Bitcoin, the world’s largest and most popular cryptocurrency, has been on a bullish streak lately, reaching $35,000 for the first time since May 2022. The digital asset has more than doubled in value this year as investors flock to it amid inflation fears, regulatory developments, and growing adoption.
One of the main drivers of Bitcoin’s rally is the anticipation of a spot Bitcoin exchange-traded fund (ETF) approval by the U.S. Securities and Exchange Commission (SEC). A spot ETF would allow investors to buy and sell Bitcoin directly on regulated stock exchanges without having to deal with crypto platforms or custody issues.
Several companies have applied for a spot in Bitcoin ETF, including BlackRock (NYSE:BLK), WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise, and Valkyrie Digital Assets. The SEC has postponed its decision on these applications until November, but some analysts believe that the regulator will eventually greenlight at least one of them.
A spot Bitcoin ETF would be a game-changer for the crypto industry, as it would boost the liquidity, accessibility, and legitimacy of Bitcoin. It would also attract more institutional and retail investors to the market, creating more demand and driving up the price.
Another factor that is fueling Bitcoin’s rise is the upcoming halving event in 2024. The halving is a process that reduces the reward for mining new blocks of Bitcoin by 50% every four years. This creates a scarcity effect that increases the value of each coin. The halving also coincides with a cyclical pattern of Bitcoin’s price movements, which tend to peak about a year after each halving.
The last halving occurred in May 2020, when the reward dropped from 12.5 to 6.25 bitcoins per block. Since then, Bitcoin has surged from around $9,000 to over $35,000. The next halving is expected to happen in May 2024, when the reward will drop to 3.125 bitcoins per block. Many experts believe that this will trigger another bull run that could push Bitcoin to new heights.
One of them is Peter Brandt, a legendary trader and analyst who has been following Bitcoin since 2011. Brandt has recently shared his bullish chart that predicts new all-time highs for Bitcoin by the third quarter of 2024. He says that Bitcoin has hit its bottom at around $25,000 in July 2023 and will break out of its long-term range by mid-2024. He also suggests that Bitcoin will go through a period of consolidation or sideways movement until then.
Brandt’s chart shows that Bitcoin follows a series of bullish impulses followed by periods of correction. He expects that Bitcoin will reach around $40,000 in the short term, based on its convincing break above the $32,000 level. He then forecasts that Bitcoin will correct to around $30,000 before resuming its uptrend and reaching new highs above $70,000 by Q3 2024.
Brandt is not alone in his optimistic outlook. Other analysts have also made bold predictions for Bitcoin’s future price. Some of them include:
- Alistair Milne, founder of Altana Digital Currency Fund, predicts that Bitcoin will surge to $45,000 depending on what happens with inflation.
- Dan Tapiero, co-founder of 10T Holdings and Gold Bullion International, who believes that Bitcoin could reach $100,000 by 2025.
- Tim Draper, billionaire investor and founder of Draper Associates and DFJ Venture Capital, expects that Bitcoin will hit $250,000 by mid-2023.
- John McAfee, a software entrepreneur and crypto advocate, who claims that Bitcoin will reach $1 million by 2025.
Why I Think Bitcoin Will Drop to $29,000 Before Surging to $40,000
Bitcoin, the world’s leading cryptocurrency, has been on a roller coaster ride this year, reaching new highs and lows. As of writing this article, Bitcoin is trading at around $35,000, up from its recent low of $25,000 in July 2023. However, I believe that this rally is not sustainable and that Bitcoin will face another major correction before it can break out of its long-term range and reach new heights.
There are several reasons why I think Bitcoin will drop to $29,000 before it can surge to $40,000 and above. These include:
- The lack of a spot Bitcoin ETF approval by the SEC
- The increasing competition from other cryptocurrencies and technologies
- The diminishing returns of the halving effect
Let me explain each of these points in detail.
The lack of a spot Bitcoin ETF approval by the SEC
One of the main catalysts for Bitcoin’s recent rally is the expectation of a spot Bitcoin ETF approval by the U.S. Securities and Exchange Commission (SEC). A spot ETF would allow investors to buy and sell Bitcoin directly on regulated stock exchanges without having to deal with crypto platforms or custody issues.
However, I think that this expectation is too optimistic and that the SEC will not approve any spot Bitcoin ETF anytime soon. The SEC has been very cautious and sceptical about Bitcoin and crypto in general, citing issues such as market manipulation, fraud, volatility, liquidity, custody, and investor protection.
The SEC has already postponed its decision on several spot Bitcoin ETF applications until November, but I doubt that it will grant any approval by then. The SEC has rejected or delayed every Bitcoin ETF proposal since 2013, and I don’t see any reason why it would change its stance now.
Therefore, I think that the market is overestimating the probability of a spot Bitcoin ETF approval and that this will lead to disappointment and sell-off when the SEC announces its verdict. I expect that this will trigger a downward pressure on Bitcoin’s price and push it below $30,000.
The increasing competition from other cryptocurrencies and technologies
Another factor that could weigh on Bitcoin’s price is the increasing competition from other cryptocurrencies and technologies that offer faster, cheaper, more scalable, and more innovative solutions.
