Bitcoin has been in the news again after trading above $50,000. The cryptocurrency reached its highest price in two years and the market is already excited that the upward trend will continue, even with the sights set on the asset breaking its all-time high value in the coming months.
But what has generated this shocking increase in the price? Is it feasible to sustain it? Knowing the volatility of Bitcoin, these are difficult questions to answer with absolute certainty. In any case, we can go over some interesting details to explain the reason for this situation.
At the end of last November, Bitcoin was trading just above $37,000. Since then, it has experienced sustained growth. Except for a drop to $39,000 last January, since the end of 2023 the cryptocurrency has traded firmly in a range between $42,000 and $46,000.
However, yesterday its value jumped from 47,900 to 50,200 dollars, surprising many. The value of Bitcoin remained around $50,000 until this morning, until it fell 2% after the inflation data in the United States was announced. The year-on-year increase in the consumer price index in the North American country was 3.1%, when it was expected to be 2.9%.
At the time of writing this article, Bitcoin is trading around $49,000, although hours before it was at $48,500. And experts in the crypto world believe that, sooner rather than later, the asset can once again exceed the $50,000 barrier.
Why did Bitcoin reach $50,000?
One of the reasons that would explain Bitcoin’s jump to over $50,000 would be related to ETFs. BTC exchange-traded funds, which the U.S. Securities and Exchange Commission approved earlier this year, saw a strong influx of money in the last week.
As reported CoinShares Yesterday, the US Bitcoin ETF market recorded the inflow of about $1.1 billion last week. Added to this was a reduction in the withdrawal of money invested in these instruments, collaborating with the bullish sentiment.
In addition, CoinDesk indicates that Bitcoin futures and options trading is also looking bullish. The aforementioned media indicates that, during the weekend, the Deribit platform registered purchase options at significantly higher prices —between 65,000 and 75,000 dollars— than the one the cryptocurrency has at this time. Although it is not a guarantee that this will happen, the decision to buy at high prices, in the expectation that BTC will trade even higher, is considered a positive signal from investors.
The proximity of a new halving
A highly anticipated event within the Bitcoin ecosystem is the halving. As we have already explained in the past, this happens exactly every 210,000 blocks on the Bitcoin blockchain. What he does halving is reduce by half the Bitcoin that is given as a reward to miners for each block that is added to the network.
This decreases the amount of Bitcoin that is mined, as well as its speed. That is why, although more than 19.6 million BTC of the almost 21 million that will exist have already been mined, the last Bitcoin will only be “mined” in the year 2140.
To better understand this, it is worth mentioning that in 2009, when Bitcoin was launched, each block added to the network granted 50 BTC to miners. In 2012, when block 210,000 was reached, the reward became 25 BTC per block. In 2016, when block 420,000 was mined, the “prize” was reduced to 12.5 BTC. While in 2020, starting with block 630,000, the reward dropped to 6.25 BTC.
The next halving Bitcoin is very soon to happen. When block 840,000 is added to the blockchain, miners will begin receiving 3,125 BTC. This will not only scarcer availability of new Bitcoinbut mining tasks will also be more complex and demanding.
Experts predict that the fourth halving of Bitcoin will occur in April 2024. Let us keep in mind that, at the time of writing this article, block 830,316 of the blockchain is being mined. Therefore, there are less than 10,000 blocks left to reach the goal, and each one of them is added approximately every 10 minutes. This means we are about 70 days away from the goal.
Historically, each halving of Bitcoin has been followed by a bullish process or bull run. This also generates a lot of expectation regarding the future price of the cryptocurrency. Many buyers are taking advantage to obtain BTC now, waiting for it to increase considerably in value after the halving. Although we keep in mind that the price increases have not occurred overnight, but rather over the course of several months.
Not everything is rosy
Bitcoin price boost from ETFs and the next halving, to mention the two most visible and brilliant factors, does not imply that the price will always remain on the rise. Being such a volatile asset, It would not be unusual for a correction in the price of BTC to occur in the middle of this entire process..
Last week, Genesis, a bankrupt crypto firm, asked a judge to be allowed to sell holdings in Bitcoin, Ethereum and Ethereum Classic for $1.6 billion. Of that figure, an estimated $1.4 billion is held by the Grayscale Bitcoin Trust, which operates one of the largest Bitcoin ETFs in the world. Therefore, it is estimated that, if it receives the green light for commercialization, the price of the crypto asset could fall.
Market experts also believe that the recent increase in the value of Bitcoin is due to many investors they have overbought the asset. This translates into a rapid rise in the price, in a very short period of time. It is usually normal for the price to subsequently drop in search of a correction, or for its growth rate to slow down.
How much can Bitcoin fall in such a situation? For now, it is impossible to know. However, there is an interesting example that is always worth keeping in mind. In May 2020, when the last halving To date, the price of BTC was around $9,100. As the months went by, it maintained an upward trend that allowed it to reach $63,000 in April 2021. However, between June and July of that year it plummeted to $30,000, as a result of the ban that China implemented on mining. and transactions. Even so, the cryptocurrency recovered and reached its all-time high of $69,000 in November.
We’ll have to see what happens from here on out. What is clear is that, at least for now, bullish sentiments have returned after the crypto winter of 2022 and 2023.