Two months into 2024, Bitcoin (BTC +1.02%) continues to hold steady above $50,000, its highest level since December 2021. And, based on their recent approval of the new spot Bitcoin ETFs in January, government regulators appear to be more favorably disposed to crypto than at any time in the past two years.
With that in mind, here are three predictions for how the rest of the year could play out.
Wall Street expands into new ETF products
The story of the year thus far has been the SEC's approval of nearly a dozen new spot Bitcoin ETF products for investors. Based on that move, Bitcoin eventually broke through the $50,000 mark, and many analysts believe that Bitcoin is now on the cusp of going mainstream with both retail and institutional investors.
CRYPTO: BTC
Key Data Points
So doesn't it make sense that Wall Street will follow up the success of its spot Bitcoin ETF offerings with those for other cryptocurrencies as well? The one crypto that everyone is talking about now is Ethereum (ETH 0.01%), which could gain SEC approval for new spot Ethereum ETFs by the start of the summer. If that's the case, then Ethereum could soar in value, much as Bitcoin eventually did after its spot ETFs officially launched.
And there are already rumblings that Wall Street could follow up its vanilla spot Bitcoin ETF offerings with slightly spicier versions. These include inverse ETFs (which would move in the opposite direction that Bitcoin moves) and leveraged ETFs, which would enable investors to make highly leveraged bets on Bitcoin directional moves. Needless to say, most investors should probably stick to the vanilla offerings.
Investors allocate more than 2% of their portfolios to crypto
Heading into 2024, crypto was largely perceived as a risky, speculative, and even potentially toxic investment. It was certainly something that did not belong in retirement accounts. Most most wealth managers, portfolio strategists, and investment advisors did not dare to suggest allocating more than 1% of a diversified portfolio to crypto.
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But all that has seemingly changed with the arrival of the new spot Bitcoin ETFs. Suddenly, it seems like everyone is open to the idea of allocating much more of their portfolios to crypto. Fidelity Investments, for example, now appears to be suggesting that a 1% allocation is "conservative," while a "balanced" approach would require a 2.5% allocation. An "aggressive" allocation would be 3% or higher.
And, in late January, Ark Invest suggested that investors might want to allocate as much as 19.4% of their portfolios to crypto for optimal risk-adjusted returns. Presumably, almost all of that exposure would come from Bitcoin, now that it's so easy to add a spot Bitcoin ETF (such as the new offering from Ark Invest) to a portfolio mix.
Bitcoin ends the year above $100,000
All of this buying pressure on Bitcoin is almost certain to send the world's most popular cryptocurrency to ever greater heights. But how high? Right now, $100,000 seems to be the Bitcoin price target on everyone's radar. That's primarily based on continued investor fund inflows into Bitcoin ETFs, an improving macroeconomic situation, and a more stable regulatory outlook for crypto.
But Bitcoin could go much higher. The highly anticipated Bitcoin halving event coming in April could be the catalyst for Bitcoin to double, or even triple, in value. That's because three previous halving events (in 2012, 2016, and 2020) have sent Bitcoin soaring to new all-time highs. Hedge fund Pantera Capital, for example, predicted last year that Bitcoin could hit $148,000 by July 2025.
Caveats for crypto investors
Right now, Bitcoin seems like a no-brainer investment, and the new spot Bitcoin ETFs appear to be a remarkable success for Wall Street. All of that would seem to suggest that 2024 will be the year that crypto finally goes mainstream. In a best-case scenario, it could also be the year that Bitcoin once again establishes a new all-time high.
But just remember -- nothing is certain in the world of crypto. Trying to predict the crypto market can sometimes seem like a fool's errand. Volatility, regulatory uncertainty, and constantly shifting narratives are the norm rather than the exception.
So before you rush out in order to buy a new spot Bitcoin ETF, or decide to crank up the crypto allocation for your portfolio, make sure to do your homework.
