Will Bitcoin finally head to the moon in 2024?

Bitcoin is ending 2023 on a high after climbing 157 per cent so far this year to about $43,000 – and excitement is building for the digital token for 2024.

Traders expect another strong year for Bitcoin, with price predictions ranging from a conservative $50,000 to the dizzying heights of $100,000 or more.

The “crypto winter” of 2022 is giving way to yet another bout of cryptocurrency spring madness, with talk of a breakthrough year for digital assets. As ever, investors need to keep a cool head to withstand their fear of missing out (Fomo), but many will not succeed.

Bitcoin hit a record high of about $69,000 in November 2021, shortly before inflation and interest rates took off.

Higher borrowing costs have since “burdened” crypto assets as their development is “highly contingent on private investors’ capital”, says Manuel Villegas, digital assets analyst at Julius Baer.

Higher yields on lower-risk assets such as US Treasuries and money market funds also increased the opportunity cost of holding cryptocurrency, which pays no interest, hitting demand.

The cryptocurrency sector was also hit by a string of platform failures and scandals, notably the $32 billion collapse of FTX and arrest of founder Sam Bankman-Fried, who was found guilty on seven counts of fraud last month.

The former cryptocurrency poster boy now faces up to 110 years in prison, plus fines and restitution, with further charges in the pipeline.

Mr Bankman-Fried was not the only platform boss in trouble, with Changpeng Zhao, founder of Binance.com, the world’s largest cryptocurrency exchange, pleading guilty and resigning for failing to maintain an effective anti-money laundering programme.

Binance has survived but only after the company agreed to pay more than $4 billion to resolve the Justice Department’s investigation.

Cryptocurrency remains the wild west of finance, with investors losing a record $685.5 million to hacks and fraud in the third quarter of this year, up 59 per cent on last year, according to security services platform Immunefi.

Yet, as interest rates peak and the US Federal Reserve hints that it will start cutting interest rates next year, investors are returning in droves.

The growing conviction that the fastest and steepest US monetary tightening cycle has come to a close is just one factor driving Bitcoin, Mr Villegas says.

Another is that investors favour “long-term holder accumulation”, buying cryptocurrency and sitting on it rather than selling, shrinking supply.

Investors are also licking their lips in anticipation of two Bitcoin-friendly events that may put a rocket under the price next year.

The first is the long-awaited US regulatory approval of spot Bitcoin exchange-traded funds that will open the market to private and institutional investors who have been wary of directly buying virtual coins themselves.

Watch: El Salvador become first country to adopt Bitcoin as legal tender

At least nine asset management firms have posted applications to run spot ETFs, including 21Shares, ARK Invest, BlackRock, Fidelity, Valkyrie and WisdomTree. The first US Securities and Exchange Commission approval could land as soon as next month.

A bill put forward by US senator Elizabeth Warren to “crack down” on Bitcoin and cryptocurrency has knocked sentiment but a spot Bitcoin ETF approval could change that, says Joshua Mahony, chief market analyst at trading platform IG.

“Ultimately, the introduction of Wall Street into the crypto space brings a greater degree of legitimacy.”

The second great hope is the latest “halving” event, due in April, when the amount of Bitcoin paid to miners halves, in a preprogrammed move to reduce supply and maintain its scarcity value.

These two coming events have triggered a spate of excited price forecasts for the year ahead.

Ryan Rasmussen, senior cryptocurrency research analyst at Bitwise Asset Management, predicts that Bitcoin will hit a record high of $80,000, as spot Bitcoin ETFs “collectively will be the most successful ETF launch of all time”.

“Within five years, we estimate spot Bitcoin ETFs could capture 1 per cent of the $7.2 trillion US ETF market, or $72 billion in assets under management,” he says.

As Bitcoin becomes more accessible, Mr Rasmussen reckons up to one in four financial advisers will allocate it to clients’ accounts and he is not the only one predicting big gains.

Within five years, we estimate spot Bitcoin ETFs could capture 1 per cent of the $7.2 trillion US ETF market, or $72 billion in assets under management

Ryan Rasmussen,
senior crypto research analyst at Bitwise Asset Management

Bloomberg reckons the price will top $50,000 next year. Standard Chartered predicts it will hit $100,000 by year end, while Coincodex forecasts $109,364.

Cryptocurrency financial services company Matrixport projects Bitcoin will hit $63,140 by April 2024 and $125,000 by the end of 2024 as inflation and interest rates continue to fall.

BitQuant is at the extreme end of the scale, predicting a post-halving price of up to $250,000. Cryptonews.com reckons the price could hit $300,000, but only in 2028.

However, not everyone is so upbeat. Analysts at JP Morgan, led by Nikolaos Panigirtzoglou, have adopted a cautious stance, warning that spot Bitcoin ETFs may not necessarily bring new capital to the market.

Spot ETFs have already been approved in Canada and Europe, without sparking an investor frenzy.

It is more likely that money would shift from existing Bitcoin products such as the Grayscale Bitcoin Trust, Bitcoin futures ETFs and Bitcoin mining companies, JP Morgan says, adding that the halving is predictable and already factored into the Bitcoin price.

Bitcoin faces another threat in the shape of a looming US recession, says Matthew Sigel, head of digital assets research at asset manager VanEck.

“Bitcoin has only experienced one official US recession, from January to April 2020, during which it fell 60 per cent peak-to-trough,” he says.

Mr Sigel believes the damage may partially be offset by an estimated $2.4 billion flowing into spot ETFs, keeping the price above $30,000 in the first quarter of 2024. But it faces another risk in the shape of a “presidential-sized wall of worry”.

The US faces a bitter election on November 3 as Donald Trump seeks to win back the White House, while other countries are also having elections, including the UK, India, South Africa, Mexico and many more.

The percentage of the global population voting in legislative and presidential elections will hit a record high of more than 45 per cent in 2024, Mr Sigel says, which could boost safe-haven inflows.

A victory for Mr Trump would raise hopes that the SEC's hostile regulatory approach will be dismantled, driving Bitcoin higher, Mr Sigel says.

So, what should investors do when faced with all the wildly differing predictions? Wise souls will continue to resist the hype and carry on investing in real-world assets.

Yet Bitcoin’s latest recovery suggests cryptocurrency is here to stay, and every investor should consider a small portfolio allocation.

For all the excitement about 2024, one thing will not change. The Bitcoin price will do what it likes, and nobody knows what will happen next. The usual advice applies: Approach with extreme caution.

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Option 1: 70% in year 1, 50% in year 2, 30% in year 3
Option 2: 50% across three years
Option 3: 30% across five years

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Will Bitcoin finally head to the moon in 2024?

The digital token has climbed more than 150% in 2023 and analysts expect it to hit record highs next year

Watch: El Salvador become first country to adopt Bitcoin as legal tender

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