Bitcoin (BTC) has been one of the best-performing asset classes over the past year, but a recent decline has made investors nervous, according to a report by asset manager VanEck on September 19th.
The report states that BTC prices have increased by approximately 124% since September 2023, and Bitcoin has gained a larger share of the cryptocurrency market. As of September 20th, Bitcoin’s market capitalization is around $1.25 trillion, accounting for 56% of the total crypto market, which is a 15% increase from a year ago.
VanEck believes that Bitcoin’s long-term bull market will continue in the foreseeable future, and notes that the adoption of Bitcoin as an investment vehicle is driven by different factors compared to 2023.
Previously, BTC adoption was primarily driven by retail investors, especially after the introduction of “inscriptions” in 2023, which allowed users to store media files directly on the Bitcoin blockchain. However, the popularity of inscriptions has declined in 2024, resulting in a 52% decrease in transaction fees on the Bitcoin network.
According to VanEck, the price appreciation of Bitcoin this year can be attributed to its growing adoption as a store of value and medium of transfer. In January, US regulators approved the listing of spot BTC exchange-traded funds (ETFs), which now have approximately $55 billion in net assets.
Wealth advisers have embraced BTC ETFs at an unprecedented rate, outpacing the adoption of any other new ETF in history, according to Matt Hougan, Chief Investment Officer of asset manager Bitwise.
The report by Matthew Sigel, VanEck’s Head of Digital Assets Research, highlights several long-term growth drivers for Bitcoin, including the increasing demand for decentralized and censorship-resistant networks, institutional adoption, and sovereign involvement in mining and cross-border trade.
However, Bitcoin miners have had a challenging year in 2024, with the April “halving” event being a significant factor. The event reduced mining rewards from 6.25 BTC to 3.125 BTC per block, leading to a decline in mining profitability. The Bitcoin Hashprice, a measure of profitability in the industry, has dropped by 97% year-over-year.
Overall, Bitcoin’s performance and market dominance continue to attract attention and investment, despite the challenges faced by miners.