Why Are Bitcoins Going Up and What Does It Mean

Bitcoins are on the rise, and it's natural to wonder why. One key factor is the growing adoption of Bitcoin as a form of payment.

More and more businesses are starting to accept Bitcoin, which is increasing its value. This trend is likely to continue as more people become aware of its potential.

The increasing demand for Bitcoin is also being driven by institutional investors, who are starting to see the cryptocurrency as a safe-haven asset.

This shift in investor sentiment is likely to drive up the price of Bitcoin even further.

Bitcoin prices are rising due to the approval of spot bitcoin ETFs, which has allowed institutional investors to buy in, increasing demand and reducing the available supply.

This has led to a significant price catalyst, with BlackRock's iShares Bitcoin ETF purchasing over $778 million worth of BTC on March 11 alone, adding 12,600 bitcoins to its coffers.

The approval of spot bitcoin ETFs has brought institutional maturity to the cryptocurrency market, according to Jeff Billingham, director of strategic initiatives at Chainalysis.

The ETF announcement has also shown that there is growing recognition of cryptocurrencies by Western financial authorities, as mentioned by Mikkel Morch, founder of digital asset fund ARK36.

Elevated inflation readings in the US have encouraged bitcoin buyers who see the cryptocurrency as an insurance policy against rising prices, according to James Knightley, chief international economist at ING.

Risk appetite has soared in recent weeks, with tech stocks fuelling the sense of FOMO in markets, and bitcoin is being swept along in all of this, says Knightley.

The collapse of FTX in November 2022 and the subsequent trial and conviction of its founder, Sam Bankman-Fried, have not deterred investors, who are now looking at riskier assets like bitcoin.

The latest price increase of Bitcoin is largely in sympathy with Ethereum, as the second-biggest cryptocurrency received some good news yesterday. This news has stoked investors' optimism for an approval, as many believed the ETFs were headed for rejection due to the seeming lack of interest from the SEC.

Economic events, including price declines and increases on the stock and bond markets, as well as developments on a global scale, can all affect the demand and supply of Bitcoin. The coronavirus pandemic and Russia’s war on Ukraine are two examples of such events.

Institutional demand continues to rise, with institutions like MicroStrategy buying a lot of Bitcoin and making a good profit as its value has increased. This is making Bitcoin more trustworthy.

The derivatives market is a big factor in Bitcoin’s price increase, with Bitcoin’s Open Interest reaching a record amount of $63 billion. This is a sign that more people are accepting Bitcoin as a real type of investment.

The next halving event is expected to take place in April 2024, and analysts believe this record is just the start of another cycle. Each of the previous three halvings were followed by large jumps in Bitcoin’s price.

The approval by the US financial regulator in January of exchange-traded funds (ETFs) that track the price of Bitcoin has been a major factor in Bitcoin’s rise since the start of the year. This shows there is now “institutional maturity” in the cryptocurrency market.

Elevated inflation readings out of the US have encouraged Bitcoin buyers who see the cryptocurrency as an insurance policy against rising prices.

From an investor's perspective, the rising value of Bitcoin can be attributed to its increasing adoption and recognition as a legitimate store of value.

The fact that Bitcoin has been consistently gaining traction among institutional investors is a significant driver of its growth. This is evident in the growing number of large financial institutions adding Bitcoin to their investment portfolios.

One notable example is the investment firm Grayscale, which manages over $30 billion in assets, including a significant portion dedicated to Bitcoin. This increased institutional involvement has helped to drive up demand and, subsequently, the price of Bitcoin.

Bitcoin's recent bounce is making investors wonder what's next.

The cryptocurrency market is in unprecedented territory due to the geopolitical climate, economic indicators, crypto regulation, and the Fed's intentions regarding interest rates.

Predicting short-term price action of digital assets is difficult, even in the best of times, and this market environment makes it even more challenging.

Investors have learned to be cautious and not get too caught up in the hype of a bull run.

The latest rise in the market has left many wondering if it's sustainable. Neil Wilson, chief analyst at Finalto, says parabolic market moves are never sustainable in themselves.

Market momentum has to ease at some point, and Wilson expects some kind of consolidation or correction to occur. This is due to standard factors such as investors cashing in their profits and the supply of new buyers drying up.

The upcoming "halving" event, where the amount of bitcoin released into circulation via mining is halved, could boost prices as reduction in supply leads to a higher price. This has happened in the past, suggesting a possible price increase.

However, John Reed Stark, a former senior SEC official, warns that the "greater fool" theory will come into play. This means people will sell hyped assets until there are no greater fools left, and then it all comes crashing down.

Bitcoin's popularity can be attributed to its anti-authoritarian stance, allowing for financial transactions without a financial institution's oversight and fees.

A low-interest-rate environment has also contributed to its appeal, as investors seek riskier assets like cryptocurrencies for better returns.

The perception of bitcoin as an "inflation hedge" similar to gold has drawn in investors, as it's designed with a finite number of units in issue - 21 million.

However, Carol Alexander, a professor of finance, cautions that bitcoin is far too volatile to be considered a safe haven asset.

Its price rose 70% alone in May 2017, attracting people to the publicity around its outsize returns.

Bitcoin has notched key regulatory victories, which have propelled its rise. A judge sided with Ripple, a crypto company, last July, and a federal appeals court in Washington ruled that the SEC was wrong to block the efforts of a crypto company trying to create a bitcoin ETF.

This ruling led to the SEC reversing course and allowing nine bitcoin ETFs to enter the market in January, resulting in over $4 billion in trading on their first day.

The involvement of traditional and trusted financial firms like BlackRock and Fidelity has brought financial heavyweights into the fold, with BlackRock's ETF performing especially well.

This trend has crypto skeptics worried, as it provides a level of assumed legitimacy and opens up a gigantic new pool of Main Street investors.

The current crypto explosion has been driven mostly by traditional institutions, whereas the previous bull run in 2021 was led by small-scale everyday investors.

The surge in Bitcoin's price can be attributed to the emergence of spot Bitcoin ETFs. These funds have injected substantial amounts of money into the market, with BlackRock's iShares Bitcoin ETF purchasing over $778 million worth of BTC on March 11 alone.

This influx of capital has reduced the world's total available supply of Bitcoin, increasing its value. The SEC's approval of spot Bitcoin ETFs has opened the door to institutional investors, leading to a significant price catalyst.

The impact of spot Bitcoin ETFs has been substantial, with very substantial funds continuing to flow in. This development is a testament to the growing recognition of cryptocurrencies by Western financial authorities.

The price of Bitcoin has jumped from under $50,000 at the time of approval to above $70,000 today, a significant increase in just a short period.