Edited & Reviewed by: Taranjit Singh
Bitcoin, the world’s most popular and valuable cryptocurrency, is on the verge of breaking its all-time high of $69,000, set in November 2021. The digital token has been on a remarkable rise since the start of the year, gaining over 50% in value and attracting a wave of new investors. What are the factors behind this bullish trend and what does it mean for the future of crypto?
The Spark: Spot Bitcoin ETFs
One of the main catalysts for Bitcoin’s rally has been the approval of new U.S. spot bitcoin exchange-traded funds (ETFs) in January 2024. These ETFs allow investors to gain exposure to Bitcoin without having to buy, store, or manage the tokens themselves. This makes investing in Bitcoin easier, safer, and more accessible for a wider audience.
According to Bloomberg, investors have poured more than $7.35 billion into the 11 different spot bitcoin ETFs available, indicating a strong demand for the crypto asset. Some of the world’s largest institutional investors, such as BlackRock and Fidelity, have also launched their own spot bitcoin ETFs, signaling a growing acceptance and endorsement of Bitcoin as a legitimate asset class.
The Fuel: Institutional Adoption and Halving Event
Another factor that has boosted Bitcoin’s price is the increasing adoption of the cryptocurrency by institutional players. MicroStrategy, a software company, has been one of the most prominent examples, increasing its Bitcoin holdings to a staggering 193,000 bitcoins, worth about $6.09 billion. This move demonstrates the confidence and conviction that some institutions have in Bitcoin as a store of value and a hedge against inflation.
Additionally, Bitcoin’s price has been supported by the anticipation of the “halving” event, expected to occur in April 2024. This event will reduce the reward for Bitcoin mining by 50%, making it harder and more expensive to create new bitcoins. This will limit the supply of new bitcoins entering the market, creating a scarcity effect that could drive up the demand and price of the existing ones.
The Outlook: New Records or New Setbacks?
As Bitcoin approaches its previous peak, the question on everyone’s mind is whether it will surpass it or face another correction. Analysts have different views on this, depending on their assumptions and models. Some are optimistic, predicting that Bitcoin could reach $300,000 or even higher at the peak of its next bull run. Others are more cautious, warning that Bitcoin could face a 33% drop after the halving event, as it did in the past.
Regardless of the short-term fluctuations, Bitcoin’s rally has shown that the cryptocurrency is not a fad or a bubble, but a resilient and innovative asset that has captured the attention and interest of millions of investors around the world. Bitcoin’s price may not reflect its true value, but it reflects its sentiment, and sentiment has no limits.