Risk v/s Reward: Bitcoin in 2024
By Evander Smart, Founder & CEO — Bitcoin University
The year 2023 was not an easy one for the crypto community. The cryptocurrency market was awash with headline-making scandals featuring the collapse of FTX and Celsius, among other fraud cases. However, even given the notable negatives that 2023 wrought, it was also a year that saw Bitcoin up by almost 160% and the whispers of a game-changing approval for ETFs on the horizon.
As we head into 2024, investors will be weighing the risks and rewards of Bitcoin and the crypto market as a whole. There are plenty of both to examine, so let’s dive into what the year ahead may have in store.
Reward: A much-heralded approval
We are only a month into the new year, but the biggest news of the year for Bitcoin has already happened. On January 10, 2024, the Securities and Exchange Commission (SEC) approved the first US-listed Bitcoin ETFs. Eleven applications from such notable names as Blackrock and Fidelity were made available. As soon as the much-anticipated announcement was made, competition came in hot and heavy, and $4.6 billion was traded in the immediate wake of the announcement.
It is a watershed moment for Bitcoin and a move that will make the flagship cryptocurrency more accessible to traditional investors while also solidifying its validity in the financial market. The approval stands as a significant “reward” for 2024 and is a move that will make the year a historic one for the crypto market as a whole.
Risk: Continued volatility
Even with the move toward stability that the BTC ETF approval may bring, it still remains a volatile investment. Bitcoin has shown a propensity for rapid, often unpredictable price swings, influenced by everything from macroeconomic trends, talk of regulation, or even news coverage of the FTX fraud case. While savvy investors know that volatility can sometimes lead to substantial returns, it does not make it any less risky.
Significant losses can also be the result of volatility in the market since, like any other tradeable asset, the price of Bitcoin hinges on supply and demand. It can also hinge on market speculation, as we will discuss, and even the opinions of cryptocurrency influencers.
Reward: Improved regulations
Given the attention paid to collapses such as those at FTX and Celsius, the call for stronger regulations has grown louder. Where once fans were proud of the “Wild West” feel of the overall cryptocurrency market, the benefits of better regulatory oversight are becoming clearer.
Establishing better regulations has become a priority for regulatory bodies. In 2023, the SEC took on 26 separate cryptocurrency actions, and 2024 will likely see more moves by regulatory bodies to make crypto investments safer and less susceptible to fraud.
Risk: Sentiment and speculation
Cryptocurrency markets are consistently influenced by market sentiment and speculation. It is part of the volatility of the market. While sentiment surrounding Bitcoin is especially positive on the heels of the BTC ETF approval, that sentiment could change on a dime if 2024 brings another FTX-level controversy.
Experts say that fear and greed can be two of the most significant drivers of crypto market behavior. A fear of missing out (FOMO) and a desire for substantial gains may overrule negative speculation resulting from highly publicized fraud cases.
Reward: A hedge against inflation
Inflation is still in the news in the new year, although it is waning from its height in 2022. Bitcoin remains a store of value similar to gold or silver and provides a hedge against inflation for investors. With the BTC ETF approval, many traditional investors will see Bitcoin’s place as a store of value as a significant positive and move into the market to diversify their portfolios.
As we begin to navigate the world of Bitcoin in 2024, cautiously but optimistically, the potential risks and rewards will be intertwined with the excitement of the evolving market. The siren song of potential high returns will likely persist, drawing both experienced crypto investors and traditional investors into the space.
The market will continue to be defined by innovation and its attractive decentralization aspect, giving investors more options and control over their money. However, the volatility of Bitcoin will continue to pose a considerable risk to investors, making moving forward into 2024 with caution advisable.
The transformative nature of blockchain technology and the continued acceptance by various industries have signaled a future that includes crypto, yet how we want that future to look may depend on several factors. What remains important is that investors remain risk-aware and informed and that they come into this new year with a balanced approach in mind.
