GM, everyone.

To those of you who celebrate Christmas: I hope you had a wonderful few days. 🤝 

To those of you who don't celebrate Christmas: I hope you had a wonderful few days. 🤝 

The year is coming to an end. So let's take a look at the year ahead and what will be driving Bitcoin in 2024. Here we go!

1. Bitcoin ETF

The Bloomberg Intelligence analysts have been giving US spot Bitcoin ETFs a 90% chance of approval by 10 January.

More than a dozen firms - including the world's largest asset manager BlackRock - are awaiting the green light from the nation's securities regulator, the SEC. If the SEC signs off on the ETFs, we'll likely see a "batch approval" with multiple approvals on the same day.

In the short term, it is impossible to predict the impact of the ETF approval on the price of Bitcoin. The approval could be a "buy the rumor, sell the news" event, where investors buy an asset in anticipation of an announcement and take profits when the announcement has been made.

But it could also be a "buy the rumor, buy the news" event, where investors continue to buy an asset even after a significant announcement has caused the price to rise.

In the long run, however, the ETF approval is likely to be a bullish event, as it will open the floodgates of the US wealth management industry.

If for some reason the ETFs don't get approved in January, we would see a significant pullback in the short term.

2. The halving

The fourth Bitcoin halving is expected to take place in April.

The halving cuts the number of newly created Bitcoin that enter circulation in half. The reduced supply growth results in lower inflation for the cryptocurrency.

Historically, Bitcoin has reached a new all-time high 12 to 18 months after each halving. While past performance is no guarantee of future results, the supply shock of the halving will likely cause the price to move up.

Keep in mind, however, that the road to the halving could be paved with pullbacks. During the previous halving in May 2020, Bitcoin plunged nearly 50% between February and March.

3. Interest rates

Currently, the cash rate, Australia's official interest rate that banks pay to borrow funds from each other, is held at 4.35% by the Reserve Bank of Australia (RBA).

The RBA has been hiking the cash rate to curb inflation. The bank has an inflation target range of 2 to 3 percent, but in September 2021, inflation started to break above the target range.

So, the cash rate is at its highest level in more than a decade. However, the S&P/ASX 200, Australia's leading stock market index, is close to a new record high.

A high cash rate typically leads to lower asset prices as it makes saving more desirable. With this in mind, it is surprising that the S&P/ASX 200 is close to a new all-time high. (The same is true in the US, where interest rates are high but all the major indexes are near all-time highs).

That said, the RBA appears to be done raising rates and is expected to lower rates in 2024 and beyond. (Same same in the US).

The Commonwealth Bank believes the cash rate will be cut by the RBA by 0.75% over 12 months starting in September 2024. This means interest rates could fall to 3.6% by the end of 2024. According to the forecast, interest rates would be at 2.85% by the end of 2025.

As low interest rates stimulate demand for assets, we can expect asset prices, including Bitcoin, to rise over the next 2-3 years.

And since our current starting point is near all-time highs, we could see several new all-time highs within that time frame.

4. Technological innovation

Crypto and Decentralized Finance (DeFi) enthusiasts often tend to write off Bitcoin as old, outdated, and boring. That’s because despite being the largest digital asset by market cap, Bitcoin hasn’t been the epicenter of innovation when it comes to use cases for years.

This narrative may be challenged in 2024, as the Lightning Network and novel token standards like BRC-20 demonstrate Bitcoin's evolving capabilities. In addition, Bitcoin's layer-2 landscape made significant progress in 2023. Bitcoin is beginning to see the programmability that DeFi is known for.

For example, Stacks is a Bitcoin layer-2 for smart contracts designed to bring decentralized applications and smart contract capabilities to the Bitcoin ecosystem. Its native token STX is up over 600% this year. 🤯 

If technological innovation continues, it could be a significant driver for Bitcoin in 2024.

5. Bitcoin and corporations

The Financial Accounting Standards Board (FASB), a US body that details how companies should report assets on their balance sheets, recently updated its standards. Starting in December 2024, it will allow companies to report changes in the "fair value" of crypto holdings.

The move will benefit companies with crypto on their balance sheets, like MicroStrategy. Under the existing rules, companies must recognize a loss if the crypto they hold is worth less than the purchase price, even if they haven't sold the assets.

Under the new rules, companies will be required to report the fair value, cost basis, and type of assets they're holding.

The move will make it easier for companies to adopt Bitcoin as a corporate treasury asset.

6. Bitcoin and nation-states

In December 2023, Javier Milei became the new president of Argentina. Milei is an anarcho-capitalist. He has announced to close the central bank and to dollarize the economy.

Milei also seems to be a Bitcoiner. While there is no indication yet that he will make Bitcoin legal tender, Foreign Minister Diana Mondino announced a few days ago that it will be possible to set contracts in Bitcoin.

Argentina's economy has performed disastrously in recent years, with inflation running at around 160%.

While Milei remains controversial and the impact of his policies on the country's economy has yet to be assessed, Argentina is a country of 45 million people. So any foray into Bitcoin could have a significant impact on the adoption of the cryptocurrency.

In addition, El Salvador is expected to issue the world's first Bitcoin bonds in 2024. The Central American country was the first to make Bitcoin legal tender in 2021.

The so-called "Volcano Bonds" were announced by President Nayib Bukele in 2021. The idea behind the bonds is to raise money to seed a Bitcoin mining industry that relies solely on renewable energy, including that generated by the country's active volcanoes.

That's it for today. I wish you all a healthy and happy new year! Talk to you next Friday. 🥳 

Before you go, please help me get better! 🙏 

Feel free to drop me an email or dm me on Twitter, LinkedIn, or Instagram with any feedback or topics you'd like to see covered in this newsletter!

Thank you! 🤜 🤛