Even though the cryptocurrency market is performing well, investors need to watch out for volatility as it can quickly evaporate the money. (File Photo)
Analysts believe the prices of bitcoin will continue to rise in 2024. Regulatory uncertainties in over 190 countries, exemplified by Nigeria's recent crackdown on cryptocurrency transactions, pose significant challenges for investors, said an expert
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Bitcoin is now more valuable than ever. It hit an all-time high of $68,900, the highest price in its 15 years’ history, with a market capitalisation of $1.35 trillion.
Considered to be most volatile, analysts are not surprised about the sudden rise and fall of the cryptocurrency, which dropped below $17,000 after the fall of Bankman-Fried’s FTX in November 2022.
According to the Farside Investors data, Bitcoin ETFs have soared to an excellent level of $6.7 billion since the Securities and Exchange Commission gave them an approval at the beginning of the year. These Bitcoin ETFs, on average, are clocking a daily inflow of nearly $210 million, as mentioned by Forbes report.
So, why is Bitcoin rising?
The price surge has triggered mostly by allocation of institutional players and increased retail participation due to Spot Bitcoin ETFs and the upcoming Bitcoin Halving event.
Bitcoin boomed when interest rates declined during the pandemic with more people borrowing and investing money easily. During Russia’s invasion of Ukraine, interest rates soared and bitcoin shrank.
Though interest rates remain high in the early 2024, Federal Reserve suggested in December that it will not increase interest rates and implement cuts. This decreased inflation gradually, and the US economy became more resilient, adding more than 353,000 jobs in January.
In January, nine bitcoin ETFs entered the market, which resulted in $4 billion in trading on their first day of availability.
Will the Price Keep Rising?
Analysts believe the prices of bitcoin will continue to rise in 2024. “We expect prices to continue to go even higher this year,” a team at Deutsche Bank led by economist Marion Laboure said, citing a few reasons.
The first, as quoted in Barron’s, is spot Bitcoin exchange-traded funds (ETFs), which were approved in the US in January and have sparked the latest leg of the crypto rally. These funds buy and hold Bitcoin itself, and as such their inflows can have a mechanical impact on prices.
Another is that the US economy could also catalyse more crypto gains, according to Deutsche Bank, with strong economic performance and a surge in the largest tech stocks like Microsoft and Nvidia.
“As central banks start cutting interest rates from the decade-high levels seen in 2022, this is expected to fuel rising risk appetite and increased market liquidity,” wrote Laboure.
Even though the cryptocurrency market is performing well, investors need to watch out for volatility as it can quickly evaporate money.
Is it a Good Idea to Invest in Cryptocurrency?
Cryptocurrencies are yet not regulated in India. As Sebi regulates investments in stocks and derivatives, banking transactions are regulated by the Reserve Bank of India; crypto transactions do not have any regulator as yet.
“Amidst the recent Bitcoin price surge sparked by the introduction of the Bitcoin ETF, investors are advised to remain cautious. Regulatory uncertainties in over 190 countries, exemplified by Nigeria’s recent crackdown on cryptocurrency transactions, pose significant challenges for investors,” says Gaurav Mehta, Co-founder and CEO, Catax- Simple Crypto Taxes, as quoted by Livemint.
Warren Buffett, known as a legend of investing, too, have strong views on bitcoins. The Oracle of Omaha once remarked that if all the bitcoins in the world are made available for $25, he will still not buy them.
first published:March 08, 2024, 16:26 IST
last updated:March 08, 2024, 16:42 IST
