Dubai: In the past month alone, the price of the world’s largest cryptocurrency, Bitcoin, skyrocketed by a whopping 70 per cent. But how high will the digital token go before seeing another correction? Also, what's fuelling the recent rally?
“Bitcoin’s price hit an all-time high and the crypto faithful are on tenterhooks for a never-before-seen level,” said Vijay Valecha, Chief Investment Officer at Dubai-based brokerage Century Financial. “In market value terms the token had reached a record before it hit a record-level high.
“The market value of Bitcoin reached $1.35 (Dh4.96) trillion, scaling the peak of $1.28 (Dh4.70) trillion from November 2021. That was the month the token jumped to $68,991.85 (Dh253,400) at the apogee of its pandemic-era run.”
Bitcoin's price rally began months before in 2023: Its price soared to a 19-month high in December to about $41,000 (Dh150,588). But why has the price of the still controversial cryptocurrency zoomed past since, i.e. the starting months of 2024?
Why are Bitcoin prices soaring again?
The token's rise this year is partly due to the top regulator in the US approving the world’s first spot Bitcoin ETFs in January. These exchange-traded funds or ETFs tied to the price of Bitcoin allow investors to enter the high-cost Bitcoin game without the risk of directly buying the cryptocurrency.
“With 2024 marked by a 50 per cent rise, partly fuelled by high inflows into US-listed Bitcoin funds, the landscape is ripe for Bitcoin price predictions. The anticipation of spot Bitcoin ETFs in the US has ushered in a wave of major investors, mirroring the fervour of the 2021 rally,” Valecha added.
Brian Deshell, a UAE-based cryptocurrency trader and analyst, agreed that investors were hotly anticipating the potential approval of Bitcoin ETFs and the new approval marks a key milestone for the cryptocurrency market in the investment avenue gaining acceptance to mainstream markets.
“The high price of a single Bitcoin has often made the crypto investment beyond the reach of most investors worldwide. This is why there has been a lot of interest in finding alternative ways to invest in Bitcoin and reduce the risks that come with directly buying the top cryptocurrency.”
Bitcoin ‘halving’ event in April hikes price
Over $6 (Dh22) billion entered the market since the ETFs began trading this year. The largest one in the US, Grayscale Bitcoin Trust, rose 48 per cent since January. And that’s not all. An upcoming technical event known as “halving” will keep Bitcoin rising even more in the months ahead.
The odd word is crypto-speak for a recurring ritual in which the supply of newly created Bitcoins entering the market — the lottery-like reward paid to Bitcoin “miners” for sustaining the network — drops by half. This looming event will be the fourth such drop-off, which occurs every four years.
Each of the last three halving events so far resulted in price increases in the following months. The last halving took place in May 2020, when Bitcoin was priced at around $8,750 (Dh32,138). Six months post event, Bitcoin’s price grew 79 per cent, and a year later it was up 547 per cent!
While Bitcoin’s pre-halving rallies are historically profitable for investors, analysts expect the biggest gains to come after the halving, with some eyeing $130,000 (Dh477,477) to $180,000 (Dh661,122) by the end of 2025.
Halving was written into Bitcoin’s code from the beginning to ensure scarcity and safeguard from inflation. Previous halving events coincided with huge price increases for Bitcoin.
In April, the reward miners get for minting new bitcoin will be cut in half, from 6.25 Bitcoin to 3.125. This happens every four years and will continue until all 21 million Bitcoins are mined.
Bitcoin ‘halving’, the right time to invest?
Bitcoin’s four-year halving cycles are widely associated with the subsequent crypto market rally that generally led to new Bitcoin all-time highs. But is the much-awaited halving the right time to invest in the world’s largest cryptocurrency?
“Based on historical Bitcoin price data, the ‘halving’ events could be a great time to buy for investors with longer time horizons,” opined Brody Dunn, an investment manager at a UAE-based asset advisory firm, who went on to explain why.
“The days leading up to the actual halving event is a great time to realise gains because the pre-halving rally turns investor sentiment into a new cycle. However, timing the market to know when to get out at the top is extremely challenging. Exercise caution when doing so.”
Additionally, both Deshell and Dunn are only expecting a brief correction after the current price spike before Bitcoin resumes its price rally to new all-time highs. This makes it an ideal time now to buy into the crypto, and what better way to do that than by buying into the affordable Bitcoin ETFs.
Your takeaways from the Bitcoin price rise?
“The high price of a single Bitcoin often made the crypto investment beyond the reach of most investors worldwide. This is why there has been a lot of interest in finding alternative ways to invest in Bitcoin and reduce the risks of directly buying the top cryptocurrency,” added Deshell.
“Bitcoin ETFs are one such alternative, and the ‘halving’ event offers one such buying opportunity. As investors can now get exposure to crypto without having to go through the trouble of setting up a wallet or dealing with erratic exchanges, it makes the move worth it.”
Dunn added that if you don't want to actively manage your crypto investment, but you want a way to diversify your portfolio with a high-risk, high-reward asset, a Bitcoin ETF is a better option than directly buying Bitcoin. “Bitcoin ETFs should be your key takeaway from the current price rise.
“Among the several benefits of Bitcoin ETFs, the key perks are low cost of ownership, being able to diversify your crypto investments, while having somebody with knowledge of the market to manage them, which also enables you to save time picking crypto tokens.”
