Q1 2024 Bitcoin Outlook: Is Bitcoin Revving Up for Another Big Bull Market?

Bitcoin 2023 in Review

As bad as 2022 was for Bitcoin, 2023 was just as good.

“History doesn’t repeat, but it does rhyme” as they say, and experienced followers of the cryptocurrency no doubt recognize some similarities with past cycles.

From the ashes of the 2022 implosions of FTX, UST, and Celsius, Bitcoin rose like a phoenix from its lows near $16K to nearly triple to $45K in 2023, bolstered by hopes of a more accommodative macroeconomic environment, clearer regulation, and an imminent spot ETF in the US exposing the asset class to trillions of dollars of investable assets.

Bitcoin 2024 Outlook

With 2022’s crypto “winter” clearly behind us, Bitcoin has entered the most bullish period of its 4-year Halving cycle. For the uninitiated, the amount of new Bitcoin that is paid out to miners is cut in half roughly every four years, decreasing the inflation rate of Bitcoin’s supply and increasing its “stock-to-flow” ratio, a measure of a currency’s “hardness.”

As the chart below – one I’ve colloquially called “The Only Bitcoin Chart You’ll Ever Need” – shows, the cryptocurrency has historically rotated through three stages with remarkable consistency every 4 years:

1. “Crypto Winter” (Bull Market Peak to Bear Market Trough)
   • Dec 2013 – January 2015 (58 weeks): -86%
   • Dec 2017 – Dec 2018 (52 weeks): -84%
   • Nov 2021 – Nov 2022 (54 weeks): -78%
2. “Crypto Spring” (Bear Market Trough to Bitcoin Halving):
   • Jan 2015 – July 2016 (78 weeks): +377% trough-to-peak
   • Dec 2018- May 2020 (74 weeks): +348% trough-to-peak
   • Nov 2022 – Apr 2024 (72 weeks): +191% trough-to-peak (so far)
3. “Crypto Summer”/Mania Stage (Bitcoin Halving to Bull Market Peak):
   • July 2016 – Dec 2017 (74 weeks): +2,873%
   • May 2020 – Nov 2021 (78 weeks): +615%
   • April 2024 - ???: TBD

If this historic pattern holds, it could point both to more potential upside in the first quarter of the year ahead of the Halvings in April, then an acceleration from there if Bitcoin enters another mania stage as we’ve seen after previous Halvings. Of course, past performance is not necessarily indicative of future results, and even if we are in the early innings of another bullish cycle, it’s worth noting that there will likely be bumps along the way. As the chart below shows, previous bull markets in Bitcoin have all seen 40-60% drawdowns before reaching their ultimate peak. Since the bottom late last year, this cycle has only seen a mere - 20% pullback:

_{Source: Glassnode}

Below, we look at some potential catalysts that could drive Bitcoin in 2024 and beyond.

Bitcoin 2024 Catalysts

Looking at the most fundamental economic relationship, the supply/demand balance and price, it’s clear that the stage is set for a big bullish move if demand picks up. Specifically, traders moved their Bitcoin off exchanges consistently all year, presumably to deposit them into long-term “cold storage” wallets, trading liquidity for security:

_{Source: GlassNode, Woonomic}

With record low balances of liquid Bitcoin available on exchanges, it would take only a relatively small spike in demand to drive the price of Bitcoin higher. Another way to look at this phenomenon is to chart the percentage of the overall Bitcoin supply that has been held for more than a year. Almost tautologically, those that have held their volatile Bitcoin for more than a year are not trying to make a “quick buck” off the cryptocurrency; rather they are more likely to be “true believers” or “HODLers” who are unlikely to sell for any reason:

_{Source: Glassnode}

As this chart shows, the proportion of Bitcoin that has been held for at least a year is at its highest level ever near 70% of the overall supply. Both of these charts signal that any marginal increase in demand for Bitcoin could have an outsized impact on its price, given the low liquid supply.

So what could cause an increase in demand?

