Many expect Bitcoin to rise above $100,000 in 2024, which they attribute to the upcoming halving in April and the possible approval of the first-ever spot Bitcoin ETF in the US. However, not everything in the crypto market always unfolds as expected.
For instance, in May 2021, as Bitcoin approached its all-time high, China, the largest mining centre at that time, revealed restrictions on miners, resulting in a rapid 50% price decline within two months. Another incident occurred in mid-October 2023 when Bitcoin skyrocketed from $28k to $30k amid news of a spot Bitcoin ETF launch. This time, it took 20 minutes for market participants to realise that it had been fake; the market immediately pulled back, leaving disappointed investors counting their losses.
Today, we'll have a look at the main pitfalls that could impede Bitcoin's growth in 2024. Pay attention, because the best strategy in the crypto market is to hope for the best while preparing for the worst.
1. Spot Bitcoin ETFs in the US may not succeed
Optimists believe that a spot Bitcoin ETF will attract large investors to the crypto industry. According to Bloomberg analysts, the tool could be launched in early 2024.
The first spot Bitcoin ETF in the US race was launched in 2013 with a filing the US Securities and Exchange Commission (SEC) received from the Gemini Exchange founders, prominent Winklevoss twins. Despite 30 more applications since then, none have been approved due to concerns about the tool's security.
In June 2023, the world's largest Wall Street asset manager, BlackRock, resumed the race to launch a spot Bitcoin ETF in the US. It was followed by others. Now (mid-December 2023), the SEC is considering 13 applications to launch the new tool in America.
In 2023, just like it was back in 2013, there is no guarantee that the watchdog will approve it. Possible application refusals could trigger a BTC panic sale.
2. Bitcoin halving may break the plan
The halving of Bitcoin mining speed occurs approximately once every four years (each 210 thousand blocks mined on the BTC network). It creates a shortage of coins in the market, which pushes the rate up. Halving has already occurred three times: in 2012, 2016, and 2020. The next one is expected in April 2024.
After each halving, BTC updated its ATH. That is why many believe April will bring a new growth cycle to the market. Take a look at the chart: at the beginning of the cycle, the BTC rate (black curve) enters the red zone of the rainbow, and towards the end it returns to the blue zone.
Halvings are blue vertical lines; the Bitcoin rate is a black curve. “Rainbow” is a colour differentiation that shows whether a cryptocurrency is cheap (blue) or expensive (red).
Anyway, there are no guarantees that this time investors will be as interested in Bitcoin as after previous halvings. So, we should consider a negative scenario with weak BTC that cannot reach a new ATH.
April 2024 is an approximate guideline for the next halving date. If a lot of miners disconnect their machines from the network, it can reduce mining speed and postpone halving. Instead, if the network speed increases due to new miners inflow, the halving will occur earlier.
3. Binance or another major exchange may collapse
Binance is the largest crypto exchange by trading volume. It has existed under the pressure of US watchdogs since 2018, a year after it was launched. They accused Binance of mixing the exchange’s own and user assets to manipulate financial statements and money laundering.
In November 2023, the crypto exchange partially resolved the conflict with American regulators. As one of the steps, the company left the United States and switched its CEO. All authorities made a peaceful pact with Binance, except for the SEC.
In the history of the crypto market, there have been many projects that died due to the SEC’s pressure: the crypto project of Telegram's founder, Pavel Durov; blockchain content platform LBRY; Bittrex crypto exchange. It is too early to close an eye on the potential Binance collapse that may push the market down. It is also important to remember that other platforms may also come under the US watchdogs' radar. The SEC already has some questions about Kraken, Coinbase, and KuCoin.
4. Crypto market regulation may become stricter
Authorities around the world are building the legal framework for the digital asset market. In some countries, for example, El Salvador, everything is done for the prosperity of cryptocurrencies. In others, nuts are getting tight. In the United States, the largest centre of the crypto community, the IRS is improving the rules for crypto-taxing income, and the SEC is bringing more lawsuits against companies and users.
Market participants should prepare themselves for the new regulatory requirements in the United States, which may make investors' lives even more complicated and provoke a market fall.
5. A popular cryptocurrency may lose its value
Another threat to the 2024 bullrun is the collapse of major cryptocurrencies. This has already happened: in May 2022, the Terra crypto project collapsed, two of whose coins were in the top 10 in terms of capitalization. The crypto market dropped over 40%.
The collapse of large-cap cryptocurrencies in 2024 could lead to a sell-off again. The SEC now sees signs of illegally issued securities in 68 popular coins (BNB, Solana, Cardano, Polygon, etc.): each of them is at risk.
Is it meant that I should not invest in cryptocurrency?
The crypto market has experienced many major shocks. Bitcoin alone has been buried 474 times in the media. Most likely, this time the crypto market will be able to withstand all the pitfalls of the new year. So, it is too early to abandon cryptocurrencies, even despite all the possible risks.
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This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.
