Touching $$40,000 this week, Bitcoin price continues to post new highs since the 2022 bear market. The going price for a whole coin was below $27,000 at the end of September just two months ago.
Growing excitement over a Bitcoin ETF approval by the SEC drove BTC higher in the fourth quarter. But the world’s leading cryptocurrency might have two even bigger macro tailwinds coming up in 2024: Bitcoin’s halving and possibly interest rate cuts by the Federal Reserve.
Bank of America’s Global Research team published its 2024 outlook Monday. The multinational financial services and investment banking corporation, with headquarters in Charlotte, North Carolina, and New York City, joined other major banks in expectations of interest rate cuts next year.
The U.S. banking giant’s global research economists and strategists say they expect disinflation, or falling prices, to continue into next year and the Fed to pivot to interest rate cuts:
“BofA Global Research economists and strategists note they expect this disinflation to continue and rate cuts to begin midway through the year from both the Federal Reserve and European Central Bank.”
That backs up a prediction by Switzerland-based UBS, made earlier in November, that calls for “meaningful reductions in the federal funds rate” at the U.S. central bank by next May.
Bitcoin’s halving is coming up sometime in April 2024. If the Fed does cut interest rates, the growing supply of dollars against a shrinking supply of BTC could boost the economics in favor of Bitcoin’s price.
But recent data from Swiss blockchain analytics firm Glassnode paints an even starker picture of the supply and demand economics at play ahead of Bitcoin’s halving.
Circulating Bitcoin supply inactive for a year or more marked a record 70% in November, according to Glassnode. That shows high conviction and long-term commitment from current BTC holders, with the BTC halving less than five months away.
According to a recent report by crypto exchange Bitfinex, 83% of the BTC supply is currently held at a profit. These are supply-limiting factors in addition to the halving.
In October, Matt Weller, global head of research at Forex.com, said:
“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 price higher at a rapid rate.”
Meanwhile, Glassnode also projects a potential $70 billion bump in institutional demand after the SEC approves a Bitcoin ETF product for regulated investors.
Combined with lower borrowing costs, should the Fed cut rates next year, plus Bitcoin’s halving, 2024 could be a perfect storm to meet the outrageous price predictions many analysts are making this quarter.