Rather than focusing on so-called Bitcoin Maximalists’ dubious economic arguments about hyperinflation and the collapse of society, we can simply look at a clear fundamental driver for the cryptocurrency: The imminent launch of a spot Bitcoin ETF in the US.

Trillions of dollars in institutional and retirement assets can only invest in regulated financial assets, a situation that has hampered the adoption of Bitcoin as an investable asset in the world’s richest economy. As of writing in mid-December, the US Securities and Exchange Commission (SEC) has a backlog of a more than a dozen Bitcoin ETF applications that it must make a final decision in 2024, starting in early January. After a string of embarrassing legal losses for its “arbitrary and capricious” discrimination against cryptoassets, analysts almost unanimously expect the SEC to approve multiple (if not all) of these applications imminently, unlocking Bitcoin.

Crucially, unlike past high-profile, derivative-based Bitcoin product launches, like futures contracts or futures-based ETFs, spot ETFs will be required to buy and hold underlying Bitcoin equal to their underlying assets, fundamentally altering the supply-demand balance.

While the situation is not necessarily identical, the launch of the first gold ETF (GLD) back in November 2004 may provide interesting context. For the first time, there was an easy, liquid way for Americans to invest in the precious metal en masse and investors poured funds into the ETF for its purported diversification from their more traditional assets, contributing to gold’s big rally from below $500 to nearly $2,000 over the next eight years:

_{Source: StoneX, TradingView}

One other potential catalyst to mention is 2024’s expected global shift in monetary policy. Central banks across the globe went from aggressive interest rate hikes and tightening monetary policy in 2022 and 2023 to investors pricing in relatively aggressive interest rate cuts and expansionary monetary policy in 2024 and beyond. As the chart below shows, Bitcoin’s year-over-year performance has historically been correlated with the change in money global money supply, a measure that seems poised to turn higher in 2024 and beyond:

_{Source: Global Macro Investor. Note that past correlations may not necessarily hold into the future and factors other than money supply will impact Bitcoin’s price.}

To be clear, these bullish catalysts may not necessarily play out as expected – and to some extent they may already be priced in – so readers should always exercise caution when trading Bitcoin and other cryptoassets. Potential bearish catalysts include the risk of draconian regulation and hacks or outright fraud at key crypto institutions, a development the space is all too familiar with over the last decade+ so it will be critical to monitor developments as the year develops.

Bitcoin Technical Analysis – BTC/USD Weekly Chart

_{Source: TradingView, StoneX}

Turning our attention to the weekly chart of Bitcoin, we can see that 2023’s bullish move has almost completely retraced the 2022 drop as of writing in mid-December. The cryptocurrency is currently in overbought territory per the 14-week RSI, signalling the potential for a near- term pullback, but as long as prices remain above previous-resistance-turned-support at $32K and the rising 50-week EMA near $30K, Bitcoin bulls will remain in control.

To the topside, bulls will be watching the 61.8% and 78.6% Fibonacci retracements of the 2021-2022 pullback around $48,500 and $57,400 as logical resistance levels, with little above those areas and the all-time record high near $69,000.

Between entering the most bullish period of its 4-year halving to the relative lack of supply and fundamental catalysts like a US ETF and pivot to expansionary monetary policy, there are plenty of reasons for Bitcoin bulls to be excited for 2024. As always, that optimistic outlook has to be balanced against the elevated risk of regulation, fraud, and hacks inherent with a nascent asset class.

Proponents of cryptoassets like to say that Bitcoin and its ilk are “speedrunning financial history,” making all the mistakes but realizing the ultimate success of other financial assets on an ultra-compressed timeline. For many traders in traditional financial markets, it may feel unbelievably quick for an asset to go from the depths of a bear market and utter despondency at the start of 2023 to the middle of a raging bull market in 2024, but for Bitcoin, that would just be par for the course.

Written by Matt Weller, Global Head of Research

Follow Matt on X: @MWellerFX