Bitcoin, the world’s largest and most popular cryptocurrency, has once again made history by surpassing the $68,000 mark. This significant milestone has been driven by robust demand from exchange-traded funds (ETFs), despite outflows from the Grayscale Bitcoin Trust (GBTC). In this article, we will explore the factors that could push Bitcoin even higher in the near future.
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- How is the PYTH token performing?
The Role of ETFs
One of the main drivers of Bitcoin’s recent rally is the approval of spot Bitcoin ETFs in early 2024. These are funds that track the price of Bitcoin and allow investors to buy and sell the cryptocurrency without having to deal with the technical aspects of storing and transferring it. Spot ETFs are different from futures ETFs, which track the price of Bitcoin futures contracts and incur additional fees and risks.
Since the launch of the first spot Bitcoin ETF by ProShares on Jan. 11, 2024, the demand for these products has been overwhelming. According to data from CryptoMarketCap, net inflows of $7.35 billion have been invested since the debut of US Bitcoin ETFs from some of the biggest fund names, including BlackRock Inc. and Fidelity Investments. These inflows represent a significant portion of the total Bitcoin market cap, which is currently around $1.2 trillion.
The popularity of spot Bitcoin ETFs reflects the growing acceptance and adoption of cryptocurrencies among institutional and retail investors. Spot ETFs provide a convenient and regulated way to gain exposure to Bitcoin, without the hassle of buying and holding the actual coins. They also offer more liquidity and transparency than other vehicles, such as GBTC, which trades at a discount to its net asset value.
The Impact of Halving
Another factor that could boost Bitcoin’s price in the coming months is the upcoming Bitcoin halving, which is expected to occur in April 2024. This is a process that reduces the reward for mining new blocks on the Bitcoin network by half, every 210,000 blocks or approximately every four years. The next halving will reduce the reward from 6.25 bitcoins per block to 3.125 bitcoins per block.
As of now bitcoin is currently trading at $68,296, according to Coinmarketcap.
The halving is designed to control the supply growth of Bitcoin, which is capped at 21 million coins. By decreasing the rate at which new bitcoins are created, the halving creates a supply shock that increases the scarcity and value of the existing coins. Historically, the halving has been a bullish event for Bitcoin, as it precedes a period of increased demand and price appreciation.
For instance, the first halving in November 2012 reduced the reward from 50 bitcoins to 25 bitcoins per block. A year later, Bitcoin reached its then all-time high of around $1,000. The second halving in July 2016 reduced the reward from 25 bitcoins to 12.5 bitcoins per block. A year later, Bitcoin reached its then all-time high of around $20,000. The third halving in May 2020 reduced the reward from 12.5 bitcoins to 6.25 bitcoins per block. A year later, Bitcoin reached its current all-time high of almost $69,000.
Based on this pattern, some analysts predict that the fourth halving in April 2024 will trigger a new cycle of growth for Bitcoin, potentially reaching new highs of $80,000 or more.
The Effect of Liquidity
A final factor that could influence Bitcoin’s price in the near term is the liquidity situation on major exchanges. Liquidity refers to the availability of buyers and sellers in the market, and the ease with which transactions can be executed. High liquidity means that there are many buyers and sellers, and that the price does not change much when a large order is placed. Low liquidity means that there are few buyers and sellers, and that the price can change significantly when a large order is placed.
According to Guy Turner, a popular crypto analyst, says there is relatively low liquidity on Coinbase and Binance, two of the largest crypto exchanges, between the current price and the $80,000 level. He claims that there is only around 5,000 BTC, equating to just over $300 million, between the current price and the $80,000 level. He compares this to the amount that the ETF sponsors buy in a single day, which is more than that.
This means that if the demand for Bitcoin continues to outstrip the supply, there is not much resistance for the price to break new highs. Conversely, if the supply of Bitcoin increases due to selling pressure, there is not much support for the price to prevent a sharp drop. Therefore, the liquidity situation could create more volatility and opportunity for Bitcoin traders.
Conclusion
In summary, Bitcoin has achieved a remarkable feat by surpassing the $68,000 mark, thanks to the strong demand from spot ETFs. However, this may not be the end of the story, as there are several factors that could propel Bitcoin even higher in the near future. These include the upcoming halving, which will reduce the supply growth of Bitcoin, and the low liquidity on major exchanges, which will increase the price sensitivity of Bitcoin. As Bitcoin continues to break new ground, it will be interesting to see how the market evolves and what this means for the future of finance.
Source:
Bitcoin Surges Above $68,000: Analysts Target $80,000 Soon – Benzinga
