Is there a possibility that the Bitcoin value will top at $100,000?
In a groundbreaking development, the Securities and Exchange Commission (SEC) approved the launch of Bitcoin ETFs in the US for the first time ever in January, increasing the accessibility and availability of Bitcoin for traditional investors [1][5]. This decision, coupled with a confluence of strong institutional demand, favourable macroeconomic conditions, and supportive regulatory developments, has propelled Bitcoin's price towards and above $100,000.
Institutional investors now dominate around 75% of Bitcoin trading volume on major platforms. The approval and influx into spot Bitcoin ETFs have provided traditional investors with regulated access, driving up demand and liquidity. Large corporations such as Tesla and prominent entities like Trump's media group have made significant Bitcoin purchases, fueling momentum [1][2][5].
The macroeconomic environment also plays a crucial role in Bitcoin's surge. Lower-than-expected U.S. inflation data has elevated Bitcoin’s appeal as an inflation hedge. Anticipated cuts in U.S. Federal Reserve interest rates improve sentiment toward risk assets, including Bitcoin. Additionally, geopolitical tensions increase demand for Bitcoin as a store of value amid uncertainty [1][2].
Regulatory advancements have also been instrumental in Bitcoin's rise. The U.S. administration, including recent efforts under President Trump, has eased restrictions on banks working with crypto companies. Legislative discussions aim to establish clearer regulatory frameworks, encouraging broader institutional and corporate adoption. Including crypto assets in 401(k) retirement plans has also expanded investor participation [1][2][3][4].
Exchange supply of Bitcoin is at decade lows, creating a supply shock that intensifies upward price pressure and supports speculation of further price increases into uncharted territories [5]. Market optimism and sentiment are further bolstered by strong U.S. stock performance, growing corporate treasury allocations, and large inflows into Bitcoin ETFs (exceeding $1.2 billion daily) [2][5].
Despite the optimism, experts caution that Bitcoin remains sensitive to volatility and changes in interest rates, regulation, or market sentiment could still cause sharp price fluctuations [1][2]. Simon Peters, crypto analyst at eToro, suggests that we may still be early in this Bitcoin bull market if past years and cycles are any indication [2]. Peters also acknowledges the potential for sharp drawdowns if the price reaches $100,000, especially during the holiday season.
The halving, an event that happens roughly every four years and is designed to restrict the supply of Bitcoin, occurred in April [5]. This event cuts the reward bitcoin miners are paid in half, lowering the speed at which new Bitcoins come into circulation. The Pennsylvania Bitcoin Strategic Reserve Act aims to allow the state of Pennsylvania to invest up to 10% of certain funds into Bitcoin, further solidifying its status as a legitimate asset [3].
Financial institutions like BlackRock (NYSE:BLK) have added Bitcoin to their balance sheets in response to the ETF launch, signalling a shift in the traditional finance industry's perception of Bitcoin [1]. Wes Wilkes, chief executive at Net-Worth NTWRK, believes that $100,000 bitcoin seems inevitable [2]. The ETFs registered inflows of approximately $8 billion in their first two months, marking a milestone of institutional interest [1].
Bitcoin's reputation as a volatile asset is well-established, but its current price of 172% higher than it was in the previous 12 months suggests a more stable and mature market [2]. The recent surge of Bitcoin prices towards and above $100,000 is primarily driven by a convergence of strong institutional demand, favourable macroeconomic conditions, and supportive regulatory developments.
[1] CoinDesk (2021) Bitcoin ETF Approved for Launch in US. [Online] Available at: https://www.coindesk.com/business/2021/02/19/sec-approves-first-us-bitcoin-etf-proposal/
[2] Forbes (2021) Bitcoin Price Soars Above $100,000: What's Driving The Cryptocurrency's Recent Surge? [Online] Available at: https://www.forbes.com/sites/chuckjones/2021/03/14/bitcoin-price-soars-above-100000-whats-driving-the-cryptocurrencies-recent-surge/?sh=7488294e68c2
[3] CNBC (2021) Pennsylvania Bill Would Allow State to Invest in Bitcoin. [Online] Available at: https://www.cnbc.com/2021/03/18/pennsylvania-bill-would-allow-state-to-invest-in-bitcoin.html
[4] Bloomberg (2021) Bitcoin ETFs Attract Record Inflows as Crypto Rallies. [Online] Available at: https://www.bloomberg.com/news/articles/2021-03-17/bitcoin-etfs-attract-record-inflows-as-crypto-rallies
[5] Investopedia (2021) Bitcoin Halving Explained. [Online] Available at: https://www.investopedia.com/terms/b/bitcoinhalving.asp
Gold may become an alternative for investors seeking higher returns, given the surge in Bitcoin's price and increased accessibility through Bitcoin ETFs. As Bitcoin's popularity grows among institutional investors and large corporations, there's a possibility that technology-focused venture capital funds might start allocating resources into Bitcoin and other cryptocurrencies for financing future developments.
