Over the past two years, the value of Bitcoin (BTC) has been significantly influenced by the ongoing COVID-19 pandemic, escalating inflation rates, and regional conflicts.
However, according to Blockstream CEO Adam Back, 2024 holds the promise of a resurgence for the world’s leading cryptocurrency.
Back, the cryptographer responsible for pioneering the proof-of-work algorithm utilized in Bitcoin’s protocol, spoke to Cointelegraph about how Bitcoin is currently trailing below the historical price trend line observed during previous mining reward halving events.
These halving events are hardwired into Bitcoin’s code, occurring every 210,000 blocks, and result in a reduction of Bitcoin miners’ block rewards, from 6.25 BTC to 3.125 BTC in the upcoming halving.
Back explained that when analyzing the averages of past market cycles and halving events, it becomes evident that Bitcoin’s relative value is lagging behind widely accepted projections.
Several factors have contributed to this decline in BTC’s price, a trend also observed in traditional financial markets.
“The last few years were like biblical pestilence and plague.
There was COVID-19, quantitative easing, and wars affecting power prices. Inflation running up people, companies are going bankrupt,” Back pointed out.
These events have had a significant impact on financial markets and portfolio management. Investment managers have had to navigate risk and losses, leading to the sale of more liquid assets, including Bitcoin.
As 2023 draws to a close, many of these macro events have subsided, and industry-specific issues have been resolved.
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This positive development has been reflected in Bitcoin’s recent price surge starting in November 2023.
Back reiterated his previous prediction that Bitcoin would reach $100,000 in the next market cycle and emphasized that it might have already reached that milestone if not for the macroeconomic factors mentioned earlier.
He also referred to the “stock-to-flow” model created by PlanB, a pseudonymous former institutional investor.
This model suggests that wise Bitcoin investors historically bought BTC six months before a halving event and sold during significant price surges in the 18 months following the reward reduction.
Given Bitcoin’s recent price hitting $44,000 multiple times in December 2023, Back’s earlier prediction seems less far-fetched.
Additionally, prominent investors and market analysts have highlighted the potential approval of several spot Bitcoin exchange-traded fund (ETF) applications by the United States Securities and Exchange Commission (SEC).
These approvals, expected in early 2024, could lead to substantial institutional investment inflows into BTC-backed products.
Back believes that Bitcoin could reach $100,000 even before the ETF approval and the halving.
He stressed that the ETF’s influence should not be underestimated, particularly as it would allow traditional market segments and major fund managers like BlackRock and Fidelity to invest in Bitcoin indirectly, which they are unable to do directly due to their fund rules and regulations.
In conclusion, Adam Back’s outlook for Bitcoin in 2024 is optimistic, with the potential for significant price gains driven by various factors, including the upcoming halving and the anticipated approval of Bitcoin ETFs.
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