Asset Markets 2024, Why Are Investors Focusing On Bitcoin

Called the 'Year of the Blue Dragon', 2024 has just begun. Cryptocurrency investors are hopeful that the bull market of Bitcoin(BTC) will continue throughout the year.

The cryptocurrency market is off to a good start in 2024. Global cryptocurrency investors' dreams seem to be one step closer to reality as the U.S. Securities and Exchange Commission (SEC) officially approved an ETF that follows Bitcoin's spot price.

Bitcoin was the most interesting investment asset for investors last year. Bitcoin's price, which had remained at $16,000 at the beginning of the year, recorded a remarkable rise despite the economic downturn and recorded its price as $42,000 at the end of last year in 2023. The annual growth rate reached a whopping 162.5%, which shows a complete escape from the 'Crypto Winter' that has continued since the first half of 2022.

Nevertheless, Bitcoin investors are still hungry. This is because the time of the real rebound, the so-called 'bull market', has not yet come. Many experts expect this year to be the year of the bull market when Bitcoin rebounds.

There is only one reason why people have high expectations for Bitcoin. This is because the prospect of market prices for other investment items is tough. Under the circumstances, Bitcoin is expected to continue its explosive rise in 2024 in the second half of last year.

What focused investors in the asset market on Bitcoin at the beginning of the new year? Experts believe that the approval of Bitcoin's spot ETF and the resulting prospect of capital inflow are factors of interest, but these reasons are not the only factors that focus investors' attention on Bitcoin.

The answer to "What drives investor's attention to Bitcoin" can be inferred from a report by global asset management company VanEck.

# Bitcoin Floated As 'Dollar Replacement' Amid Prolonged Global Recession

In a report published late last year, VanEck predicted the first quarter of 2024 as the starting point for a prolonged global recession.

When the U.S. Federal Reserve officially declared a slowdown in inflation based on eased economic indicators last year, it declared a freeze on the interest rate for the first time in two years, hinting at a possible cut in the interest rate. The result seemed to bring vigor to the asset market back for a while, but that was all.

Despite the Fed's dovish comments, various investment assets such as stocks, real estate, and dollars continued to struggle while looking far away from their highs. The second half of 2023 passed without reversal.

Rather, a new type of recession signal appeared in the asset market. The dollar, which once had continued the 'strong dollar' myth, showed high volatility, and the gold price reached its highest level in December.

As the value of the dollar, which was considered a representative 'safe asset', continues to fluctuate, experts now agree that "the value of the dollar will go downward."

Due to the 'weak dollar' phenomenon, investors are looking for new investments to replace the dollar. However, stocks and bonds that have been on the sideway drifting, real estate that has been on the down, and gold that recently hit a new high are not considered as the best options for investors.

VanEck expressed it more harshly. "The U.S. will face a full-fledged recession in the first quarter of 2024, and a lot of money will lose its investment destination," VanEck said.

Bitcoin, which hit hard at a time when the dollar was losing power, could be the perfect option for investors who were lost in their way because they could not find an attractive investment destination.

# Why Bitcoin Spot ETF Was Approved In January

VanEck pointed to 2024 as the year of Bitcoin's bull market because of the subtle timing of events predicted in 2024.

Experts expected that the SEC would approve Bitcoin spot ETFs in early January, and as expected, 11 Bitcoin spot ETFs were approved on the 10th. On the first day of approval alone, $4.5 billion, 10% of the usual Bitcoin trading volume, flocked to Bitcoin spot ETFs.

Less than a week after the Bitcoin spot ETF was launched on the market, investors have high expectations for the ripple effect of the Bitcoin spot ETF.

The market is reconsidering the meaning of why the SEC approved the Bitcoin spot ETF in early January. There may be some coincidences, but there is general speculation that the SEC intentionally selected January as the time to approve the Bitcoin spot ETF. This means that it was an action with various intentions, both economically and politically.

VanEck said, "If Bitcoin spot ETFs are traded from January when the economic downturn begins in earnest, about $2.4 billion could flow into Bitcoin spot ETFs."

Even from the perspective of the U.S. government, a recession is a big trouble. Investors will blame the U.S. government for watching the economic downturn.

