Year-end Review: Bitcoin Survives Three Quarters of Downturn and Soars at the End of the Year

When it comes to the most noteworthy asset of this year, there is no doubt that it is Bitcoin. After a 65% plunge in 2022, Bitcoin's price has led the market with a surge this year. Its price has skyrocketed from around $19,000 at the beginning of the year to $44,000 at the end of the year, an increase of over 136%.

There are two main factors supporting this upward trend. First, people are optimistic that US regulatory agencies will soon approve the first-ever spot Bitcoin exchange-traded fund (ETF), and investors will know whether this bet will succeed before January 10th next year. Second, the Federal Reserve has signaled a dovish interest rate cut, which has also fueled investors' interest in risk assets and further pushed up cryptocurrencies.

However, Bitcoin's rise this year has not been smooth sailing, as it has experienced two setbacks during the year. Zhitong App will review Bitcoin's trend this year and look ahead to next year's prospects in this article.

A bumpy first half of the year: Cryptobank collapse and Bitcoin's multiple retracements after reaching $25,000

After experiencing stablecoin collapses and the FTX scandal last year, Bitcoin gradually recovered lost ground this year, rising from $16,000 to $24,000 at the beginning of the year. However, a "thunderbolt" in March halted its upward momentum, and Bitcoin even fell below $20,000 at one point.

Cryptobank Silvergate announced in March that it needed more time to complete the audit of its financial statements and could not submit its 10-K annual report to the US Securities and Exchange Commission (SEC) by the deadline of March 16th. What was even more alarming to investors at the time was that the company explicitly warned of possible capital insufficiency issues and was also evaluating the impact of a series of subsequent events on its ongoing operations.

As a result, many cryptocurrency market companies announced their disassociation from Silvergate. Cryptocurrency exchange Coinbase (COIN.US), cryptocurrency financial services company Galaxy Digital, and stablecoin issuer Paxos decided to stop using Silvergate's payment or transfer services. In addition, cryptocurrency exchange Crypto.com, Bitstamp, and cryptocurrency company Gemini subsequently announced the suspension of using Silvergate's deposit or transfer services.

However, with the intervention of regulatory agencies, the company orderly closed its banking business and voluntarily liquidated the bank. Bitcoin returned to the right track and its price surged by over 30% within four days, breaking free from the chaotic situation in the global market after the collapse of Silvergate and Silicon Valley Bank. Rocky Third Quarter: Musk's SpaceX Sells Bitcoin, Plunges Nearly 8% in a Day

Entering the summer, the cryptocurrency market seemed to enter a "summer slumber". After Bitcoin emerged from the low point of the cryptocurrency bank's collapse, it rose all the way, with prices briefly surpassing $30,000.

However, as Bitcoin fell back below $30,000, indicators tracking Bitcoin trading volume dropped to a 30-month low. According to data from K33 Research, due to the slowdown in price fluctuations, the 7-day average trading volume of Bitcoin spot trading on July 22nd fell to the lowest level since the beginning of 2021.

As August arrived, Bitcoin took a big hit when Elon Musk's SpaceX announced the sale of Bitcoin, intensifying market concerns. Bitcoin fell nearly 8% in a day, briefly dropping below $26,000.

The sudden drop in Bitcoin triggered massive liquidation on various exchanges. According to data from Coinglass, as prices fell, more than $1 billion in positions were liquidated on August 18th.

SpaceX wrote down the value of its Bitcoin holdings by $373 million and sold the cryptocurrency. However, it is unclear when SpaceX sold the Bitcoin, and this news also dampened market sentiment.

This round of Bitcoin's decline has almost wiped out the gains recorded since BlackRock unexpectedly submitted a Bitcoin ETF application on June 15th. After soaring 72% in the first quarter, Bitcoin has fallen nearly 9%.

According to data analysis from CryptoQuant, the total trading volume of Bitcoin held by all exchanges, whether spot or derivatives, has fallen to the lowest level since 2018 in early August and has been difficult to rebound.

