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Bitcoin has had a strong 2024 so far with the price hitting a new record high of over $70,000 in March.
The launch of a raft of bitcoin exchange-traded funds (ETFs) and the halving in April has likely helped propel the original crypto asset higher.
The price has hovered between around $60,000 and $70,000 since then, but is it going to keep moving higher from here or crash back down to lower levels?
In this article we explain:
What’s happening to bitcoin’s price?
As of May 2024, the bitcoin price has been in a consolidation pattern for several weeks. It has traded in a range of slightly below $60,000 to a peak around $70,000. The price started the year near $40,000, so the current levels remain significantly higher.
A swing from $70,000 down to $60,000 in a matter of days is much more than you would see in the stock market for example, except under the most extreme circumstances such as the beginning of the pandemic.
See more: How high could bitcoin’s price potentially go?
Is bitcoin going to crash?
It is impossible to predict Bitcoin’s price movements with certainty. Given the volatility of Bitcoin it is probable that the price will see a dramatic fall again at some point in the future that could be defined as a crash.
When this will come is very hard to say. Though past performance is not an indicator of future results, looking at historical patterns, bitcoin’s big crashes have not come in the year following a halving. In fact the opposite has been true. Bitcoin’s price has risen significantly during the year following the halving.
The rise in price seen following previous halvings has not been a smooth, constant uptrend however. From day to day and week to week, the price has moved both up and down significantly, within a broad longer-term uptrend.
Previous crashes have occurred more than a year after the last halving. If that pattern repeats a crash would occur in late 2025 or in 2026, given the latest halving took place in April 2024. There can be no certainty the pattern will repeat though. Events could occur that completely invalidate the patterns of the past and investors’ expectations.
See more: Is cryptocurrency an investment to consider?
Is bitcoin’s price going higher?
This is impossible to know for sure. Proponents expect its price to continue to go higher over the long term, while remaining volatile. The introduction of ETFs and the recent halving are likely two of the main reasons many people believe the price will go higher.
ETFs provide institutional investors and non-technical people with easier access to the asset. Institutions collectively have trillions of dollars in investible wealth, so if only a small fraction of this money comes into bitcoin over the coming years it could lift the price significantly.
The halving means the amount of new bitcoin being brought into existence each day is now half what it was before 19 April. This means supply is tighter. Lower supply with equal or rising demand typically pushes a price up over time.
What makes bitcoin so volatile?
Bitcoin is volatile for a number of reasons. Firstly, it is a new type of asset with no inherent value other than what bitcoin investors are willing to pay for it, which makes valuing it more difficult. It was only invented in 2009 in the aftermath of the global financial crisis. While 15 years may be a big chunk of time to an individual person, it is very small relative to how long other investable assets have been around, such as stocks and gold.
Liquidity can be another factor in volatility. The less of an asset there is available to buy and sell on exchanges the more volatile its price typically is. While bitcoin’s liquidity on exchanges is much higher than it was in the early years, it remains less liquid than traditional assets such as shares in major companies.
One other big reason for the volatility is the regulatory uncertainty. While this has eased to some degree with the approval of bitcoin ETFs, the regulatory picture for bitcoin and crypto in general remains unclear.
Read more: What are ETFs and are they a good investment?
What caused bitcoin’s last big crash in 2022?
In March 2022, the price of one bitcoin was around $46,000. But the market turbulence that followed saw this drop by nearly two thirds.
In June 2022 bitcoin dropped below $20,000 for the first time since 2020. This was prompted in part by the decision of Celsius Network, a major US cryptocurrency lending company, to freeze withdrawals and transfers, citing “extreme” conditions. There were also other crypto related collapses, including crypto asset Luna, and a crypto hedge fund called Three Arrows Capital. These helped fuel a slump across the cryptocurrency market.
However, the most significant blow for crypto in 2022 was likely triggered by the collapse of FTX in November. This was a major cryptocurrency exchange which handled around $1 billion transactions each day. Its collapse had a knock-on effect on other crypto exchanges. In November 2022, the price of bitcoin fell to around $16,000, a far cry from its peak of around $65,000 a year prior.
Read more: Should you invest in European stocks?
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