Spot Bitcoin ETFs and Halving Process Drive Cryptocurrency Market Surge
In the first half of 2024, the cryptocurrency market experienced a significant surge, driven by the approval of spot Bitcoin exchange-traded funds (ETFs), the Bitcoin halving process, and a partially increased risk appetite among investors. Regulatory efforts regarding crypto assets accelerated in many countries, including Turkiye, during this period.
Optimism surrounding cryptocurrencies was further fueled by the upcoming U.S. presidential elections, where candidates from both parties adopted positive stances on crypto assets. The approval of spot Bitcoin ETFs in the world’s largest economy, coupled with expectations for Ethereum ETF approvals, also contributed to the price increase.
Analysts highlight that Republicans have shown a favorable stance towards the crypto industry to attract wealthy crypto investors, while Democrats have adjusted their previous positions to avoid losing ground.
Bitcoin, which entered a bullish trend since the last quarter of 2023, reached a record high of $73,750 on March 14th following the U.S. Securities and Exchange Commission’s (SEC) approval of 11 Bitcoin spot ETF applications. According to Coinmarketcap data, Bitcoin’s price increased by approximately 45%, from $42,600 on December 31st to $61,975 on June 30th.
The halving process in May, which reduced the new Bitcoin supply, also played a role in this price increase. Besides Bitcoin, thousands of other cryptocurrencies are actively traded. Ethereum, the second-largest cryptocurrency by market value, rose nearly 50% in the first half of the year to $3,420.
The total market value of the global cryptocurrency market increased by $650 billion during this period, reaching $2.31 trillion.
Bitcoin ETFs See First Approval
One of the main reasons for the rise in Bitcoin and the cryptocurrency market in the first quarter was the approval of Bitcoin ETFs by the SEC on January 11th. Following the approval of futures Bitcoin ETFs in 2021, numerous asset management companies applied for spot ETFs. Among the approved companies, BlackRock, with assets under management worth $10 trillion, stood out.
These investment funds, traded through securities exchanges with Bitcoin, have attracted the interest of more institutional investors.
Impact of Halving Process and Fed Expectations
Another significant factor affecting the Bitcoin and cryptocurrency market was the halving process. This process, which occurs approximately every four years, reduces the rewards from Bitcoin mining by half. The most recent halving in May 2024 resulted in a 50% reduction in mining rewards, aiming to keep Bitcoin’s total supply limited to 21 million.
In the U.S., inflation data and the associated expectations for interest rate cuts by the Federal Reserve (Fed) caused fluctuations in cryptocurrency prices. When interest rates decrease, investors often turn to alternative assets with high return potential, including Bitcoin and other cryptocurrencies, benefiting from the increased risk appetite.
Continued Volatility in Cryptocurrency Markets
Despite the rise in the first half of the year, the cryptocurrency market frequently experiences significant value losses. Bitcoin, which reached an all-time high of $73,750, fell below $65,000 on April 2nd, losing more than 10% of its value in a short period.
Developments related to exchanges like FTX, which misuse client assets, and the resignation of Binance CEO Changpeng Zhao, sentenced to four months in prison in April, also impacted the market.
The lack of clear regulations and laws concerning cryptocurrencies in many countries continues to create uncertainty about the market’s future. Experts believe that macroeconomic developments, potential regulatory decisions, and technological advancements, especially in blockchain, will determine the performance of cryptocurrencies for the rest of 2024.
Source: Trthaber / Prepared by Irem Yildiz