This text is taken from Courrier de l’ économique. Click here to subscribe.
Bitcoin has had a turbulent 2023, marked by significant price swings and increased volatility. At the start of the year, the digital currency reached its all-time high, over US$68,000, fueled by the influx of institutional investors and growing interest from the general public.
However, a series of events, such as rising interest rates by central banks, rising inflation and geopolitical uncertainty, caused its price to plummet, reaching a low of US$17,600. in December 2023.
Institutional demand
Since the start of 2024, bitcoin has experienced a slight recovery: it is currently trading around US$23,000. The cryptocurrency is in the news again as it hit a record high of US$72,500 on Monday, surpassing its previous high of US$69,000 recorded last week. The cryptocurrency then experienced a significant fall, losing 13.2% of its value in just four hours.
Bitcoin regained its lost value during the last days of the week and even reached a new record on Monday at over US$72,000. Its volatility is such that it is difficult to predict what its value will be when you read these lines…
That said, its newfound momentum is attributed to a few factors, the most important of which being the Securities and Exchange Commission’s authorization of exchange-traded funds called “spots,” which can directly hold bitcoins and whose value therefore fluctuates directly depending on that of said cryptocurrency.
Bitcoin, it should be remembered, is an extremely speculative asset. If you are considering investing in bitcoin, it is recommended that you exercise caution and fully understand the associated risks.
Its price movements are always influenced by various factors. These include market expectations regarding monetary policies, such as interest rates, and developments in the cryptocurrency ecosystem.
That said, more and more large investors are interested in bitcoin, which supports its increase in value. Investment funds and asset management companies plan to integrate it into their portfolio, which should increase market liquidity and stabilize the price.
Faced with this enthusiasm, a growing number of companies are accepting bitcoin as a means of payment, which is helping to increase its adoption and daily use. Bitcoin should therefore appear less exotic to smaller investors.
Still so volatile
Despite the current recovery, bitcoin remains a volatile technology, and there are a number of uncertainties and challenges that could impact its price in the future.
For example, governments around the world are taking different approaches to regulating cryptocurrencies. Too restrictive regulation could hinder innovation and adoption of bitcoin. Several states are trying to curb the money laundering of organized crime, which is partly enabled by cryptocurrencies.
The bitcoin mining process uses a lot of energy, raising concerns about its effect on the environment.
In short, bitcoin still has an uncertain future, but also the potential to become an important and widely used digital currency. Its success will depend on its ability to overcome the challenges and uncertainties surrounding it.