Bitcoin is ending 2023 on a high after climbing 157 per cent so far this year to about $43,000 – and excitement is building for the digital token for 2024.
Traders expect another strong year for Bitcoin, with price predictions ranging from a conservative $50,000 to the dizzying heights of $100,000 or more.
The “crypto winter” of 2022 is giving way to yet another bout of cryptocurrency spring madness, with talk of a breakthrough year for digital assets. As ever, investors need to keep a cool head to withstand their fear of missing out (Fomo), but many will not succeed.
Bitcoin hit a record high of about $69,000 in November 2021, shortly before inflation and interest rates took off.
Higher borrowing costs have since “burdened” crypto assets as their development is “highly contingent on private investors’ capital”, says Manuel Villegas, digital assets analyst at Julius Baer.
Higher yields on lower-risk assets such as US Treasuries and money market funds also increased the opportunity cost of holding cryptocurrency, which pays no interest, hitting demand.
The cryptocurrency sector was also hit by a string of platform failures and scandals, notably the $32 billion collapse of FTX and arrest of founder Sam Bankman-Fried, who was found guilty on seven counts of fraud last month.
The former cryptocurrency poster boy now faces up to 110 years in prison, plus fines and restitution, with further charges in the pipeline.
Mr Bankman-Fried was not the only platform boss in trouble, with Changpeng Zhao, founder of Binance.com, the world’s largest cryptocurrency exchange, pleading guilty and resigning for failing to maintain an effective anti-money laundering programme.
Binance has survived but only after the company agreed to pay more than $4 billion to resolve the Justice Department’s investigation.
Cryptocurrency remains the wild west of finance, with investors losing a record $685.5 million to hacks and fraud in the third quarter of this year, up 59 per cent on last year, according to security services platform Immunefi.
Yet, as interest rates peak and the US Federal Reserve hints that it will start cutting interest rates next year, investors are returning in droves.
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