Bitcoin’s Fortunes: The Year In Review

Just two years ago, bitcoin fell to a low of $US16,000 following the fallout from multiple crypto catastrophes throughout 2022, including the implosion of FTX. However, 12 months later it was a different story, with bitcoin closing out 2023 at over $US42,000, spurred by applications for spot BTC ETFs from financial giants like BlackRock and Fidelity. 

In early January, the 11 spot Bitcoin ETF applications filed in mid-2023 were approved by the US Securities and Exchange Commission (SEC). This was a landmark moment for bitcoin, legitimising BTC as a financial asset and opening the floodgates for institutional capital to gain exposure to BTC.

Within a month, several BTC ETFs had garnered more than $US3 billion of inflows, making them some of the most successful ETFs in history. This new wave of capital propelled BTC to new highs in March, breaking its previous all-time high and briefly trading above $US73,000.

As expected, the crypto market was euphoric after BTC set a new record. However, the excitement didn’t last long. From March to September, bitcoin traded down and sideways, briefly hitting a low of $US50,000. Attention turned to other cryptocurrencies like Ethereum, which launched its own spot ETFs for trade in the US. 

Meanwhile, BTC ETFs continued to gain momentum in the background as investors bought up. Spot BTC ETFs now hold over 5% of the total BTC supply, an incredible achievement for a group of ETFs that have existed for less than a year.

At the start of October, this buying pressure flowed onto BTC’s price action, with the asset pushing up above $US60,000 again.

During the recent US election, Trump was vocal about his support for crypto, and his proposed government includes several pro-crypto figures, such as JD Vance and Elon Musk.

As polls closed for counting—and it became evident that the Republicans were leading the race—BTC moved from $US65,000 to a new high of $US75,000 over a 24-hour period. This momentum was sustained as news broke that the House of Representatives and the Senate had an overwhelming majority of pro-crypto politicians. 

Good news for the crypto industry continued to pour in during the weeks following the election. The chair of the SEC, Gary Gensler, who had pursued exchanges and led crackdowns on crypto players for the past four years, announced that he would be stepping down. Trump also announced a dedicated “AI and Crypto Czar”, David Sacks, a known proponent of revolutionary technologies like artificial intelligence (AI) and cryptocurrency.

This positive momentum carried BTC throughout November and into December 5, when it hit a new all-time high of over $US103,000 per coin. After starting the year at $US43,000, this marked a gain of almost 150%: over 15 times more than the average yearly gain of popular indexes like the S&P 500. 

Several significant catalysts influenced Bitcoin’s price throughout the year. These include:

Approval of Spot BTC ETFs

While spot BTC ETFs have existed on smaller exchanges for several years, the approval of 11 spot BTC ETFs for trade on US exchanges marked a particularly pivotal moment for bitcoin. Not only are US stock exchanges the largest in the world, but the signal that the world’s financial capital had finally embraced digital assets marked an important moment for bitcoin.

Several funds managed by industry behemoths like BlackRock, Fidelity, and ARK Invest were among the 11 ETFs approved in January 2024. The launch of these ETFs opened the floodgates for both individual and institutional capital to gain exposure to the world’s largest digital asset. 

Within a month, several ETFs had cleared $US3 billion worth of inflows, and as of the time of writing (December 11th), the cumulative inflows to all 11 ETFs have exceeded $US56 billion.

This unprecedented demand was a testament to the pent-up interest in bitcoin from both individual and institutional investors, who had been waiting for a regulated and secure way to access the asset through a familiar investment vehicle.

US Election: A New Era for Crypto

The 2024 US election marked a significant turning point for the crypto industry, with the election of the most pro-crypto US government in history. Crypto became a bipartisan issue for the first time, with both parties acknowledging its potential to drive economic growth and innovation. 

Many crypto community members were relieved at the Republican win, and digital assets rocketed higher on the news. 

Many crypto bulls viewed the actions of SEC chair Gary Gensler, who initiated several lawsuits against US-based crypto companies, as emblematic of the previous government’s attitude toward crypto. Gensler’s departure has created optimism that the next four years will yield a more collaborative regulatory environment, where the crypto industry and lawmakers can work together to create a safe and fair environment for everyone.

Combined with President-elect Donald Trump’s DeFi protocol and crypto holdings, Vice President-elect JD Vance’s pro-crypto stance and Elon Musk’s vocal support for crypto, many are predicting a bright future for bitcoin and other legitimate digital assets. The later appointment of David Sacks as the Whithouse’s ‘AI and Crypto Czar’ further strengthened the bullish sentiment. 

