Bitcoin is the largest cryptocurrency by market capitalization and has been since its inception in 2009. It is the world’s most popular digital asset and the first decentralized cryptocurrency. Bitcoin also ushered in blockchain technology and has popularized the technology since then, paving the way for the several thousand digital assets currently trading across the crypto market.
Bitcoin has revolutionized the finance sector and has lived up to its initial purposes, as indicated in the whitepaper published by Satoshi Nakamoto in 2008. In addition to its application as cash, Bitcoin is a valuable investment tool. While a selection from valuewalk.com shows several different investment options, including hedge funds and the stock market, Bitcoin is one of the most popular and lucrative. Nonetheless, individual preference is generally the primary factor that dictates whether or not a Bitcoin purchase is a smart choice.
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Reasons to Buy Bitcoin in 2024
Bitcoin’s popularity has expanded past the finance sector, making the world’s king coin a household name across multiple industries. Today, the reasons to buy Bitcoin may be obvious to most crypto enthusiasts who have been a part of the market for a long time. Nevertheless, experienced and inexperienced people alike can benefit from buying Bitcoin in 2024 for the following reasons:
Spot Bitcoin ETF Approval
On January 10, the United States Securities and Exchange Commission (SEC) approved 11 spot Bitcoin exchange-traded funds (ETFs) for trading. The development is a major boost for the cryptocurrency sector, especially since the SEC has rejected all previous proposals. Since the Gemini Exchange’s Cameron and Tyler Winklevoss filed for the first spot BTC ETF in 2013, the SEC has turned down all requests, citing problems with fraud and market manipulation.
The approval of spot Bitcoin ETFs has convinced many that authorities are gradually becoming supportive of the king coin and crypto in general. This opinion is pervasive even though the approval came somewhat reluctantly. After Grayscale Investments sued the SEC for refusing its proposal to convert the Grayscale Bitcoin Trust Fund (GBTC) into an ETF, a judge ruled in Grayscale’s favor. It is also important to note that SEC Chair Gary Gensler’s statement announcing the approval of ETFs specified that the approval was not an endorsement of Bitcoin. Nonetheless, observers believe that the Commission’s hands were already tied.
The possibility of trading spot Bitcoin ETFs already spurred several bullish forecasts even before the official approval. Generally, Bitcoin ETFs allow traditional institutions to access the Bitcoin market without direct exposure to the asset. This opportunity is expected to be positive as it enables interested entities to trade Bitcoin in a regulated fashion. On the day of approval, the Bitcoin ETF market traded $4.6 billion worth of shares.
Halving Event
Bitcoin’s halving occurs after every 210,000 blocks, which happens roughly every four years. The event is a deflationary measure coded into the Bitcoin blockchain, which reduces miner rewards by half. The next event will halve Bitcoin miner rewards from 6.25 to 3.125 Bitcoins per block.
The halving event and the network’s maximum supply are two factors that keep Bitcoin’s inflation in check. Bitcoin’s maximum supply is 21 million, with current projections estimating the network will hit this limit in 2140. At that point, minting Bitcoins will no longer be possible. According to data from CoinMarketCap, Bitcoin’s circulating supply is 19.6 million. This means that at least 93% of all Bitcoins that will ever be minted are already in circulation.
The halving is expected sometime in April 2024, when the number of mined blocks hits 740,000. Reducing the amount of Bitcoin that enters the market helps maintain the king coin’s scarcity and keeps price action healthy. Historically, the price of Bitcoin has reacted positively to halving events. Although not immediately, Bitcoin becomes bullish after halvings.
High Liquidity
Bitcoin’s position as the asset with the largest market cap puts it at the forefront of crypto liquidity. With a 24-hour trading volume above $10 billion in January, Bitcoin has robust liquidity. This ensures that the market is stable, indicating that many buyers and sellers are continuously trading on exchanges and in marketplaces. It also means that trades are completed at the best possible prices, contributing to general market equilibrium. In addition to stability, high liquidity means the average transaction time is fast. Anyone looking to enter or exit a Bitcoin position can do so quickly without concern for scarcity.
Investment
Despite the volatility in the cryptocurrency sector, Bitcoin is still considered a worthy investment tool and has provided returns for holders nearly every year since its inception. In 2023, investors enjoyed gains of more than 155% between January and December. While it is impossible to be certain about 2024, some factors favoring Bitcoin, including the approval of spot ETFs and the upcoming halving, may be enough to be bullish about Bitcoin’s chances.
Bitcoin has always been considered a great store of value and a hedge against inflation, especially for countries suffering heavy bouts of hyperinflation. Consequently, buying Bitcoin as an investment vehicle could return profits to holders at the end of the year. Nonetheless, interested investors should do extensive research before making any investments.
Interest Rates
The US Federal Reserve launched an aggressive tightening cycle to curb inflation, increasing the federal funds rate from 0.25% - 0.50% in March 2022 to 5.25% - 5.50% in July 2023. The Fed has held the rates steady since then, indicating in its January 2024 meeting that the plan is still to keep rates unchanged. Fed Chair Jerome Powell even added that the Federal Open Market Committee (FOMC) might not be ready to cut rates even at the next meeting in March.
The problem with interest rates might be bullish for Bitcoin because of its status as a hedge against inflation. Many believe Bitcoin is one of the best ways to maintain value as inflation swings wildly. Even when rates are reduced, funds may flow into the Bitcoin market as people regain their purchasing power.
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