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Crypto at 15: Take a look at me now ...

Janine Grainger, CEO of Easy Crypto, New Zealand’s largest crypto exchange, reviews where we landed in 2023, what’s afoot and where the industry might be heading this year.

15 January 2024

Fifteen years ago this month, Satoshi Nakamoto mined the first Bitcoin block, known as the “Genesis Block”, laying the foundation for what would become one of the most transformative technologies in the world’s financial history.

Fast forward to today and that first cryptocurrency has defied critics and is now ranked as the ninth most valuable asset in the world with global uptake growing daily.

Over the past few weeks those subscribed to investment newsletters would have received countless alerts such as “Bitcoin’s Christmas Eve record” and “BTC is now up by +XXX per cent over the last 24 hours”.

What was: The remarkable recovery that set up a springboard for 2024: Off the back of what many had dubbed the “longest bear market” in history, crypto saw a remarkable recovery in 2023 to gain an incredible 160 per cent (in US dollar terms) by the end of the year. So remarkable was the recovery that the number of wallets containing BTC worth at least $1 million went up by nearly 300 per cent since the start of the same year, reports Coin Telegraph.

A trifecta of macroeconomic shifts responsible for Bitcoin and the wider crypto market’s price movement included growing signs of monetary tightening cycles ending, meaning investors turn to higher risk assets like Bitcoin in their search for better returns. In addition, there was increasing institutional investment in the crypto space across multiple geographies. A more tightly regulated environment has also helped increase adoption among consumers, businesses and institutions as this has boosted trust and confidence in the industry.

What is: Crypto finally ‘mainstreams’ within the investment landscape: Even more significant has been the very recent and historic approval by the United States Securities and Exchange Commission (SEC) of a Bitcoin spot exchange traded fund (ETF). In a few minutes, millions made the jump from “Should I invest in crypto?” to “Where can I invest with the lowest fees?”

At the time of writing this post, there were no fewer than 11 approvals of a Bitcoin ETF, each with their own “ticker” (the four-digit symbol that represents a publicly traded stock or index), management fees and sponsors (or the companies backing the ETF).

ETFs are a financial product in America that allows people to buy Bitcoin through investing in a managed fund, similar to a KiwiSaver product. Approval of the ETF allows hundreds of millions of investors around the world who can buy American ETF products to access Bitcoin as easily as they can purchase any other managed fund and gives big investors (like pension funds) access to the Bitcoin market for the first time.

With issuing companies including Blackrock and Grayscale, and sponsors including JP Morgan, it’s a move that has usurped tech, business and even mainstream headlines. It’s expected these issuers will aggressively drive funds into these offerings, including an uptick in marketing and media attention around Bitcoin.

In terms of implications, optimists have started to draw comparisons with how the first gold ETF impacted prices. The impact was not immediate, albeit definite and sustained. Some outlets are claiming the move is akin to “adults stepping in the room”, although others might say that they’re finally catching up to the future.

Increased institutional participation will inject substantial liquidity into the market and might help foster greater price discovery via increased trading on a regulated platform. This boost in trading activity may also reduce the gap between buying and selling prices, known as the spread, making it easier and more cost effective for investors to buy or sell Bitcoin ETF shares. In essence, the ETF approval enhances market efficiency and accessibility.

Once demand is established it could lead to sustained buying pressure as institutions and retirement funds begin to incorporate crypto into their portfolios.

What’s coming: Halving - the cherry on top of pricing optimism: Another pivotal event on the calendar for 2024 is the next Bitcoin halving. “Halving” takes place about every four years and is forecast to happen next in April.

Unlike traditional currencies, which are controlled by central banks and governments, the supply of Bitcoin is programmatically limited and there will only ever be 21 million Bitcoins. When a halving event happens, the miners who operate the Bitcoin network receive less Bitcoin as reward for their efforts. This means less new supply coming into the market which affects the classical supply and demand price curve. Halving events are now widely covered by the media, further contributing to the hype and excitement.

This year’s Bitcoin halving has been widely tipped to be the cherry on top of pricing optimism. These mathematical projections range broadly, but unequivocally predict currency increases significantly in value. Those looking to make a quick buck, however, might face disappointment as a true market surge typically happens a few months after the event itself.

Quite comically, one of the SEC’s latest posts on social media cautioned would-be investors with the slogan “Say “NO GO to FOMO” (fear of missing out) which read the wrong way, could be taken to mean “Beat FOMO and get in fast!”

Responses varied from comical (“This sounds like a hand-wringing warning someone who owns no BTC puts out before approving the BTC ETF”) to (“When it comes to #Bitcoin you should absolutely have FOMO. This is a once-in-a-lifetime opportunity to procure generational wealth and I’m scooping up as much as I can afford while it's still cheap sub $1 million”).

Whatever your reaction, astute investors across the world are realising there has never been a better time to hone their knowledge around crypto. As always, basics like investing only what you can afford to lose are key, but with crypto, investors should also brush up on things like how to keep their holdings safe in a ‘self-custody’ wallet.

Although only time will tell, the many who ignored the currency in 2009 are well and truly kicking themselves in 2024 and vowing not to make the same mistake again.

Disclaimer: Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.


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