MicroStrategy’s Billion-Dollar Bet on Bitcoin

MicroStrategy, a pioneer in institutional bitcoin adoption, revealed plans to raise $US42 billion in fresh capital for BTC purchases over the next three years. The company, which initially purchased bitcoin in 2020, has been a pioneer in the institutional adoption of digital currency and, following the announcement of this ambitious plan, now holds over 2% of the total bitcoin supply.

MicroStrategy has been selling stock, which is overvalued compared to the amount of BTC the company holds, to raise capital to buy more bitcoin. This has created a virtuous cycle where the company continues to sell stock to buy bitcoin while the share price continues to go higher, simultaneously creating upward pressure on the price of the BTC they hold.

Michael Saylor, the CEO of Microstrategy, also reaffirmed that the company is not planning to sell its holdings and believes that it will be able to continue raising capital to buy more BTC while paying down the debt with its operations. 

Saylor’s efforts to further bitcoin adoption have also extended beyond his own company, and he is now working with other companies to help them adopt a similar model to MicroStrategy. Most notably, Saylor was in talks with Microsoft about adding BTC to their balance sheet. Shareholders decided against this move in a vote, to which Saylor promptly tweeted, “In five years, they’ll understand. Everyone buys bitcoin at the price they deserve.”

While many believe Saylor is taking serious risks by closely tying the company to Bitcoin’s fortunes, others see a method to the madness. While governments worldwide continue to debase fiat currency, Saylor sees the price of BTC continuing to rise against fiat currencies, allowing him to continue ‘selling fiat’ to buy more bitcoin.

The implications of MicroStrategy’s move are profound, as it sets a precedent for other institutions to follow suit. With more companies exploring adding bitcoin to their balance sheets, the asset’s adoption is poised to accelerate. This, in turn, could drive up demand and prices, creating a virtuous cycle reinforcing bitcoin’s status as a trusted store of value. As more mainstream investors and institutions enter the market, bitcoin’s legitimacy as a financial asset is expected to grow, paving the way for a new era of adoption and growth.

While bitcoin has performed exceptionally well over the past year, many other assets have performed strongly throughout 2024. Many markets have left the bear market of 2022 far behind them despite the changing economic conditions.

Bitcoin’s almost 150% rise from January to December beat most other assets by a notable margin. However, some individual equities outperformed bitcoin, as could be expected when BTC is a multi-trillion dollar asset.

Here’s a comparison to put bitcoin’s performance into perspective against popular market indices and individual stocks as of December 11th 2024:

While Nvidia, among other individual stocks, outperformed bitcoin, it’s worth noting that Nvidia is indirectly linked to Bitcoin’s success by being the largest producer of dedicated bitcoin-mining GPUs. This highlights a symbiotic relationship, where the success of bitcoin and other cryptocurrencies directly influences the performance of crypto-adjacent companies.

Bitcoin’s inherent nature is characterised by volatility. Its price is susceptible to swift and significant changes, driven by factors ranging from regulatory changes to institutional adoption. While offering the potential for substantial gains, this unpredictability also carries the risk of equally significant losses.

While bitcoin is a relatively new entrant to the financial sector, it has now survived almost a decade and a half with 100% blockchain uptime. With nearly 50 public companies now holding BTC on their balance sheets (and many more private companies), governments considering adopting it as a reserve asset and with ETFs available in almost all major markets, it’s safe to say that bitcoin is here for the long haul.

With the continued debasement of fiat currencies by reserve banks worldwide, bitcoin’s finite nature makes it a more compelling investment for those who wish to preserve their wealth and purchasing power over the long run. While it’s undeniably a volatile asset, and careful consideration should be made as to what percentage of your portfolio should be held in digital assets, it is clear that BTC deserves some consideration from investors. 

For investors just beginning their journey into crypto, particularly those more accustomed to the stability of traditional equities, the high returns of bitcoin should be weighed against its potential for sharp downturns. It’s prudent not to abandon traditional investments entirely in favour of cryptocurrencies. Instead, bitcoin could be viewed as a component of a diversified investment portfolio, offering a blend of different assets to mitigate risk.

The key for investors is to strike a balance—to recognise Bitcoin’s enticing potential for high returns—while being aware that digital assets are typically more volatile and risky.

This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class.  Cryptocurrency is unregulated in Australia and your capital is at risk. Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital. You should always consider whether you can afford to lose your money before deciding to trade in CFDs or cryptocurrency, and seek advice from an authorised financial advisor.