Bittime - Bitcoin, crypto asset by market capitalization, recorded a new record high of $70,083.05 on CoinMarketCap this week after spending more than 2 years in the crypto slump.
However, the short celebration did not last long because within a few hours, the price of Bitcoin fell to $66,700, before rising again to $68,600 at the time this article was written. Opinions on Bitcoin's price volatility are divided, as the memecoin's explosive price growth, high level of open interest, and CMC Fear and Greed Index score of 89. Despite this, long-term projections for BTC remain very optimistic.
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What's Driving This Price Surge?
Apart from the opinions above, here are several factors that are driving Bitcoin's latest price spike.
Bitcoin Spot ETFs Generate Demand That Far Exceeds Available Supply
The most significant catalyst behind Bitcoin's latest surge is without a doubt the recent debut of a spot Bitcoin ETF in the United States. This flow of capital into spot ETFs has created relentless buying pressure in the Bitcoin spot market, as these funds are forced to continually accumulate real BTC to support ETF demand. This demand, regardless of price, has fueled Bitcoin's latest rally, pushing it to new highs.
After years of rejecting proposals for spot Bitcoin ETFs that would hold real BTC, the SEC finally gave the green light to several offerings from TradFi heavyweights and crypto-focused funds in January 2024.
Big players like BlackRock, Fidelity, Grayscale, and Ark Invest have launched their own spot Bitcoin funds, making it easier for institutions to gain exposure to BTC.
Also Read: What is the History of Bitcoin?
FASB and Better Reporting Rules
Of course, survivors of the 2021 bull market cycle say this is nothing new, and point to Bitcoin's initial rise from under $4,000 to $69,000, driven by factors such as the Covid pandemic stimulus, Elon Musk's (temporary) patronage, Coinbase's listing on Nasdaq, and countries such as El Salvador declaring Bitcoin as legal tender. They point to the biggest crypto cycle catalyst Bitcoin Halving, which came quickly after its latest 4-year orbit.
As of March 4, just 2 months after the launch of the spot Bitcoin ETF, they had collectively accumulated just under $45 billion in assets under management (AUM), a total of 684,000 BTC, and they are not slowing down. That same day, they saw net inflows of $562 million, exceeding current market supply by 10x. BlackRock's iShares Bitcoin Trust surpassed the $10 billion AUM mark in just 7 weeks - a stunning pace compared to the first US gold ETF which took 2 years to reach the milestone. It now accounts for more than 40% of overall spot ETF volume, followed by Fidelity at around 20%.
According to CryptoQuant, 75% of new Bitcoin investments come through ETFs. Bloomberg ETF analyst Eric Balchunas predicts that Bitcoin ETFs could surpass gold ETFs in assets under management in the next few years given their rapid growth rate. If the buying trend continues, Bitcoin's entire liquid supply of 1.3 million BTC could be managed by an ETF by September 2024!
Also Read: What is Bitcoin's Busy Week?
Bitcoin Halving
After ETFs, the Bitcoin halving expected in April 2024 is the biggest narrative for crypto redemptions. Halving is a pre-programmed event that occurs every four years that cuts the block reward for miners in half.
Previous halvings in 2012, 2016, and 2020 saw mining block rewards drop from 50 BTC to 25 BTC to 12.5 BTC to the current 6.25 BTC mark. After April, only 3,125 BTC will be issued per block.
That has created predictable deflationary pressures that historically precede major Bitcoin price rallies. Previous halvings in 2012 and 2016 were followed by Bitcoin prices hitting new record highs in 12-18 months.
Anticipation of reduced supply from the upcoming halving in April has driven increased demand from investors who expect BTC prices to increase significantly after the halving, as happened in previous cycles.
Many analysts project BTC will reach $100,000 or higher after the halving based on historical patterns. And with good reason, as supply pressure following previous halving events reached a 12-month peak with Bitcoin price increases of 10x or higher.
Also Read: Bitcoin Halving: What is it and when will it happen?
Rebranding Bitcoin
Another bullish factor to consider is Bitcoin's rebranding as the new home for DeFi and NFTs, thanks to the exploding ecosystem of BRC20 tokens, network-disrupting Ordinals, and layer-2 DeFi networks like Stacks. Ordinals Bitcoin trading volume reached $51 million on March 3, a bullish indicator for many who see its contribution to soaring mining costs.
Another indication of the strength of this rally is the record trading volumes on Bitcoin exchanges and constant futures markets. On-chain data provider Glassnode reported that Bitcoin trading volume on trusted exchanges hit a new record high along with the price. Crypto traders feel risky and roll the dice as a result.
Open interest pressure in Bitcoin reached $31 billion on March 4, easily surpassing the record of $24.3 billion set on April 14, 2021. While most of that was wiped out during the March 5 post-ATH dip, this huge volume suggests there is real buying pressure and dominating demand from institutional and retail investors piling into Bitcoin.
Part of what has pushed Bitcoin past key resistance levels like $60,000 has been liquidations leading to short squeezes. On February 27 alone, more than $161 million in Bitcoin short liquidations were executed in a single day as BTC shot through $57,000 and continued to rise. Since then, each push to the upside has added fuel to the fire by forcing even more shorts to cover thereby creating successive buying pressure.
Also Read: Mining Bitcoin vs Validating Bitcoin Transactions
Macro Environment in 2024
Lastly, the macro environment in 2024 has created very favorable tail winds for Bitcoin's price trajectory. Inflation remains high above 3% annualized, despite the Federal Reserve's aggressive interest rate hikes in 2022 and 2023. This increases demand for scarce hard assets, such as Bitcoin which is considered an inflation hedge.
Eventually, interest rates will fall. The Fed is also starting to indicate that an interest rate cut may be in the cards towards the end of 2024, increasing the risk appetite for speculative assets in the market. Meanwhile, geopolitical tensions in war zones and persistent instability in the global banking sector have increased the conceptual appeal of censorship-resistant decentralized cryptocurrencies like Bitcoin.
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Conclusion
The crypto asset Bitcoin has hit a new record high after more than 2 years of stagnation, driven by a variety of factors including the debut of a spot Bitcoin ETF in the US, expectations of the upcoming Bitcoin halving, and increasingly widespread adoption in the traditional financial sector.
This incredible price spike has sparked debate about Bitcoin's short-term direction, but the long-term outlook remains optimistic. A number of varying price projections have been put forward, with some expecting Bitcoin to reach a value of $100,000 or even higher in the near future.
Despite this, Bitcoin volatility remains high, and market participants are reminded to be aware of the risks associated with crypto investments. In this situation, investors and observers are advised to consider various factors influencing Bitcoin prices, including fundamental aspects and market sentiment, before making an investment decision.
How to Buy Crypto with Bittime
You can buy and sell crypto assets in an easy and safe way via Bittime . Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappebti.
To be able to buy crypto assets on Bittime , make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet. For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application. Learn Complete Guide How to Buy Crypto on Bittime .
Monitor price chart movements of Bitcoin (BTC) , Ethereum (ETH) , Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Also Read:
What is the Real Purpose of Bitcoin?
Is Bitcoin Legal in Different Countries?
DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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