Positive News in the Fourth Quarter: Good News for Spot ETF, Bitcoin Gathers Momentum and Surges to $44,000

In the past few months, with the expectation of a Bitcoin spot ETF listing, the price of Bitcoin has risen from $25,000 to over $40,000.

As October arrived, Bitcoin received multiple positive news. On October 24th, the U.S. Federal Appeals Court officially ruled that Grayscale Investments LLC successfully won the lawsuit against the SEC's rejection of its application for a Bitcoin spot ETF.

In August of this year, the U.S. Court of Appeals for the District of Columbia Circuit overturned the SEC's decision to block the ETF. The court stated that "the rejection of Grayscale's proposal was arbitrary and capricious because the SEC failed to explain its differing treatment of similar products." This ruling was made by only three judges of the court, and the SEC could have requested a review by all judges.

The August ruling was seen by cryptocurrency advocates as a watershed moment for the industry and a condemnation of the SEC's stance.

**With the "approval deadline" for the expected Bitcoin spot ETF approaching, asset management giant BlackRock frequently meeting with exchanges and regulatory agencies is also seen as a sign that "good things are coming". Market expectations are that the SEC may approve related ETFs in mid-January or earlier next year. These funds will trade Bitcoin in the form of low-tax, high-cost-effective ETFs. Previously, the SEC had consistently rejected such applications for the past 10 years. At first glance, this provides a path to redemption for digital asset supporters. A year ago, the collapse of FTX triggered the industry's biggest survival crisis and emboldened cryptocurrency opponents who have long dominated traditional finance.

It is estimated that with the participation of heavyweight companies such as BlackRock, Fidelity, and Invesco, the Bitcoin spot ETF market may eventually develop into a behemoth with a scale of $100 billion.

Outlook for 2024: Can Bitcoin "fly" even higher?

It seems that the returns of Bitcoin in 2023 are not enough, and there are multiple catalysts that could drive it higher in 2024.

Firstly, many people are paying attention to the possible launch of Bitcoin spot ETFs. Major asset management companies, including BlackRock and Fidelity, have submitted applications to the SEC to bring these products to the market. Many industry observers believe that these measures may be approved as early as January next year.

Bitcoin will benefit from this. Spot ETFs not only provide recognition for this digital asset, fundamentally legitimizing it in the financial services industry, but also a lot of new capital may flow into Bitcoin. Increased demand may push up prices.

Macro factors may also become more accommodative. As inflation continues to show signs of cooling down, Federal Reserve officials may be prepared to cut interest rates multiple times in 2024. Loose monetary policy like this is usually favorable for higher-risk assets.

Of course, it is difficult to know to what extent this optimism has already affected the price of Bitcoin. But these potential positive developments are still worth paying attention to.

Perhaps the most powerful catalyst is the halving of Bitcoin next year. This event occurs approximately every four years and reduces the new supply of Bitcoin entering the market by half. This supply reduction combined with rising demand is usually very favorable for Bitcoin. The next halving is expected to take place at the end of April 2024.

Several institutions also predict that Bitcoin will continue to shine.

Morgan Stanley expects Bitcoin to rebound after the halving event in early 2024.

Geoff Kendrick, Head of Foreign Exchange Research at Standard Chartered Bank, recently reiterated his price forecast for April, stating that the price of Bitcoin will reach $100,000 by the end of 2024. The bank stated that this will be driven by the approval of many ETFs.

Analysts at Bernstein have also joined the bullish camp on Bitcoin. They predict that due to supply reasons, Bitcoin may reach $150,000 by mid-2025.

Michael Novogratz, Founder and CEO of digital currency company Galaxy Digital Holdings, predicts that with the growing expectation of the SEC approving the first spot Bitcoin ETF in the United States, Bitcoin is expected to reach its previous peak of $69,000 in a year. Cathy Wood, also known as "Wood Sister" from Ark Investment, has a more optimistic prediction. She believes that by 2025, the price of Bitcoin could rise to between $650,000 and $1.5 million.