3 Reasons Why The Price Of Bitcoin Is Going Up In 2024
The value of Bitcoin has hit a record high. What is causing the cryptocurrency's latest revival?
By Sukhbir Cheema — 06 Mar 2024, 04:57 PM
"Is Bitcoin back?" That's the question on everyone's minds as the world's most famous cryptocurrency's value surpassed its all-time high of USD69,000 (RM326,678) recently
This comes after a month-long rally that saw Bitcoin's price surge by almost 60%, breathing life back into the NFT market.
Sceptics might be wary of this latest surge, especially given Bitcoin's history of dramatic rises followed by equally dramatic falls. But this time, things seem different.
Here are the possible reasons that are contributing to Bitcoin's revival.
1. Bitcoin ETFs
One key factor is the launch of Bitcoin ETFs earlier this year.
An ETF is a traded fund that tracks an index, offering diversified investments in stocks, bonds, or Bitcoin. It fluctuates in price depending on market demand.
BlackRock's iShares Bitcoin Trust, for instance, attracted USD520 million (RM2.4 billion) in a single day on 27 February this year, marking the second-largest daily inflow for a US ETF.
2. Bitcoin halving event
This April will see the first Bitcoin halving event since 2020.
A Bitcoin halving event is when the reward for mining Bitcoin transactions is halved, reducing the rate at which new Bitcoins are created. In other words, this event will put more pressure on supply.
Investors expect Bitcoin prices to increase further when demand exceeds supply if basic economic principles are applied.
3. High interest rates
The US Federal Reserve has raised interest rates to 5.25% to curb inflation.
Image via AFP Photo / New Straits TimesInterest rates can significantly impact Bitcoin and other cryptocurrencies. Bitcoin's current resurgence is happening against a backdrop of high interest rates in the US, a stark contrast to its peak at the end of 2021 when rates were almost zero.
Central banks around the world typically raise or lower interest rates to control how people spend and invest their money.
Bitcoin historically thrives in a lower interest rate environment because the cost of borrowing money decreases.
With the US Federal Reserve expecting to cut interest rates in June, many Bitcoin investors are hoping they can ride the wave.
However, not everyone in the crypto space is celebrating
Crypto startups, particularly those in their later stages, are finding the funding environment challenging.
Those banking on reinventing industries like gaming with crypto tech are struggling.
Some predict that the momentum from the halving could be short-lived. JPMorgan, for example, predicts that Bitcoin could drop to as low as USD42,000 once the dust settles.
Actually, there's a lack of consensus on what's driving this rally
There's no single, agreed-upon narrative for what's pushing crypto towards a new peak.
This uncertainty might be worrying, but it's also reflective of the wider economy, where market experts regularly make strong cases for both a hard and soft landing.
So if you're thinking of investing in Bitcoin, we urge due diligence and caution since it's a speculative investment that's highly volatile.