Criticism against the government will soon result in the election. Coincidentally, the U.S. presidential election will take place in November this year. Furthermore, from January 15, the primary caucuses for electing presidential candidates from both parties of the U.S. will begin. As the mood for the presidential election heats up, the issue of economic downturn will surely become a hot topic of conversation among citizens.

The Democratic Party is not very willing, but as the upward atmosphere of cryptocurrency is clear, it must have been intended to encourage the SEC to approve the Bitcoin spot ETF to turn the presidential election atmosphere to its advantage.

In addition to the intentional move to occupy an advantageous position in the presidential election, the U.S. political community's move to introduce cryptocurrency regulations has also been evaluated as a foundation for the approval of bitcoin spot ETFs.

Last year, the U.S. Congress failed to develop a clear regulation of cryptocurrency integration. As a result, many cryptocurrency investments left the United States. Nevertheless, the Republican and Democratic parties, the major two parties in the United States, continued to engage in a tug-of-war over cryptocurrency regulations and failed to reach an agreement on the introduction of regulations for years.

To win the U.S. presidential election more than 10 months ago, both parties in the U.S. must present a brilliant alternative that attracts votes regardless of their political views. In particular, analysts say that they will be active in introducing cryptocurrency regulations to capture the cryptocurrency community, which is considered a 'large number of voters' and this will support the rise of Bitcoin.

"The U.S. presidential election will create various political events and it will create appearant cyptocurrency regulations," VanEck said. "This will break the record for Bitcoin prices in the fourth quarter of next year."

Another reason VanEck judged that January was the right time for ETF approval is because of the 'Bitcoin halving event' in which Bitcoin's supply is halved. Bitcoin halving event refers to the time when Bitcoin's mining production is reduced by half every four years. It increases the scarcity value of Bitcoin by halving the supply of the Bitcoin market.

"Bitcoin, which has been invested in large institutional funds, will soon reach a Bitcoin halving event," VanEck said, explaining, "The high volatility of Bitcoin, which can arise from Bitcoin spot ETFs, will stabilize at the Bitcoin halving event."

Analysts say that the money lost to the prolonged economic downturn will flow into a new alternative asset called Bitcoin Spot ETF, and the money flowing in that way will not leave Bitcoin in line with the upcoming Bitcoin halving event.

# Bitcoin's Value as a Network, It's Time to Shine Up

In a CNBC interview late last year, Jan van Eck, CEO of VanEck commented on the essential value of Bitcoin. He opened with the words, "There can be no other Internet store that can surpass Bitcoin."

CEO VanEck spoke of Bitcoin's explosive rise in 2024 not just in price but in terms of its value as a network.

"Bitcoin is an astounding asset because there are about 50 million holders worldwide," he said. "Considering that it is a managed network with $76.4 billion, Bitcoin is more visible than any other Internet creation that exists."

Considering the actual number of users currently held by the Bitcoin network and the liquidity of funds held by the Bitcoin network, it was pointed out that the Bitcoin network has superior value than any other Internet store.

Around four years have passed since the term 'Web 3.0' appeared in earnest in the world under the subtitle 'decentralization'. Numerous projects with the slogan 'Web 3.0' immediately appeared in the cryptocurrency market. However, it is also true that the value and power of Web 3.0 are still somewhat unfamiliar to many.

Although it was born as a network, the essential value of Bitcoin, which was described as 'digital gold', has been somewhat forgotten. However, Bitcoin, which has absorbed 50 million holders and $76.4 billion in assets, is truly a platform that can realize the essence of Web 3.0.

# 2024 is The Year of Bitcoin's Prosperity

Last year, Bitcoin had a dismal start with various events in the main theme of recession. Nevertheless, Bitcoin in 2023 surprised the asset market with a remarkable turnaround.

Even at the beginning of 2024, the major theme of recession remains. Like VanEck's analysis, a lot of money seems to be lost and wandering. Money that has lost its place can knock on Bitcoin's door.

Bitcoin prices are running again, and there is plenty of possibility that the price will jump again in the future. The good news that can raise the price of Bitcoin is waiting for investors this year. Bitcoin can be a reliable alternative investment destination to keep money that has lost its place. Putting all the reasons mentioned so far, all the money in the market will be collected, and eventually, the price of Bitcoin will jump. 2024 will be the year of the bull market.

In 2024, full of exciting events, let's look forward to seeing if Bitcoin can replace the dollar as a truly decentralized network asset.

권승원 기자 ksw@