Bitcoin is the first and most dominant cryptocurrency, but it is not the only one. There are thousands of other cryptocurrencies that have emerged since Bitcoin’s inception in 2009, each with its own features, advantages, and disadvantages.
Some of these cryptocurrencies are challenging Bitcoin’s supremacy in different aspects, such as:
- Ethereum, which is the second-largest cryptocurrency by market cap and the leading platform for smart contracts, decentralized applications (DApps), decentralized finance (DeFi), non-fungible tokens (NFTs), and more.
- Cardano, which is the third-largest cryptocurrency by market cap and a rival to Ethereum that claims to offer a more scalable, secure, and sustainable platform for smart contracts and DApps.
- Solana, which is the fifth-largest cryptocurrency by market cap and a high-performance blockchain that boasts over 50,000 transactions per second (TPS), low fees, and interoperability with other blockchains.
- Dogecoin, which is the ninth-largest cryptocurrency by market cap and a meme-inspired coin that has gained popularity among retail investors and celebrities such as Elon Musk.
These are just some examples of the many alternatives to Bitcoin that are gaining traction and adoption in the crypto space. These cryptocurrencies are not only competing for market share but also for innovation and development.
While Bitcoin has a loyal fan base and a strong network effect, it also suffers from some limitations and challenges that could hinder its growth potential. Some of these include:
- Its slow transaction speed of around 7 TPS, makes it unsuitable for micropayments or high-frequency transactions
- Its high transaction fees of around $10 per transaction, which make it expensive for small or frequent transfers
- Its limited scalability is due to its fixed block size of 1 MB, which limits its capacity to handle more transactions per second
- Its high energy consumption is due to its proof-of-work (PoW) consensus mechanism, which requires a lot of computing power and electricity to secure the network
- Its lack of programmability due to its simple scripting language, which limits its ability to support complex functions or applications
These limitations could make Bitcoin less attractive or relevant compared to other cryptocurrencies or technologies that offer better solutions or features. Therefore, I think that Bitcoin will face more competition and pressure from other players in the crypto space and that this will affect its price negatively.
The diminishing returns of the halving effect
A third reason why I think Bitcoin will drop to $29,000 before it can surge to $40,000 is the diminishing returns of the halving effect.
The halving is a process that reduces the reward for mining new blocks of Bitcoin by 50% every four years. This creates a scarcity effect that increases the value of each coin. The halving also coincides with a cyclical pattern of Bitcoin’s price movements, which tend to peak about a year after each halving.
The last halving occurred in May 2020, when the reward dropped from 12.5 to 6.25 bitcoins per block. Since then, Bitcoin has surged from around $9,000 to over $35,000. The next halving is expected to happen in May 2024, when the reward will drop to 3.125 bitcoins per block.
Many experts believe that this will trigger another bull run that could push Bitcoin to new heights. However, I think that this effect will be weaker and less predictable than before.
There are several reasons why I think the halving effect will diminish over time. These include:
- The decreasing impact of the reward reduction on the supply and demand of Bitcoin. As the reward gets smaller and smaller, it will have less influence on the inflation rate and the market price of Bitcoin. For instance, the first halving in 2012 reduced the inflation rate from 50% to 25%, while the fourth halving in 2024 will reduce it from 1.8% to 0.9%. This means that the supply shock will be less significant and less noticeable than before.
- The increasing difficulty and cost of mining Bitcoin. As the reward gets smaller and smaller, it will become harder and more expensive for miners to break even or make a profit. This could lead to some miners exiting or reducing their operations, which could affect the security and stability of the network. It could also create more selling pressure on the market, as miners need to sell some of their coins to cover their expenses.
- The decreasing correlation between the halving and the price cycles of Bitcoin. As Bitcoin matures and becomes more influenced by other factors such as adoption, regulation, innovation, and competition, it will become less dependent on the halving as a price driver. The halving may not be as reliable or accurate as a predictor or indicator of future price movements as before.
Therefore, I think that the halving effect will not be as strong or consistent as before and that it will not be enough to propel Bitcoin to new highs without other positive catalysts or developments.
Of course, these predictions are not guaranteed to come true and should be taken with a grain of salt. Bitcoin is a volatile and unpredictable asset that can be influenced by many factors beyond anyone’s control. Some of the risks and challenges that could affect Bitcoin’s price include:
- Regulatory uncertainty and crackdowns from governments and central banks
- Cyberattacks and hacks on crypto platforms and users
- Technical issues and bugs in the Bitcoin network or software
- Competition from other cryptocurrencies and technologies
- Market manipulation and fraud by whales and bad actors
- Loss of confidence and trust among investors and users
Therefore, anyone who is interested in investing in Bitcoin should do their own research and due diligence before making any decisions. They should also be aware of the potential rewards and risks involved and be prepared for high volatility and price swings.
Bitcoin is a revolutionary and innovative invention that has changed the world of finance and technology. It has also created a new asset class that offers unprecedented opportunities and challenges for investors and users. As Bitcoin enters its second decade of existence, it will continue to evolve and grow, and possibly reach new heights that no one can imagine.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.