As Bitcoin reaches the $44,000 threshold, why the surge and what’s next?

Bitcoin’s rapid-fire ascent to $44,000 comes on the back of roughly 25% gains in the last week. The grandfather of all cryptocurrencies has had an even more lucrative 2023, rising 158% from its year-ago levels, according to CoinMarketCap data.

Given how long the crypto world has been dealing with a downturn, what’s driving Bitcoin’s price ascent and similar value gains among other tokens? And can the good vibes continue into the new year?

“The main impetus for the bitcoin price rise seems to be the upcoming approval of the [spot] bitcoin ETF and the additional capital flows that will follow after the ETF is live,” said Tegan Kline, CEO of Edge & Node, a company that is behind a protocol for organizing blockchain data.

Luke Nolan, a research associate at CoinShares, thinks the “kick-off” of this Bitcoin rally came on the back of the mid-October ruling from the D.C. Circuit Court of Appeals that closed the June 2022 suit between the SEC and digital asset manager Grayscale. The federal court issued a final ruling that ordered the SEC to rescind its rejection of the firm’s Bitcoin spot ETF application.

“We have seen tremendous buying for two reasons as a result of this,” Nolan said. “People front-running what they believe will be significant flows stemming from the potential launches of the ETFs [and] if the SEC approves a spot bitcoin ETF, there is a ‘stamp of approval’ for the asset class from the largest capital market regulator in the world.” If that happens, bitcoin could see more capital inflows, potentially boosting its value.

Bitcoin’s price surge into year-end has been exceptionally encouraging, as it has been accompanied by the highest trading volume it has seen since November 2022, said Joel Kruger, LMAX Group currency strategist.

“Of course, one of the main fundamental catalysts is coming from anticipation of mass institutional and mainstream adoption in 2024 as channels are opened up that will allow for easier access to bitcoin exposure,” Kruger said.

While ETF excitement is the driver being cited most frequently right now, it is unlikely that near-term demand for an ETF will be large enough to justify these price moves alone, said Wolf CEO Kelly Brewster.

“What seems substantially different this cycle is that there is a lot of activity happening around Bitcoin beyond those simply buying the asset expecting that it will appreciate,” Brewster said. “There has been significant growth in layer-2 technologies such as the Lightning Network, collectibles and NFT projects that leverage the Bitcoin Ordinals protocol, and exciting new innovations like Taproot Assets from Lightning Labs, which is making Bitcoin a multi-asset network.”

Momentum has been “consistently building” for Bitcoin-focused builders this year, said Muneeb Ali, CEO and co-founder of Trust Machines. “We are entering an era of Bitcoin that we have never seen before. One where scaling the usability of Bitcoin unlocks billions in untapped value.”

Image Credits: Bloomberg/CoinShares

And the weekly crypto asset flows data from CoinShares supports that, Nolan noted. “For the last several weeks we have seen consistently high inflows into crypto funds,” he said. The 10-week total was $1.76 billion, taking the total for the year to $1.84 billion in crypto asset flows. That amount has been “largely dominated” by bitcoin with year-to-date flows of $1.68 billion.

Of course, other factors are contributing to this rally, too. For example, there seems to be a renewed appreciation for Bitcoin’s security model and simplicity, and what is clearly different for Bitcoin this time around is that a lot of the things piloted on other blockchains during the last bull market are now being rebuilt on Bitcoin.

What should we expect for Bitcoin in 2024?

“Bitcoin is a very volatile asset, and so in the short term it would not be surprising to see $50,000 on the back of the technical factors that contribute to an upside squeeze,” Nolan said. “Conversely, in every significant rally for bitcoin, prices can retrace 20%+ before resuming a longer positive trend. Looking at the weekly chart, we have seen eight green candles in a row. It would be largely unsurprising to see prices cool down in the near term and pull back 10–15%. But bitcoin often doesn’t act the way it should.”

Given that trends have a way of pushing into year-end, Kruger thinks it’s quite possible the upside pressure will persist throughout December with “setbacks exceptionally well supported into dips.”

The rapid pace of this price movement is “not uncommon in the crypto space,” Edge & Node’s Kline said. “While price corrections can happen, the current rally appears to be underpinned by strong fundamental factors, suggesting that the upside potential may be greater than in previous instances.”

Kruger said he wouldn’t be at all surprised to see Bitcoin close out 2023 in the “next big resistance zone, which we see in the $48,000 to $53,000 area.”

In the long-term, if the easing of financial conditions plays out the way the market is expecting, and there are rate cuts in the middle of next year, as well as an increase of global liquidity, which seems likely, these factors would be positive to support a sustained rally and we very well could see Bitcoin at $70,000 by the end of 2024 “as a conservative estimate,” Nolan said.

Kruger expects more bullish price action, too, predicting that Bitcoin’s price will push to a “fresh record high” and potentially “challenge the major psychological barrier at $100,000.”

Optimism is seemingly back in crypto markets, especially for Bitcoin, and if the momentum keeps up long-term, 2024 can be a strong year for the industry, startup activity and market players alike.