In its short history, Bitcoin has been one of Wall Street’s most controversial asset classes. While Bitcoin “maximalists” see the world’s largest digital asset as a cure for rampant government spending and inflation globally, Bitcoin pessimists see it as magic make-believe internet money. Regardless of what one believes, one factor is black and white and is impossible to argue – performance. Time and time again, over its history, Bitcoin has shown resilience and the ability to recover in the face of bad news. “Satoshi Nakamoto’s” brilliant creation has survived the Global Financial Crisis of 2008, a 2013 China Ban, and several crypto exchange collapses, to name a few. 2023 was no different – fresh off a vicious bear market and the collapse of crypto exchange giant FTX, Bitcoin rewarded investors who stayed the course with a 154.37% surge in 2023, adding more than $500 billion to its market capitalization. Can Bitcoin’s momentum continue into the new year? Below are three reasons it will:
More Demand Due to Bitcoin ETF Approval
Bitcoin Spot ETFs, the most highly anticipated ETFs in history, are all but a done deal. ETF operators such as Invesco, BlackRock (BLK), and ARK, are already working with the SEC to finish approval, unveiling their fee structure, and showing off their ticker symbol. In fact, there is already $12 billion Bitcoin “physically backing” these ETFs. At this juncture, the real question is not whether Bitcoin ETFs will be approved, but rather, will the approval be a classic “sell-the-news” event?
To answer this question, here are three shocking facts from a recent survey:
· Only 39% of financial advisors believe a spot Bitcoin ETF will be approved in 2024.
· 88% of advisors interested in purchasing Bitcoin are waiting until after a spot ETF is approved.
· Only 19% said they are able to currently buy in client accounts.
In other words, many financial advisors have no access to Bitcoin but want it. Expect a rush of demand in the coming months.
Bitcoin Halving = Supply Constraint
While demand is likely to soar, supply will be constrained in 2024 due to the next “Bitcoin Halving” in April. A Bitcoin halving is an event that occurs approximately every four years, reducing the reward miners receive for validating and adding new blocks to the Bitcoin blockchain by half. One of the virtues of Bitcoin is its built-in monetary policy. The reduction in the rate at which new Bitcoins are created leads to a gradual decrease in the overall supply of newly minted Bitcoins. Though the number of halvings in Bitcoin’s history is only three, the stats suggest that bulls should stay the course for at least the next year.
Image Source: Factor Research and Trading Services
2024 is a Presidential Election Year
Did you know that in the past three presidential election years, Bitcoin returns were as follows?
· 2012 +272.4%
· 2016 +161.4%
· 2020 +302.8%
Investors should strive to interpret rather than predict. With that in mind, investors who soberly look at the data should conclude that Bitcoin is likely to be much higher in 2024. Look for Bitcoin proxies such as Riot Platforms (RIOT), Coinbase (COIN), Marathon Digital (MARA), and MicroStrategy (MSTR), to be higher in 2024.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.