February 28 marked a significant moment for the popular crypto asset Bitcoin as it surged past $60,000, achieving the milestone for the first time in more than two years. In November 2021, the price of Bitcoin skyrocketed to nearly $69,000 (intra-day) but later plunged by half due to regulatory concerns and high interest rates, diminishing its appeal as an asset class. 

The surge last time was driven by the liquidity in the world economy after governments eased monetary policy in the wake of Covid-19. However, this time around, the crypto market has rallied due to factors like the expected rate cut by the US Federal Reserve, the increasing popularity of Bitcoin exchange-traded funds (ETFs), and the anticipation of Bitcoin halving in April.  

The resurgence “signifies a pivotal moment in the crypto landscape,” says Raj Karkara, Chief Operating Officer (COO) of ZebPay, a crypto exchange. “It not only demonstrates the resilience of digital assets, but also underscores the growing mainstream acceptance of Bitcoin,” he says. “The approval of ETFs has played a significant role in expanding the investor base, contributing to the positive sentiment,” he adds.

Bitcoin ETFs were listed on highly regulated US stock exchanges starting in January 2024. The listing has been well-received as the ETFs are subject to close supervision, adding an extra layer of protection for investors. Moreover, Bitcoin ETFs offer the benefit of investing in a robust and regulated market. This is important considering scandals in the past where many individuals lost their assets due to compromised wallets or sudden closure of companies.
The Bitcoin halving is another event that is generating a lot of excitement. It takes place every four years when the reward for Bitcoin mining is reduced by half. The purpose is to limit supply, so when the reward decreases, it positively impacts prices. There will only be 21 million Bitcoins, and nearly 19 million have already been mined.

Historically, halvings have driven Bitcoin prices to new highs. The first halving took place in November 2012, and in  just over a year, the value of Bitcoin surged from $13 to $1,152 by December 2013. The second halving occurred in July 2016, leading again to a significant increase in Bitcoin price—from $664 to $17,760 by December 2017. The third halving took place in May 2020, and the price of Bitcoin rose from $9,734 to $68,789 by November 2021, reaching its peak one year and six months after the halving, explains Ryan Lee, Chief Analyst at Bitget Research, which looks at cryptocurrencies.
“The fourth halving will occur in April 2024. It is expected that the price of Bitcoin will rise and peak one year and five months after the halving. A similar trend has been observed with the previous three halvings, with prices increasing over time to hit a new all-time high,” says Lee. “There are approximately 60 days until the Bitcoin halving in April 2024, which could potentially push the cryptocurrency market to new highs,” says Shivram Thakral, CEO of digital asset exchange BuyUcoin.

The Bitcoin price has surged 3.8 times since the beginning of 2023, indicating sustained growth this time around. Standard Chartered Bank has predicted that the Bitcoin price could reach $120,000 by the end of 2024.

Post February 1, 2022, trading volumes on crypto exchanges in India had plunged by more than 90% due to the introduction in the Union Budget of a flat 30% tax on profits from crypto and 1% TDS (tax deducted at source) on sell transactions. Indian crypto exchange founders have been fighting for survival for the past couple of years. They embraced varied strategies. These include exploring alternative revenue sources, implementing workforce reductions, and cutting marketing expenditures. Some have diversified their businesses, while others have migrated to more crypto-friendly locations.  
However, the US Securities and Exchange Commission’s (SEC) approval of the first Bitcoin ETF in the US has boosted crypto worldwide and increased demand for the oldest virtual currency. Bitcoin has risen more than 16% so far this year. The crypto market has started heating up in the past few months, thanks to improving macroeconomic conditions and in anticipation of rate cuts by the US Fed. Crypto trading platform CoinSwitch saw a 200% sequential growth in trading volumes in Q32023. Coinbase Global Inc., the largest US crypto exchange, saw net consumer transaction revenue in Q42023 rise 60% over a year ago, according to a letter to shareholders.

Although there are positive signs suggesting Bitcoin’s rise, there is scepticism surrounding it due to the unpredictable nature of this asset class. Market participants are looking forward to April now—to see if the halving will drive up Bitcoin prices.  

@teena_kaushal