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Bitcoin has outshone every major asset class in the past year, according to a recent report from American investment management firm VanEck. 

Bitcoin is up by 141% in the last 12 months: Source: Brave New Coin Bitcoin Liquid Index

As of September 26th 2024, Bitcoin has seen its price surge by 141% over the past year – far more than traditional assets like Gold or the S&P 500. According to the VanEck report, a key factor supporting this rise is the surge in crypto venture capital (VC) investments. Over the past year, crypto VC flows have jumped 87%. Bitcoin’s market capitalization now stands at approximately $1.25 trillion – up 15% since last year, the report said.

Bitcoin is shifting towards a more established role as a “store of value and a tool for wealth transfer”, rather than just a speculative asset. This transition may bolster its long-term stability but also poses challenges, especially as the network’s scalability and energy consumption issues persist, the report said. 

In the report, Matthew Sigel, head of Digital Assets Research at VanEck, said, “Bitcoin’s adoption today is driven by different forces than in 2023, when retail demand and viral innovations like inscriptions played a major role.”

Since the U.S. authorized the listing of spot Bitcoin exchange-traded funds (ETFs) earlier this year, institutional demand for these products has surged. As of September, Bitcoin ETFs account for around $55 billion in net assets, and financial advisors have embraced these funds faster than any other new ETF in history.

According to the VanEck report, the involvement of seven countries in Bitcoin mining, including recent entrants Ethiopia, Kenya, and Argentina, will signal a broader global trend toward de-dollarization, with countries exploring Bitcoin as a potential tool for cross-border trade.

While Bitcoin continues to surge, miners find themselves in a much tougher spot. The April 2024 “halving” event slashed mining rewards in half, dropping them from 6.25 to 3.125 BTC per block. VanEck reports that the hashprice, a measure of revenue earned per unit of computational power, has plummeted by 97% over the past year. 

According to VanEck, the Federal Reserve’s rate cuts and the upcoming U.S. elections are the biggest influencers on Bitcoin’s future performance. VanEck report predicts that continued monetary easing could drive demand for Bitcoin as investors seek higher returns in a low-yield environment. 

On the political front, Bitcoin stands to gain regardless of whether Kamala Harris or Donald Trump wins the upcoming U.S. presidential election. VanEck’s report suggests that a Harris presidency could drive Bitcoin adoption by spurring interest in decentralized financial systems as a response to stricter regulations and anti-business policies. 

Meanwhile, a Trump administration is expected to create a more favorable landscape for Bitcoin through deregulation, fostering an environment where the cryptocurrency and broader crypto ecosystem could thrive. Both scenarios point to Bitcoin continuing its upward trajectory in a politically charged environment, the report said. 

Bitcoin’s long-term growth is guaranteed, citing global trends like the rising demand for censorship-resistant networks, growing institutional adoption, and increasing involvement of sovereign nations in Bitcoin mining and trade. VanEck predicts that by 2050, Bitcoin’s value could skyrocket to $2.9 million per coin, underscoring the cryptocurrency’s bright future as a key player in the global financial system.

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