Bitcoin Outperformed Nearly Every Asset Class in the Past Year
Bitcoin has shown remarkable performance over the past 12 months, surpassing nearly every other asset class, according to a recent report by asset manager VanEck. Despite a recent downturn that has unsettled some investors, Bitcoin’s spot prices have surged by approximately 124% since September 2023. As of September 20, 2024, Bitcoin’s market capitalization stands at around $1.25 trillion, making up 56% of the total cryptocurrency market—a 15% increase over the last year.
Bitcoin’s Long-Term Bull Market
VanEck forecasts that Bitcoin’s long-term bull market will persist for the foreseeable future. Unlike the previous year, Bitcoin’s adoption as an investment vehicle is now driven by different forces. For example, in 2023, retail-driven phenomena and “inscriptions”—a viral innovation that allowed users to store media files directly on the Bitcoin blockchain—played a significant role in accelerating BTC adoption. However, the popularity of inscriptions has waned in 2024, leading to a 52% year-over-year decline in transaction fees on the Bitcoin network.
Increasing Institutional Adoption
One of the key drivers behind Bitcoin’s price appreciation this year is its growing adoption as a medium for storing and transferring value. In January, U.S. regulators approved the listing of spot Bitcoin exchange-traded funds (ETFs), which now hold approximately $55 billion in net assets. Wealth advisers have embraced these ETFs at an unprecedented rate, outpacing any other new ETF in history, according to Matt Hougan, Chief Investment Officer of asset manager Bitwise.
Major Themes Driving Bitcoin’s Growth
VanEck’s report, authored by Matthew Sigel, head of digital assets research, identifies several “mega-themes” that are fueling Bitcoin’s long-term growth. These include:
- The increasing need for decentralized, censorship-resistant networks
- Growing institutional adoption
- Heightened sovereign involvement in mining and cross-border trade
Challenges for Bitcoin Miners
While Bitcoin has been thriving, its miners have faced significant challenges over the past year. The April “halving” event is largely to blame. This event, which occurs every four years, reduces the number of Bitcoins mined per block by half. The most recent halving reduced mining rewards from 6.25 BTC to 3.125 BTC per block. As a result, the Bitcoin Hashprice—a measure of profitability in the industry—has plummeted by 97% year-over-year.
Future Outlook
Despite the struggles faced by miners, VanEck remains optimistic about Bitcoin’s future. The asset manager expects Bitcoin’s long-term bull market to continue, driven by its increasing adoption as a valuable investment and medium of exchange.
In summary, Bitcoin has outperformed nearly every other asset class over the past year and continues to show promising growth prospects. While miners are grappling with reduced rewards and profitability, the broader adoption of Bitcoin as a store of value and investment vehicle bodes well for its future.
