Bitcoin's price has always been on a rollercoaster ride, leaving investors on edge. Bitcoin, the world's largest cryptocurrency, launched in 2009 has a fifteen-year history. However, let's start with the year 2021, which led to the most controversial year in the crypto era when the FTX exchange collapsed. On June 18, 2021, the price of Bitcoin was USD 35,787, a whopping 280 per cent surge from USD 9,411 on June 18, 2020. But investors who were overjoyed by this surge lost almost half their wealth on June 18, 2022, when the value plummeted by over 70 per cent to USD 19,017. The huge volatility prompted critics to dismiss cryptocurrencies as mere gambling assets, while advocates of cryptocurrency argued it was a mere blip, a consequence of broader market movements, including global interest rate hikes. But yet the final blow for crypto advocates was to come. The downward spiral of BTC continued into November 2022, and Bitcoin crashed below USD 16,000 when the famous FTX exchange meltdown happened. Bitcoin was declared dead by naysayers.
Fast forward to 2024. The narrative has taken a dramatic turn with Bitcoin's price skyrocketing from USD 28,123 in October 2023 to USD 73,794 by March 14, 2024, its record, and a threefold jump in just 12 months. Balaji Srihari, Business Head of crypto platform CoinSwitch said, " 2024 has marked a significant period for Indian crypto exchanges and investors. Data from the CoinSwitch platform show a remarkable uptick in user registrations, trade volumes and deposits. Since January the registrations have increased fivefold compared to the 2023 daily average. Trade volumes on CoinSwitch and CoinSwitch PRO in the first quarter of the year have been over 250 per cent of the 2023 average."
But despite the price surge BTC trade volumes paled in India in comparison to global peers, "However, compared to the global peers, the growth in the Indian exchanges is underwhelming. This is majorly due to the high taxes in India, which impact both retail investors and high-frequency traders. For retail users, the lack of offset or carry forward is a major burden. For traders, the 1 per cent TDS on every sell transaction locks up their capital available for trade. This means traders have to seek fresh capital for every large trade instead of using earned margins," Srihari added.
Yet, this bullish momentum faced a marginal dip as Bitcoin slumped 7.4 per cent to USD 67,712 due to concerns over hotter-than-expected U.S. inflation. Also, profit-taking among investors when the price jumped 3-fold led to this marginal dip which pales in comparison to the recent surge. Investors and traders feared missing out on profits when the price was at its highest, and that led to profit-taking and a minor dip. As of today at 1 pm on cryptomarketcap.com the price of Bitcoin stands at USD 68,340, rising 4.95 per cent over the past day.
In the context of these wild swings in bitcoin prices, investors wonder about BTC's future trajectory. Balaji Srihari said he can't make any price prediction but added it is clear that the investors have turned bullish in the wake of the Bitcoin ETFs in the US, and the scheduled Bitcoin Halving. "The ETFs of Blackrock and Fidelity provide a simple and familiar investment route into Bitcoin, and this has created a surge in demand. As of today, these ETFs are recording a daily capital inflow of about $1 billion. This rise in demand from retail and institutional investors in the US comes amidst a scheduled reduction in the supply of Bitcoin through Halving," Srihari said.
"This would create a supply-demand mismatch and could have a positive impact on the price. The price of BTC has also increased following every Halving event in the past. The next Bitcoin halving event is scheduled to occur in April 2024," he added.
The cryptocurrencies have gained trust, Shailesh Dhuri, CEO, of Decimal Point Analytics Pvt Ltd said, "The weakness in the traditional banking system, plus the cleansing from the system of rogue elements like FTX, became a blessing for bitcoin and other cryptocurrencies. The first application of a new technology attracts nefarious elements and the 2022-23 phase helped take out some of these actors from the market. It was heartening to see that investors could focus on the underlying strength of DLTs and ignore the noise. Bitcoin and several other cryptos had a banner year, ignoring the residual crisis of 2023."
Roshan Aslam, Co-founder & CEO of GoSats said, “The surge in Bitcoin prices can be attributed to various factors. One driving force behind this bullish momentum is the US SEC's approval of Bitcoin ETFs, resulting in several financial industry leaders initiating institutional ETFs. Meanwhile, there has also been renewed interest by retail investors in Bitcoin which has resulted in a spike in volume. The most important factor behind this bullish action is the forthcoming Bitcoin halving event that is scheduled to happen on April 20. This occasion will reduce the number of new Bitcoins granted to miners in half and has the potential to result in an escalated shortage of Bitcoins and steeper costs.”
Bitcoin halving, which occurs every four years, is expected to reduce the rate of new Bitcoin issuance. This may create a supply-demand mismatch that could increase prices, analysts said. There are only about 1.5 million Bitcoins left to be mined and the last one is expected to be mined around the year 2140. This creates a scarcity effect because the total supply of Bitcoins is capped at 21 million. The price of Bitcoin is solely determined by this scarcity effect and the overall cap of 21 million. There is no underlying asset that governs the price. So investors should always take the surge in crypto price in the context of the inherent volatility and speculative nature of Bitcoin evident in its price history.
