In the last two months, Bitcoin (CRYPTO:BTC) has lived up to its reputation as one of the most volatile assets in the world. After reaching a new all-time high of $73,750 in mid-March, Bitcoin it quickly fell below $57,000 in late April.

For now, Bitcoin has recovered well to the $62,000 level. But questions still remain about where Bitcoin will go in 2024. Is Bitcoin overvalued or undervalued at its current price? To answer this question, let’s take a closer look at two main catalysts.

Bitcoin ETF Inflows

It all starts with the new Spot Bitcoin exchange-traded funds (ETFs). During the first four months of 2024, massive investor flows into these ETFs led to a huge rally in the price of Bitcoin. The new Bitcoin ETFs in sight – led by iShares Bitcoin Trust (NASDAQ: IBIT) and the Fidelity Wise Origin Bitcoin Fund – quickly accumulated more than 30 billion dollars in assets under management. They have found wide acceptance from investors. At one point, the iShares Bitcoin Trust had a 71-day streak of positive net inflows.

Image source: Getty Images.

Admittedly, there was a notable pullback in the amount of new money flowing into these ETFs last month as the price of Bitcoin fell. But now we are preparing for what could be considered the “second round” of these ETFs. According to Black stone, issuer of the iShares Bitcoin Trust, the next round of ETF buyers will include three important types of institutional investors: sovereign wealth funds, pension funds and endowments. Combined, this will represent another huge influx of new money into Bitcoin, helping to support its price for the foreseeable future.

The halving

The second main reason to buy Bitcoin now is the halving. This event, which took place on April 19, resulted in the rewards paid to Bitcoin miners being halved. On the surface, this might not seem like a big deal. But this process sets off a chain reaction of events that (a) increases Bitcoin’s scarcity and (b) cements its status as a disinflationary asset.

Both results are very important for investors. Increasing the perceived scarcity of any asset should increase its price, and it is no different with Bitcoin. Furthermore, investors are always clamoring for inflation-resistant assets. By combining these two resources into a single asset, you should have a fantastic long-term store of value.

For this reason, halving events have historically been very bullish for Bitcoin. After the previous halving (which took place in May 2020), for example, the price of Bitcoin went parabolic. On May 11, 2020, the price of Bitcoin was $8,600. At the end of the year, Bitcoin was trading at around $30,000 per coin. The price of Bitcoin would eventually reach a new all-time high of $69,000 in 2021. Given that similar patterns occurred following halving events in 2012 and 2016, it is easy to see why crypto investors are hoping for repeat performance.

The story continues

The only problem is that this year’s halving was a bit lackluster. When it occurred in mid-April, Bitcoin was trading at around $64,000. More than two weeks later, it is still trading around the $64,000 level. Additionally, there was a worrying drop to around $57,000 along the way. This was completely unexpected – the Bitcoin halving was supposed to lead to a higher price, not a lower price!

Don’t believe the hype?

And that brings me to an important warning for stock investors who are new to crypto. Bitcoin can be a riskier investment than buying an individual stock, mainly due to its volatility. There were many reminders of this in 2024, with Bitcoin rising or falling 10% in a single day. And keep in mind that some of the world’s smartest investors – including billionaire Warren Buffett – say they have no intention of buying Bitcoin.

That said, it’s hard not to see the new Bitcoin ETFs as a real game changer. They are democratizing crypto for small retail investors while making Bitcoin popular enough for even the largest institutional investors. As long as investors of all sizes continue to invest their money in these ETFs, I will buy Bitcoin like there is no tomorrow.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The motley fool has a disclosure policy.

2 reasons to buy Bitcoin like there’s no tomorrow was originally published by The Motley Fool

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