As Bitcoin keeps setting new highs, it is likely to reach the $100,000 milestone before 2024

Cryptocurrencies Surge Again

Bitcoin has just hit a new all-time high of over $72,000 (£56,300), surpassing the previous peak of around $69,000 set during the last bull market at the end of 2021.

Other top cryptocurrencies, such as Ethereum and Solana, have also reached their highest prices in three years, driven by a steady increase since the fall of 2023. The total value of the cryptocurrency market has soared to $2.6 trillion—three times its value at the beginning of 2023—and is approaching its previous peak of $3 trillion.

This surge has occurred largely during a period when the U.S. dollar has been strong relative to other currencies (although it has declined slightly in recent weeks). Typically, this would weaken cryptocurrency prices, so the current strength reflects a notable bullish momentum.

During this period, many other fiat currencies around the world have fallen against the dollar, meaning that Bitcoin has hit record highs not just in dollars but also in many other national currencies.

What’s Driving the Price Spike? And Where Might the Market Go for the Rest of 2024?

Bitcoin ETFs

A major factor driving Bitcoin’s price surge is the approval by U.S. regulators in January of a type of investment vehicle called an exchange-traded fund (ETF), specifically targeting the spot market for Bitcoin. ETFs are a convenient way for ordinary investors to gain exposure to an asset, as they typically buy ETF shares through financial advisors rather than purchasing the underlying asset directly.

A total of 11 Bitcoin ETFs have been approved in the U.S., now seeing daily trading volumes of over $10 billion, with BlackRock and Fidelity leading the pack. This indicates strong interest from traditional market participants. As these spot ETFs mature, providers are likely to roll out more promotional materials and educational resources to attract clients.

The crypto market is constantly evolving and innovating. One potential development is the launch of options contracts on these new spot ETFs. Options allow traders to hedge against price movements in the crypto market and could draw even more capital into the space.

However, the U.S. Securities and Exchange Commission (SEC) has recently postponed approval of such innovations until at least the end of April. Some experts believe the delay could last longer, as it remains unclear which regulatory body would oversee these new types of derivative contracts.

Bitcoin Halving

A built-in feature of the Bitcoin system is that approximately every four years, the reward for mining new Bitcoins—using arrays of computers—is cut in half.

The last halving occurred in May 2020, reducing the reward per block from 12.5 to 6.25 Bitcoins. The next halving is scheduled for April 19, when the reward will drop to 3.125 Bitcoins.

Each halving reduces the number of new Bitcoins entering circulation, and is often accompanied by a sharp increase in Bitcoin's price. What remains uncertain is whether this has already been priced in by the market and therefore may not be the real driver of the current rally.

One theory suggests that institutional investors behind the spot ETFs are actively buying now because they know that once the halving occurs, fewer Bitcoins will be available on the open market.

Ethereum’s Outlook

Meanwhile, the upcoming months may also see a boost from the potential approval of spot ETFs for the Ethereum network. At least ten firms, including BlackRock and Fidelity, have applied to launch such ETFs, and the SEC must make a decision by May.

While Bitcoin’s blockchain is largely viewed as a store of value, Ethereum has emerged as the leading blockchain for developers creating decentralized applications.

SEC Chair Gary Gensler has expressed the view that most cryptocurrencies—unlike Bitcoin—should be treated as securities, i.e., financial instruments rather than simple commodities. This makes the approval process for Ethereum ETFs more complicated. If the SEC classifies Ethereum as a security, it means ETFs won’t be able to buy it from crypto exchanges unless those exchanges are approved to trade securities.

Despite this regulatory uncertainty, a recent upgrade known as "Dencun" (also referred to as Duncan or EIP-4844) may bolster Ethereum’s prospects. Ethereum has faced competition from other blockchains like Solana and Avalanche, largely due to its relatively slow and expensive transactions.

In 2023, Ethereum transitioned to a system called "proof of stake" (PoS) for verifying transactions—a major step in its long-term plan to reduce costs and improve scalability. The Dencun upgrade, which launched on March 13, aims to further improve scalability and reduce transaction fees by enhancing how data is stored on the network.

What’s Next?

Predicting cryptocurrency prices is notoriously difficult. Markets are highly volatile, and price swings often defy expectations. As Isaac Newton once said, “I can calculate the motions of heavenly bodies, but not the madness of people.”

That said, most commentators expect crypto prices to continue rising in the coming months. Election years often create favorable conditions for investment, and a second Trump administration could create a more crypto-friendly regulatory environment in the U.S. (as could a Rishi Sunak victory in the UK—though that currently seems unlikely).

As Bitcoin continues to go mainstream and integrates with traditional financial assets, a price of $100,000 in 2024 is not out of the question—an extraordinary milestone for an invention that was worth nothing in 2009.

Andrew Urquhart is Professor of Finance and Financial Technology at the ICMA Centre, Henley Business School, University of Reading.