the recent Bitcoin price rally:
1. Institutional Adoption: The increasing interest and investment from major institutions such as PayPal, Square, and Grayscale Investments have played a crucial role in driving up Bitcoin’s price. This institutional adoption signifies a growing acceptance of Bitcoin as a legitimate asset class.
2. Economic Uncertainty: The global economic uncertainties caused by the COVID-19 pandemic have led investors to seek alternative stores of value, and Bitcoin has emerged as a popular choice. Its decentralized nature and limited supply make it an attractive hedge against inflation and fiat currency devaluation.
3. Halving Event: Bitcoin’s halving event, which occurred in May 2020, reduced the rate at which new Bitcoins are created by half. This scarcity factor, combined with increased demand, has created a supply-demand imbalance, pushing the price upwards.
4. Retail Investor FOMO: The fear of missing out (FOMO) among retail investors has also contributed to the Bitcoin price rally. As more individuals see others profiting from Bitcoin investments, they are increasingly jumping on the bandwagon, further driving up the price.
Overall, these four key factors have created a perfect storm for Bitcoin’s price rally, attracting both institutional and retail investors alike.
Crypto data analytics platform Kaiko has provided insight into the factors driving the recent rally in Bitcoin’s price. According to Kaiko, the growth to $35,000 can be attributed to volume, implied volatility, market depth, and funding rates. Kaiko observed a real shift in market structure over the past six months, noting that despite a slowdown in trading volume and lower volatility during the summer, things changed when rumors of a fake approval of a Bitcoin spot ETF linked to BlackRock circulated. Kaiko also highlighted Bitcoin’s liquidity remaining flat despite increased trading activity. The platform suggested that the market is anticipating near-term volatility, with the potential catalyst of a spot Bitcoin ETF news from the SEC in January. Despite recent geopolitical conflicts, Bitcoin’s correlation with equities has dipped into negative territory. Market leaders such as Robert Kiyosaki and Cathie Wood predict a bullish turn for Bitcoin in the long term, with Kiyosaki having a $135,000 price target for BTC. Ultimately, the market will determine whether Bitcoin’s price continues to rally towards the end of the year.