Bitcoin Jumped Over 160% This Year. Is the Crypto Winter Over?

This time last year, crypto investors wondered if the bleak winter would ever come to an end. FTX, a popular crypto platform, had just collapsed and Bitcoin (BTC) had erased most of the gains of the previous few years. Some wondered if the emerging crypto market could ever recover.

Today tells a different story. The granddaddy of crypto has soared over 160% since the start of the year. According to CoinGecko data, Bitcoin opened at around $16,540 on Jan. 1, and at time of writing it was worth almost $44,000.

Is the crypto winter over?

There's a sense of cautious optimism about Bitcoin and crypto right now. It has crept upwards in spite of economic uncertainty and heavy regulatory headwinds. Bitcoin's price hasn't reached the highs we saw in November 2021, but it has demonstrated a certain resilience. The crypto fear and greed index, which measures market sentiment, has been in greed territory for over a month now.

One of the big driving factors behind Bitcoin's recent rally is the hope that the SEC might approve a spot Bitcoin exchange-traded fund (ETF) in 2024. Up to now, the SEC has steadfastly refused to greenlight spot Bitcoin ETFs. However, many observers think next year will bring a change of heart.

Earlier this year, an appeals court ruled that the SEC didn't have grounds to say no to the EFT proposals. The SEC didn't appeal the judgment, which fueled speculation that it may now give the go-ahead to one (or several) of the applications in the pipeline.

A spot Bitcoin ETF could significantly change the crypto landscape. Investors would no longer need to buy Bitcoin from a crypto exchange. Instead, they could use their brokerage account to buy shares in an ETF that owns Bitcoin. It would make it much easier for both retail and institutional inventors to hold the leading crypto.

Is it safe to buy Bitcoin in 2024?

During the crypto frenzy of 2020 and 2021, many Americans bought crypto for the first time. The soaring prices created a sense that the market could only go upward. Speculation was rife. Sadly, many retail investors lost money in the subsequent crash, which saw Bitcoin lose around half its value in six months.

If you're wondering whether it will be safe to buy Bitcoin in 2024, the short answer is that cryptocurrency is a risky asset class. It is still a relatively new and unregulated industry, and there is a lot we don't know about how it will unfold. Here are some questions to consider:

• Are you comfortable with the volatility? Bitcoin's price fluctuates dramatically. It gained over 300% in 2020, gained another 60% in 2021, only to lose 65% in 2022. It isn't uncommon for Bitcoin's price to move by 20% in a matter of days, which can be difficult for some investors to stomach.
• How do you plan to store your Bitcoin? If you don't want to move your Bitcoin to a crypto wallet, make sure you know what might happen to your funds if the exchange you use fails. Cryptocurrency exchanges don't carry the same protections as a bank or brokerage account.
• How does crypto fit with the rest of your portfolio? There are many different investments to choose from, so try to make sure crypto only makes up a small percentage of your portfolio. That way you'll benefit if Bitcoin goes to the moon, but your wealth-building plans won't be destroyed if it doesn't succeed.
• How do you think Bitcoin will perform long term? Short-term speculation rarely pays off, so try to understand Bitcoin's long-term potential use cases. Some people argue that Bitcoin could become the native currency of the internet. Others think it could take a portion of the global remittance market or become a currency for emerging markets. Critics believe it has no inherent value at all.
• Are you comfortable with crypto's regulatory situation? Most cryptocurrencies are currently viewed as commodities and come under the purview of the CFTC. The SEC has brought charges against several top crypto exchanges this year, making the case that many cryptos are actually unregistered securities. At the same time, at some point the government is likely to introduce a regulatory framework for crypto. But right now there's a lot of noise and not a lot of certainty, which some investors find concerning.

Speaking personally, Bitcoin and other cryptocurrencies continue to make up a small percentage of my wider investments. However, I am concerned by the regulatory landscape and the questions about what goes on (or has gone on) behind the scenes at various crypto platforms. Bitcoin's price may have recovered from the collapse of FTX, but for me, the stain of the fraud and extreme mismanagement remains.

Key takeaway

Bitcoin's 150% rally in 2023 is great news for crypto investors. But don't assume that the end of the crypto winter means it is safe to enter the crypto waters. Bitcoin still has many significant hurdles to cross. These include a changing regulatory landscape, bruised investor confidence, and questions about its utility. Do your research before you jump in.