Bitcoin's 2024 Surge: Halving and Fed Factors

Approaching the $40,000 mark this week, Bitcoin's value continues to surge, marking fresh highs since the bearish trends of 2022. Just two months ago, the entire coin was valued at less than $27,000 by the end of September.

The recent spike in Bitcoin's value during the fourth quarter was fueled by growing anticipation of the SEC approving a Bitcoin ETF. Looking ahead to 2024, the world's leading cryptocurrency could experience two significant macroeconomic boosts: Bitcoin's impending halving and potential interest rate reductions by the Federal Reserve.

Bitcoin's Halving Might Be Followed by Federal Reserve Interest Rate Reductions

The Bank of America's Global Research team, in its Monday release of the 2024 outlook, aligned with other major banks in forecasting interest rate cuts for the next year. The multinational financial services corporation predicts continued disinflation into the next year, prompting a mid-year shift towards interest rate reductions by both the Federal Reserve and the European Central Bank.

This echoes the earlier November prediction by Switzerland-based UBS, foreseeing "meaningful reductions in the federal funds rate" at the U.S. central bank by May next year.

Bitcoin's halving is slated for April 2024. Should the Federal Reserve proceed with interest rate cuts, the juxtaposition of an expanding supply of dollars against a contracting supply of BTC might tilt economic conditions in favor of Bitcoin's price.

However, recent data from Swiss blockchain analytics firm Glassnode paints an even more vivid picture of the supply and demand dynamics preceding Bitcoin's halving. In November, a record 70% of circulating Bitcoin supply remained inactive for a year or more, indicating a strong commitment from existing BTC holders despite the impending halving.

A recent report from crypto exchange Bitfinex reveals that 83% of the BTC supply is currently held at a profit, adding to the supply-limiting factors alongside the halving.

Glassnode Anticipates a Jolt in Bitcoin Supply Dynamics

Matt Weller, the global head of research at Forex.com, noted in October, "With lower supply in the market, it only takes a small bump in demand — like what we've seen with speculation around the ETF — to really drive prices higher at a rapid rate."

Simultaneously, Glassnode anticipates a potential $70 billion surge in institutional demand following SEC approval of a Bitcoin ETF for regulated investors.

When combined with potential lower borrowing costs resulting from Fed rate cuts in the coming year, alongside the impact of Bitcoin's halving, 2024 may present the ideal conditions for realizing the extravagant price predictions that many analysts are currently making in this quarter.

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