Analyst: Four major factors push Bitcoin to $70,000 this year

Analysts at Bernstein Investment Company predict that there will be no major obstacles for Bitcoin to return to its all-time high of $69,000 this year, and it may even exceed $70,000.

“While we do not call for volatility to free-fall to all-time highs, we are optimistic on the risk-reward for the remainder of 2024 at today’s prices,” analysts Gautam Chhugani and Mahika Sapra wrote in a note to investors.

On January 11, after 10 spot Bitcoin ETFs were listed in the United States, Bitcoin plummeted by $49,000 at one point and is currently trading at around $42,600.

The report added that the $42,000 to $43,000 range is “strong support” and predicted that Bitcoin will rise another 65% to around $70,000 by the end of the year.

Analysts Chhugani and Sapra give four reasons for their bullishness.

“Huge flows of ETFs”

The first is net ETF inflows, which totaled about 19,000 bitcoins last week alone, according to Bernstein.

“ETF giants will continue to be an important factor influencing price action. For BTC with a known finite supply curve, any incremental buying demand of this size will have an impact on prices,” the analyst said.

Bernstein said the second reason to be optimistic about Bitcoin is that ETF issuers are receiving "unprecedented and accelerated" responses from advisor clients asking how to allocate Bitcoin in client portfolios, suggesting that ETFs may indeed unlock long-term source of Bitcoin demand.

A CoinShares report released today shows that $708 million in net inflows into institutional crypto investment products last week alone, bringing the total net inflows since January 1 to $1.6 billion, with Bitcoin accounting for 99% of these flows.

New U.S.-based BTC spot ETF inflows totaled $1.7 billion, down from the weekly average of $1.9 billion since its launch on January 11. Still, the market is growing.

“Inflows into U.S. BTC ETFs have been offset by outflows from existing issuers totaling $6 billion, but the data highlights that the momentum of these outflows has weakened significantly,” CoinShares said.

Last week, Grayscale Bitcoin Trust ( GBTC ) sold $926.7 million in BTC and ProShares sold $108.9 million in BTC, but these outflows were offset by iShares (BlackRock) and Fidelity ETFs, which added $1.6 billion.

Rate cuts

Macroeconomic conditions also look favorable, Bernstein said.

The Federal Reserve has hinted at a possible rate cut, with the range of 5% to 5.25%. With lower interest rates, savings will no longer be attractive, and investors will look for returns elsewhere, and risky assets, including Bitcoin, tend to perform better at lower interest rates.

However, Federal Reserve Chairman Jerome Powell ruled out an early rate cut in March 2024 in an interview with CBS 60 Minutes on Sunday, and a potential rate cut cycle could be delayed until May 2024 or later.

Impact of the US election on the SEC

Monetary policy aside, Bernstein said crypto markets could rise on a Republican victory in the U.S. presidential election — because it would mean a change in leadership at the Securities and Exchange Commission (SEC). SEC Chairman Gary Gensler has been criticized by the cryptocurrency industry and lawmakers for his enforcement approach to cryptocurrency regulation.

Bitpush previously reported that the crypto industry has raised more than $85 million for the 2024 US election. Major donors include Coinbase , venture capital firm Andreessen Horowitz, and Ripple , which have each donated at least $20 million.

The Fairshake Super PAC and its affiliated organizations have raised $6 million since the beginning of the year, adding to the $78 million previously publicly confirmed. Pro-crypto House Financial Services Committee Chairman Patrick McHenry and Majority Whip Tom Emmer are the main beneficiaries, which will ensure that the crypto industry continues to expand its influence on Capitol Hill.

Growth of the Bitcoin Ecosystem

Bernstein said the fourth driver for Bitcoin is the growth of its on-chain ecosystem, such as the Ordinals protocol, which is a way to provide unique identifiers for small portions of Bitcoin, thereby turning them into NFT-like products.

“As the Bitcoin developer ecosystem grows, we expect Layer 2 to continue to drive transaction revenue for miners, and economic activity for token minting and Ordinals to continue,” the report said.

Ed Goh, head of trading at cryptocurrency trading firm B2C2, also agreed with Bernstein's view. "Bitcoin has shown clear preference for buyers, and the investment model for cryptocurrencies remains strong, with investments evenly distributed from crypto-native funds, retail brokers and proprietary trading firms, thus continuing the trend we have seen so far this year," said Ed Goh.

Bitpush terminal data showed that Bitcoin fell from $43,400 earlier in the day to $42,200. As of press time, the 24-hour decline was 1.2%. SwissBlock analysts said in a report on Monday that despite the decline, BTC still held above $42,000, which is an important price support level for buyers to intervene, but due to the lack of new investment narratives in the crypto market, risk appetite is currently low.

“Exclusive drivers of the cryptocurrency market, such as Bitcoin ETFs, have already played out, leaving participants waiting for the next important signal,” the report states.