Bitcoin: Time to Buy, Sell or Hold in Today’s Changing Market?

Although Bitcoin (BTC 0.40%) got off to a flying start in 2024, the cryptocurrency has surrendered some of those gains. Despite seeing little progress over the past five months, in typical crypto fashion, the broader market landscape has continued to evolve rapidly.

A deeper analysis of Bitcoin’s current situation, macroeconomic indicators and recent developments in the crypto industry reveals why, despite its recent stagnation, Bitcoin remains a screaming buy today.

Image source: Getty Images.

Short-term catalysts to watch

Currently, there are several catalysts that are putting Bitcoin in the spotlight. These could be grouped into short-term and long-term categories, but both sets highlight why Bitcoin could be poised for another bull run in the near future. First, let’s explore some short-term factors.

1. Bitcoin Halving

Among the most crucial events in Bitcoin’s life cycle are its halvings, the most recent of which occurred in April 2024. The halving process is central to Bitcoin’s monetary policy, halving the rewards miners receive, reducing thus the amount of new Bitcoin in circulation. . This effectively halves Bitcoin’s growth rate, creating upward price pressure as long as demand remains constant or increases.

Historically, Bitcoin has risen after each halving. In fact, the price of Bitcoin has typically increased by more than 100% in half a year. What’s even more compelling is that Bitcoin has delivered an average return of 350% in the years following a halving. If history is any guide, Bitcoin’s post-halving trajectory could still yield significant gains for investors.

2. The rise of institutional investors

Another bullish factor for Bitcoin is the influx of institutional investors. Over the past year, the introduction of spot Bitcoin exchange-traded funds (ETFs) has allowed major financial players to enter the market in a regulated and familiar way. Since the launch of these ETFs, Wall Street giants such as Goldman Sachs, BlackRockand even state pension funds in Michigan and Wisconsin have jumped into the Bitcoin game. These institutions, which had previously been restricted from investing directly in Bitcoin, now have a clear path to do so through ETFs.

The results were nothing short of astounding. These Bitcoin ETFs have become the most successful exchange-traded funds in history, reflecting a surge in demand. The introduction of institutional investors to the market has not only further legitimized Bitcoin, but also has the potential to add huge buying pressure to its limited supply.

3. Federal Reserve rate cuts

The Federal Reserve’s recent decision to cut interest rates for the first time in more than four years could be another significant catalyst for Bitcoin. While rate cuts and Bitcoin might seem unrelated at first glance, they are closely related on many levels.

First, when interest rates fall, investors are usually incentivized to take on more risk. In low rate environments, the opportunity cost of holding safer investments such as bonds becomes less attractive. Instead, investors often shift capital into riskier assets, including stocks and cryptocurrencies, in search of higher returns. This so-called risk environment tends to support Bitcoin price appreciation.

Second, lower interest rates lead to more liquidity in the financial system. In the bull market of 2021, when rates were close to zero, excess liquidity found its way into Bitcoin and helped drive the price up over 100% at one point.

Perhaps most importantly, interest rate cuts typically weaken the US dollar, which could boost inflation. This is where Bitcoin’s unique properties really shine. Unlike fiat currencies, which central banks can print in unlimited quantities, Bitcoin has a lifetime limit of 21 million coins (about 19.8 million are now in circulation). Its decentralized nature and fixed supply make it an attractive store of value, especially during periods of inflation. As fiat currencies lose their purchasing power, Bitcoin scarcity becomes even more attractive, retaining its long-term value.

Bitcoin’s long-term value proposition

In a world where government debt burdens continue to skyrocket, fiat currencies are regularly degraded by inflation, and economic policies are implemented without regard for the average person, Bitcoin is a beacon of hope.

Its decentralized network and limited supply ensure that no central authority can manipulate it, making Bitcoin more than just an asset, but a necessity to preserve (and grow) one’s wealth. It is a unique asset that can serve as a hedge against not just inflation, but broader economic instability.

While there is more reason to be optimistic about Bitcoin in the coming months, it is important to remember that halvings come and go, institutional interest can ebb and flow, and monetary policy is always subject to change. All of this means that Bitcoin will experience more bear markets over time. However, for those with a long-term perspective, Bitcoin’s value proposition remains strong, making it a buy today and for the foreseeable future.