Why is Bitcoin rising in 2024, compared to other asset class.

Bitcoin is a decentralized digital currency created in 2009 by an anonymous person or group using the pseudonym Satoshi Nakamoto. Unlike traditional currencies issued by governments, Bitcoin operates on a peer-to-peer network, using blockchain technology to enable secure, transparent, and immutable transactions. Its limited supply of 21 million coins has contributed to its status as "digital gold," appealing to investors seeking alternatives to fiat currencies. Bitcoin’s value is driven by factors such as market demand, regulatory developments, technological advancements, and its adoption as a store of value and payment method across industries.

Bitcoin's rise in 2024 can be attributed to several key factors, positioning it as an attractive asset compared to other investment classes.

1. Bitcoin Halving and Scarcity

One of the major drivers of Bitcoin’s value in 2024 is the halving event scheduled for spring. Bitcoin halving, which happens roughly every four years, reduces the reward for mining new Bitcoins by half, decreasing the supply while demand remains constant or increases. Historically, these events have been followed by significant price surges, as seen in 2020 when Bitcoin’s value surged by over 200%. This scarcity effect attracts investors who anticipate price appreciation due to limited supply.

2. Increased Institutional Investment

Institutional involvement has expanded considerably, with major investment firms like BlackRock and Fidelity embracing Bitcoin. This development has added legitimacy to the cryptocurrency, especially after Bitcoin was recognized by the Financial Accounting Standards Board (FASB) in the U.S., allowing companies to report Bitcoin at fair market value. This change boosts corporate balance sheets and encourages more institutional players to consider Bitcoin, leading to increased demand and price appreciation.

3. Diminishing Correlation with Traditional Assets

A crucial appeal for Bitcoin in 2024 is its low correlation with traditional asset classes such as equities and bonds. This decoupling makes Bitcoin an attractive asset for portfolio diversification. With traditional markets facing potential challenges due to inflation, recession concerns, and rising interest rates, Bitcoin’s relative independence from these factors has made it a safe haven for investors seeking to hedge against market volatility.

4. Regulatory Clarity and Adoption

Regulatory improvements have also played a significant role in Bitcoin’s rise. Pro-Bitcoin legislation across several U.S. states and other countries, like El Salvador and Argentina, has improved confidence in the asset. Additionally, Bitcoin ETFs (exchange-traded funds) have made it easier for mainstream investors to access the cryptocurrency market without directly purchasing Bitcoin. The growing acceptance of Bitcoin as a legitimate asset class is encouraging more widespread adoption.

5. ESG and Sustainability Appeal

Bitcoin’s evolving role in ESG (Environmental, Social, Governance) narratives has also boosted its appeal. With renewable energy sources powering a significant portion of Bitcoin mining operations and initiatives to mitigate methane emissions, Bitcoin is increasingly viewed as compatible with sustainability goals. This aspect has attracted environmentally conscious investors and institutions.

Comparison with Other Asset Classes

In comparison to traditional assets like gold, stocks, and real estate, Bitcoin’s performance has been exceptional in 2023 and early 2024.

While gold has traditionally been viewed as a hedge against inflation, Bitcoin is emerging as “digital gold,” offering similar hedging benefits but with higher growth potential. Stock markets, although performing well, remain susceptible to inflation and interest rate fluctuations. In contrast, Bitcoin’s scarcity and decentralized nature make it less vulnerable to these macroeconomic factors.

Furthermore, real estate, while a stable long-term investment, lacks the liquidity and explosive growth potential that Bitcoin offers. Meanwhile, bonds and fixed-income assets are struggling with low yields due to the prevailing low-interest-rate environment, further enhancing Bitcoin’s relative attractiveness.

In summary, Bitcoin's rise in 2024 is supported by its upcoming halving event, increasing institutional investment, regulatory clarity, low correlation with traditional markets, and growing ESG appeal. Compared to traditional asset classes like gold, stocks, bonds, and real estate, Bitcoin presents a unique combination of high potential returns and diversification benefits, positioning it as a favored asset in the current economic climate.