Luno outlines Bitcoin drivers for 2024

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 16 Jan 2024
The Bitcoin halving event slated for April is expected drive the price upwards.
The Bitcoin halving event slated for April is expected drive the price upwards.

2024 is lining up to be another big year for crypto-currency, according to Luno, South Africa’s biggest crypto exchange.

Luno believes upcoming events will have a significant impact in driving the growth of digital currencies this year.

During the first week of January, Bitcoin, the world’s most popular crypto-currency, started strongly, trading at $45 000 (R846 000) since April 2022.

At the time of publishing, Bitcoin was trading at $42 700 (R804 000).

Bitcoin halving

Luno expects the Bitcoin halving event slated for April to drive the price of the world’s biggest crypto-currency upwards.

It explains that roughly every four years, Bitcoin rewards paid to miners are cut in half as a way to avoid excess supply and potentially rapid inflation.

These events are known as halvings, and such events have historically been credited by analysts as having had a major impact on the price as they decrease the supply of new Bitcoin into the market and reinforce the sense of Bitcoin’s scarcity, it notes.

The next halving event is expected to happen in April 2024, and this will see the number of Bitcoin rewards earned per block approved fall from 6.25 to 3.125.

“What’s happened previously? The first halving was followed in the ensuing months by the price of Bitcoin increasing more than 8 000% on pre-halving levels. The price of Bitcoin also increased roughly 3 000% after the second halving in 2016. The last halving in 2020 was followed by a bull run that ended in an all-time high price of almost $69 000,” says Luno.

David Porter, GM of AltCoinTrader, concurs, saying the Bitcoin halving event has traditionally resulted in major bull runs.

“The supply of newly mined Bitcoin will halve, leading to a supply shock that could coincide with the spot ETF approval and the resultant increase in demand. This could provide serious impetus for the bulls throughout 2024 and maybe even into early 2025,” says Porter.

Farzam Ehsani, CEO and co-founder of VALR, adds that the halving event will very likely result in higher price pressure as has been the case in the past.

US elections

Luno believes that the outcome of the US election in November 2024 could have profound implications for the crypto industry.

“US regulatory and financial decisions tend to have a marked impact on the global crypto industry, as we’ve seen with the Bitcoin spot-ETF applications. But there’s also an interesting development of government officials playing into crypto for voter support,” says Luno.

“Crypto started to enter the conversation, albeit in a small way, in the last election. The amount of talk has grown since, and it could herald a more different approach to crypto than we’ve seen in recent years.”

African volumes

According to Luno, research firm Chainalysis recently pointed out that crypto investment in sub-Saharan Africa tends to be more retail driven than other regions, possibly a sign that crypto has become an important part of people’s daily lives.

“No country exemplifies this better than Nigeria, which ranks second overall on our Global Crypto Adoption Index and also leads the region in raw transaction volume,” Chainalysis noted.

Luno points out that Nigerians are increasingly turning to crypto-currencies for storing and transferring value, gaining access to international markets.

More recently, it adds, it’s also been used as a means of overcoming challenges in accessing dollars and hedging against naira volatility.

Bitcoin ETFs

A spot Bitcoin ETF is an investment fund that directly tracks the price of Bitcoin throughout the trading day, just like a stock, according to Investopedia. It allows investors to get exposure to the value of the underlying asset without directly owning it.

The Security and Exchange Commission approved 11 spot Bitcoin exchange traded funds on 10 January, a landmark decision which experts say could lead to an influx of institutional investment into Bitcoin, says Luno.

ITWeb last week reported that South African-based crypto-currency players are confident the approval will result in a surge in the price of Bitcoin.

“In 2017, we had initial coin offerings, and in 2020 we had NFTs [non-fungible tokens]. The next bull run will also likely have ‘a thing’, a lightning rod for its popularity, and the spot-ETF could be it,” says Luno.

AI is coming

Given the hype around artificial intelligence (AI) in 2023 and the obvious benefits of automated trust for transacting in an automated ecosystem, Luno believes that AI could be a particularly interesting development for crypto.

“AI development is not looking like it’s slowing down anytime soon, with experts calling last year’s breakthroughs among the most significant in human history. It seems like the technology will leave no industry unturned, including crypto. From AI-driven chatbots to automated trading bots, the technology seems a natural fit for programmable money, aka crypto.”

Tokenise, everything

According to Luno, it’s time to pay attention when juggernauts like JP Morgan enter the fray.

It says the banking giant recently created its own blockchain and started trading tokenised assets on it.

Luno explains that tokenisation is a process wherein an asset is represented by a crypto token and immortalised on a blockchain.

“This could be in the form of a house, a fraction of a house, music royalties, gold, bonds, stocks, and so on, and so on.”