Bitcoin
4 Catalysts That Could Fuel the Next Crypto Rally
- Bitcoin is up over 60% in 2024, driven by January crash spot ETF approval and the recent halving event.
- Developers have been working to add functionality to the Bitcoin network, which could increase prices.
- The red-hot crypto could also get a boost from interest rate cuts, looser regulation and the November elections.
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Bitcoin achieved records this year thanks to two catalysts: the spot ETF approvaland the recent halving event. The red-hot crypto is up more than 60% year-to-date on Friday, trading about 6% below all-time highs reached in March.
Although both drivers are expected to maintain pushing the price of bitcoin up, they are now in the rearview mirror and investors are wondering where to look for more upside. According to analysts, there are many ways in which the price of bitcoin could continue to rise.
Four future catalysts are detailed below:
1. Interest rate cuts
Investors are focused on the Federal Reserve’s outlook for rate cuts, anticipating that stocks could rise as a result. The same dynamic applies to bitcoin, which has traded as a speculative asset that appreciates when borrowing costs are lower.
In fact, 2021’s ultra-low interest rates are largely what pushed bitcoin to a record that year. The recovery then reversed when the Fed began its monetary tightening campaign.
“In the first quarter, we had the halving coming up, but mainly we had a huge adoption of ETFs. So as that gets priced in, now you’re looking at what the Fed can do,” said Galaxy CEO Mike Novogratz. told Bloomberg earlier this month.
Until short-term interest rates ease, bitcoin will likely remain in the $55,000 to $73,000 range, he said.
2. Changing regulations
At this point, the crypto community is also seeking coherence on the regulatory front, which has proven to be a frequent obstacle for bitcoin. For example, the eventual approval of spot ETFs by the Security and Exchange Commission was preceded by a judicial loss.
But legal sentiment around crypto appears to be adjusting. A future bitcoin catalyst could be the future stable currency note, Oppenheimer CEO Owen Lau told CNBC in early May. It could happen later this year.
Meanwhile, the US House of Representatives has just passed a broad regulatory framework for the crypto industry, which is being hailed as a victory for the sector. While its fate is unclear in the Senate, it would offer clearer rules to the cryptosphere.
3. November elections
But real regulatory clarity will come after the presidential election, Novogratz said. He noted that Republican nominee Donald Trump has been a growing voice of support for the industry, in contrast to President Biden’s policies.
In a May note, Standard Chartered’s Geoff Kendrick also said a Trump victory would be broadly positive for bitcoin.
He added that increased concern surrounding the US deficit and debt trends It will also likely boost bitcoin as investors begin to look for alternative investments. That could happen with both candidates, as neither has offered a plan on how to handle government spending, Kendrick said.
4. Expanded use
While perspectives on bitcoin are changing, the cryptocurrency itself is undergoing something of a makeover.
According to Bloomberg, developers have been working hard to add functionality to the bitcoin network. These efforts seek to make crypto more than just a speculative asset to hold, and with projects quickly coming online, could offer another catalyst.
For example, the recently launched Ordinals protocol allows users to store more than just bitcoin on the BTC blockchain, but start trading assets like non-fungible tokens. The Ordinals market has already seen daily trading volume reach $3.42 million in mid-May, said Bitget Managing Director Gracy Chen. wrote on X.
“The advent of Ordinals in Bitcoin in 2023, the later created BRC-20 token standard, and now the Runes token standard have helped drive interest in thinking about Bitcoin as a platform network, not just a monetary network.” Galaxy wrote in a note. And now, those projects are attracting considerable attention from venture capitalists, he said.