The COVID-19 pandemic, rampant inflation, and regional conflicts directly influenced the decline in bitcoin (btc) value over the past two years. However, 2024 promises to be a period of resurgence, according to Blockstream CEO Adam Back.
The cryptographer, who pioneered the proof-of-work algorithm applied in the bitcoin protocol, tells Cointelegraph that the preeminent cryptocurrency is below the historical price trend line from previous reward halving events mining.
“Biblical” events hurt bitcoin
Back weighed in on potential bitcoin price action as the next halving, in which bitcoin miners' block reward will be reduced by 6.25 btc to 3.125 btc, looms in April 2024. Block reward halvings are programmed into the bitcoin code and take place after every 210,000 blocks are mined.
Back says that the overlapping averages of previous market cycles and halvings indicate that bitcoin's relative value is lagging behind widely accepted projections. Multiple events have influenced the decline in the price of btc, which has also been observed in conventional financial markets:
“The last few years were like a biblical pestilence and plague. There was COVID-19, quantitative easing, and wars that affected energy prices. Inflation makes people rise and companies go bankrupt.”
According to Back, the impact has deeply affected markets and portfolio management. Investment managers have had to manage risks and losses in recent years, which has required the sale of more liquid assets.
“They have to come up with cash and sometimes they sell the good stuff because it's liquid and bitcoin is super liquid. It used to happen with gold and I think that is a factor for bitcoin in recent years,” explains Back.
bitcoin would have already reached $100,000
As 2023 draws to a close, many of these macro events Back cited have ended, while more industry-specific glitches have also been resolved. This has been reflected in the recent bitcoin price surge from November 2023 onwards.
“The wave of contagion, the companies that went bankrupt because they were exposed to Three Arrows Capital, Celsius, BlockFi and FTX, that is almost over. “We don’t think there are many more surprises in store,” Back said.
Related: Blockstream Targets Continued Surplus of bitcoin Miners with BASIC Note Series 2
The Blockstream CEO predicted that bitcoin would reach $100,000 in the next market cycle earlier this year and addressed this point. He believes that btc would have already reached this mark if not for the factors highlighted in the conversation with Cointelegraph.
Back also referred to the bitcoin “stock-to-flow” model created by pseudonymous former institutional investor PlanB as a benchmark for bitcoin's bullish potential in 2024.
If you want to know more about bitcoin Stock-to-Flow:
*This is the original article from 2019:https://t.co/n5P5uMCKHT
*Or watch this YouTube video:https://t.co/3SGMU1Ln00 pic.twitter.com/Qp8SjqtXIB— PlanB (@100 billion dollars) December 5, 2023
Back explains that PlanB's model and heuristics suggest that savvy bitcoin investors historically bought btc six months before a halving event and sold significant increases in price that occurred in the 18 months following the halving event. mining rewards:
“People thought the statement that we could reach $100,000 before the halving was a little crazy because I said it when the price was around $20,000.”
He adds that bitcoin's price hitting $44,000 multiple times in December 2023 suggests his previous prediction might not be so far-fetched.
The bitcoin ETF Effect
Prominent investors and market analysts have also highlighted the effect of the possible approval of several bitcoin spot exchange-traded fund (ETF) applications by the United States Securities and Exchange Commission (SEC).
People ask me if we change the odds. No, we're still holding the line at a 90% chance of approval by January 10 (aka this cycle), the same odds we've had for months (before it was cool/safe). What we're watching for now: More amended/final submissions to implement and clarity on the distinction between kind and cash https://t.co/uiWgfxOfzz
– Eric Balchunas (@EricBalchunas) November 29, 2023
ETF senior analysts Eric Balchunas and James Seyffart have touted these apps getting the green light in early 2024. Galaxy Digital co-founder Michael Novogratz has also predicted massive inflows of institutional investment into btc-backed products, a point Back echoes:
“Believe bitcoin could reach $100,000 even before the ETF and before the halving. “But I certainly think the influence of the ETF should not be undervalued.”
A key reason cited by the bitcoin advocate is that entire segments of traditional markets, including major fund managers like BlackRock and Fidelity, simply cannot invest directly in assets like bitcoin.
Related: bitcoin ETFs Will Drive Institutional Adoption in 2024: Galaxy Digital's Mike Novogratz
“If they run a mutual fund, they have rules, whether imposed externally or as part of their fund, that they can only buy things like public stocks and ETFs. They can't buy new companies, they can't physically buy precious metals. They can't do any of that,” Back highlights.
This remains a pertinent reason why a spot bitcoin ETF could generate significant capital inflows into the space. Back adds that the investment vehicle opens up access to bitcoin exposure to many types of funds, particularly in the US, which are more inclined to do so through Fidelity or BlackRock than with a cryptocurrency exchange.
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