The end of the year is fast approaching and several factors have marked the year that has just passed for bitcoin. We will take this opportunity to highlight these key elements and look at possible bitcoin predictions for the year 2024.
The highlights of bitcoin for the year 2023
There have been several catalysts during 2023 that have had a strong impact on bitcoin. We are going to highlight some of these key points.
In March 2023, following the crisis in regional banks, the Fed came to the rescue to avoid a cataclysm. Bitcoin being very linked to liquidity reacted positively. Then the other key element of the year was the slowdown in inflation which improved consumer sentiment. When sentiment improves, it encourages investors to take more risks.
The other catalyst that has really driven bitcoin’s price action in 2023 remains the wait for a bitcoin spot ETF to be approved by the SEC. Each speculation generated peaks of upward but also downward volatility.
The cyclicality of bitcoin
Just like the majority of assets, bitcoin is quite cyclical. That is to say, it is composed of well-defined bullruns and bear markets. These cycles are often similar to cycles of acceleration and slowdown of economic growth. Moreover, bitcoin is often one of the assets that gives an early signal of a peak in the growth cycle since it is often the first to decline. Each bear market corresponds to a growth peak followed by the start of an economic slowdown. This can be seen in the graph below:
Generally speaking, bear market cycles for bitcoin are approximately 2 years. This means that a downtrend can last 2 years. Bullrun cycles are shorter.
The last bear market began at the end of 2021 with a bottom in October 2022. Therefore, we can deduce that the bear market cycle is behind us since it has been 2 years.
Pivot expectations
The years 2022 and 2023 were marked by inflation, geopolitical issues and monetary policy. Obviously, these factors influence investor behavior, which has led to a lot of reluctance from consumers and investors. The latest communications from the central bank of the FED have clarified that we are at the peak of the rate hike and that they were probably going to make several rate cuts during 2024. This anticipation of a pivot during the 4th quarter of 2023 has led to excitement across all financial markets.
The impacts of the economic environment
If we want to support a continuation of the movement, we will not have to disappoint the markets. That is to say that we will have to remain in a soft landing logic assuming an environment of stable growth, inflation which continues to slow and a resilient job market. All this will help continue to improve consumer sentiment and therefore attract investors. The worst scenario would be a deterioration of the economy with the lagged effects of monetary policy. This is also a reason why central banks have decided to take a pause for now. In this vein, we need to know the reason why the FED wants to pivot:
- Fall in inflation?
- Rising unemployment?
- Liquidity crisis?
Regarding the fall in inflation, if it is not due to negative growth (economic deterioration + increase in unemployment), this can confirm the soft landing. In the case of a hard landing, everything will depend on the extent of the lagged effects of monetary policy on the economy. The data that will make the difference between a soft or difficult landing will be the job market. This is therefore the data that will have to be monitored closely for forecasts. For the moment, we have some resilience in terms of employment:
The impacts on financial markets and bitcoin will also depend on valuations at that time. If valuations are very high without an economic rebound to justify this rebound and we have the start of an increase in unemployment, there could be a more significant correction in valuations at that time since all the increase will have been anticipated on a soft landing which does not take place.
Analysis of bitcoin from a general point of view
There are several factors that can influence bitcoin forecasts in 2024. We will list a few of them:
- Liquidity
- Supply, demand (supply of 21 million bitcoins in total)
- Consumer sentiment
- The economic context (growth, inflation, job market)
- External events (positive or negative catalyst)
- The US dollar
- The halving
In terms of liquidity, we can see that current liquidity is quite bullish, which is positive for bitcoin. In the context of a recession, this should also increase and ultimately be a positive element for bitcoin.
The other important event for 2024 is the halving which allows the available supply to be reduced, which tends to be positive for bitcoin too. The cyclicality of the halving every 4 years is often linked to the average economic cycle of 5 years.
With inflation slowing, consumer sentiment has improved.
A possible approval of a spot ETF risks being a positive element in the long term because it will help attract more flows and further democratize bitcoin.
In terms of the economic context, everything will depend on the capacity of the economy to withstand the delayed effects of monetary policy. For now, as long as the unemployment level remains resilient, this is positive for the economy.
Analysis of bitcoin from a technical point of view
For bitcoin forecast from a technical order and on a long-term basis, bitcoin is above the 10-month moving average, which remains technically bullish. Even though we have excess deviations between the price and the moving average, we can see that the trend still remains intact. Therefore, pullbacks remain buying opportunities.
Still in a technical order, the trend MACD indicator is still in positive momentum. On the other hand, the RSI oscillator still remains above the 50 zone (bullish trend) but still far from the long-term overbought zone.
Possible bitcoin predictions for 2024
The best buying zones on bitcoin remain the lateral zones. That is to say when volatility decreases and the price stabilizes in a sideways zone after a bear market. Here are some examples :
Therefore, there is a high probability that the bottom for this cycle is behind us. And structurally and fundamentally speaking, bitcoin remains bullish in the long term. Here are the possible scenarios:
Optimistic scenario : the soft landing is confirmed next year and bitcoin can persevere towards the ATHs. Initially, bitcoin could test 65k and then 80k, 100k. This type of scenario assumes stable growth, a fall in inflation without an increase in unemployment.
Pessimistic scenario : economic data deteriorates after monetary policy is released, and bitcoin could retrace towards 25k-30k in the event of a deterioration in consumer sentiment. This kind of scenario could be possible if the level of unemployment increases.
CONCLUSION
Generally speaking, bitcoin forecasts are structurally bullish. Its usefulness and rarity (21 million bitcoins) make it a unique asset. And like any asset, bitcoin goes through different cycles. We can also add that the bear market cycle has passed, and that we are in the momentum of a new cycle.
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