By Arnold Mutunga
Editor’s note: The opinions expressed here are those of the authors.
The price of Bitcoin is soaring this year with the leading cryptocurrency rallying past $50,000 for the first time since December 2021. This surge comes as a welcome recovery from some major setbacks faced by the greater crypto industry over the past couple of years. The rocky past of bankruptcies, scandals and fraudulent activities had muddied the waters for cryptocurrencies casting doubts over their long term sustainability in the long run.
Bitcoin’s ability to overcome these challenges and regain its superiority in the digital assets world is quite remarkable. Now, there is a positive outlook across the industry with other currencies following suit as the cryptocurrency market embarks on yet another bullish run.
Bitcoin is currently trading above $56,000, meaning it has tripled in value from its price at the beginning of 2023. With the current trajectory, it is likely that Bitcoin will test its all-time high (ATH) price of $69,000 it hit in November 2021.
What is Driving the Bitcoin Price Surge?
The recent surge in Bitcoin price is attributable to multiple factors, key among them the SEC approval of spot ETFs in January 2024 that has opened up the digital asset to public investments. Traditionally, the digital asset’s price has largely been driven by speculation, pure greed and herd mentality that haven’t been sufficient to maintain its pricing. This time, the rally seems a bit different as it’s attributable to the rising optimism arising from the spot ETF approvals. This serves as a seal of approval from the regulatory body thus increasing its acceptance in the mainstream markets.
One of the major hurdles that Bitcoin has had to overcome is the negative image, occasioned by the widespread speculation and continuous bashing by the mainstream financial sector. The leading digital asset has borne the brunt of this onslaught and negative associations as money used for illegal transactions. Approval of the spot Bitcoin ETF changes this providing some much needed reprieve from the adverse relations, allowing the asset to trade like other financial instruments in the mainstream market.
Since the spot ETF approval, there has been an inflow of money into Bitcoin with the financial markets and momentum players embracing risk to participate early in this emerging asset class. The year-to-date inflows now exceed $5.7 billion with the majority of this derived from the new spot ETFs. In the past week alone, digital asset investment products recorded inflows of $598 million, to culminate a fourth consecutive week of inflows. The total assets under management in the approved funds peaked at $63.8 billion, showing the remarkable amounts of money being channelled in the digital asset.
Increased demand to drive Bitcoin price to new ATH?
On Feb. 27 Bitcoin rallied past $57,000 following a massive breakout that saw its market cap cross $1.1 trillion for the first time since 2021. The Bitcoin ETFs set a record of their own, trading a combined volume of $2.4 billion in a single day, beating their first day figures. Additionally, crypto whales continued to accumulate strongly with over 150 new addresses that have been created over the last month holding over 1,000 Bitcoin each.
On the other hand, market insights show that Bitcoin is in a strong position to maintain the price above $50,000 and set the set to breach past $60,000 soon. The 50-day and 200-day moving averages indicate a bullish trend following breaking of resistance at the $57,000 mark. Attention now remains on the Bitcoin spot ETF market data as the key indicators for the growing demand of Bitcoin and a critical precursor of the digital asset potentially hitting and surpassing its previous ATH.
In addition to the positive developments in the space, the Bitcoin halving is expected in 6 weeks and it’s expected to be a huge game changer for the digital asset’s price. Traditionally, the halving event has had a parabolic effect on Bitcoin’s price as the rewards decrease further constricting future supply of the coin. This deflationary effect has catalysed the previous bull runs and the upcoming one is expected to have a similar if not greater effect. With the spot ETF demand having already set the stage, the halving will likely push Bitcoin to reach new ATH in the coming months.
Conclusion
Approval of the Bitcoin Spot ETF has had a huge positive effect on the asset, causing its price to soar over the past few weeks. The approval basically provided the much needed legality, recognition and authenticity of Bitcoin and cryptocurrencies as an asset class of their own. This recognition has injected renewed optimism, energy and funds into digital assets that have turned around fortunes. The increased demand from the mainstream financial world is expected to keep driving Bitcoin’s price upwards. With the upcoming halving, the leading cryptocurrency is likely to test new highs and potentially hit a new ATH.
