previous occasion, a halving has preceded a steep run-up in price with the squeeze on supply complemented by a rise in demand.

Next there is the rising interest from big institutions, exemplified by the multiple filings seeking a green light from regulators to launch bitcoin ETFs. This would let people effectively trade cryptocurrency on stock markets as easily as more traditional assets – letting people buy and sell quickly as well as hold them in existing portfolios.

Some of the biggest names in global finance see now as the time to offer a bitcoin backed product to their millions of clients. These include the world’s biggest investment firm BlackRock as well as Franklin Templeton, Fidelity, VanEck and Cathie Wood’s ARK Invest, among others.

Thirdly, it is likely interest rates will be brought down. With inflation close to target in the US and falling fast in other parts of the world, central banks are expected to cut rates. Lower rates typically raise demand for assets such as stocks and crypto.

As articulated by VanEck chief executive Jan van Eck recently, big players are becoming convinced by the ‘digital gold’ narrative. That is to say, they see bitcoin as something that can be recognised globally as having enduring value and the scarcity required to support that over time.

The global gold market is worth around £10.75 trillion, while bitcoin is only worth £0.63 trillion. If this narrative holds any weight at all, then bitcoin could be seen as having substantial headroom to grow.

Gold has limited real world use, with jewellery being the main one, but that has not stopped it reaching this lofty valuation due to the perception of scarcity and a social consensus that it has value.

The parallel with gold is as powerful as it is easy to understand and allows for relevant historical comparisons. Institutions have been including gold in portfolios for many decades.

Another factor is simply that the price has gone up a lot over multi-year timeframes and many people have made a lot of money in bitcoin. Institutions completely dismissed bitcoin in its early years, but through the passage of time more and more large investors have come to accept it is here to stay and that demand is much more likely to increase than decrease over time.

It seems highly probable that launching a bitcoin ETF will see prices for the underlying crypto assets rise. Nothing is ever guaranteed with any price forecast, least of all in something as volatile as crypto. But it is hard to see how widespread availability of ETFs would not raise demand and therefore prices.

This is because the ETFs being proposed by BlackRock and others must be directly backed by bitcoin in a one-to-one ratio, and this can only be bought from existing holders. No investment firm can create new bitcoin without mining them themselves – something they’re not set up to do.

The other side of the ETF coin is that it opens-up crypto investing to a vast new potential market. Namely, investors who cannot or do not wish to deal with directly buying and holding crypto themselves.

##Institutional interest There are two main reasons somebody may be interested in owning crypto, but not be able to buy and hold it directly. Firstly, the technical knowledge needed. To look after your own crypto requires an understanding of how to use an online exchange safely, and then withdraw the asset to your own digital wallet to store it securely.

The second, which applies to institutions rather than individuals, is that they simply are not allowed to hold crypto directly, or any unregulated investments. They can of course hold ETFs in most cases.

There is also a relevant historical precedent to consider. The launch of gold ETFs in 2004 preceded a prolonged and dramatic run-up in price. An ounce of gold had been floating around the £200 point for several years before ETFs were launched, then went on a strong, pretty consistent climb from there to the current £1,600 area.

While there are still die-hard sceptics who think bitcoin’s price has already seen its peak, or even those who say it will ‘go to zero’ in due course, they get fewer in number every year.

That’s because while there have been crashes aplenty in the past, so far bitcon has always recovered, then gone on to exceed its previous peaks.

If that pattern holds true again, we can make some solid preditions on the next peak.

In 2021 bitcoin reached a peak of $69,000. This was just over three times its peak of around $20,000 in 2017 at the top of previous bull market. Tripling the 2021 peak would mean a price in the region of $200,000 per bitcoin before the next slump. There is of course no certainty this will be repeated, but it is a yardstick worth knowing.

The majority of forecasts point to prices well above the current level of around $40,000.

Investment bank Standard Chartered has forecast that the bitcoin price will reach the $100,000 mark by the end of 2024.

Ark’s Cathie Wood has gone on the record with a long term ‘base case’ forecast of around $650,000 and a potential ‘bullish scenario’ peak price of $1,500,000 at some point in the future.

Other notable forecasts include crypto focused hedge fund Pantera Capital’s very specific forecast of a $148,000 peak, while German bank Berenberg has put out a relatively restrained prediction of $56,630 by the time of the halving in April 2024.

It is theoretically possible. It is very debatable as to whether there is any realistic likelihood of this though. Bitcoin has been around for close to 15 years now, and has survived several dramatic crashes before making new highs.

It could be reasonably argued the ‘go to zero’ scenario would have happened already if it was going to.

It would seem that some form of ‘black swan’ event that fundamentally shifts the picture would be required for this to happen quickly. One guess is as good as another in terms of what could prompt such an occurrence.

An example of a black swan event would be a complete breakdown of the underlying technology due to incredibly powerful quantum computers cracking the encryption algorithm. Or the internet itself going completely offline. Such events remain in the realm of science fiction.

The bitcoin miners all stopping at once for some reason would be another way the ‘kill’ bitcoin but this is incredibly far-fetched and would be nigh on impossible for any government or other entity to bring about.

This is due to the decentralised nature of the network. As miners stop mining, the ‘difficulty’ of mining decreases, so less computing power is needed. Ending bitcoin would require all miners around the world to simultaneously stop maintaining the blockchain. If just a handful of people with computers and access to the internet wanted to carry on, bitcoin would survive.

However, over a longer time frame, it is easier to see declines becoming embedded. Plenty of coins have fallen into and out of favour over the years. The recent experience of some NFT owners has shown that once traders decide to stop investing, things don’t go well for prices.

Of course, this doesn’t happen quickly, and would require people to decide they’d rather put their money somewhere else or use a different coin over a longer period of time. This leaves people plenty of time to reallocate their assets.

So far, however, bitcoin has faced down all comers to retain its title as the biggest cryptocurrency. That doesn’t look like changing anytime soon.

To read it online, it's archived at: https://archive.md/R8y2w