Bitcoin hits new highs continuously! What is the logic driving this rise?

In 2008, under the influence of cypherpunk ideas and digital currency concepts, Satoshi published the paper Bitcoin: A Peer-to-Peer Electronic Cash System; in January of the following year, Bitcoin came along, and blockchain entered the 1.0 era. After a while, people gradually mined the underlying implementation technology of Bitcoin—blockchain technology; since then, blockchain technology has been applied in finance and other fields like mushrooms after rain.

Broadly speaking, Bitcoin is a digital currency ecosystem formed based on a package of blockchain technologies such as cryptography, peer-to-peer network models, distributed consistency, and scripting systems; narrowly speaking, Bitcoin represents the digital currency unit in the system. Used to convert assets and values.

Bitcoin has constructed a completely decentralized and trusted payment environment to ensure users can trade freely and safely in the complex and ever-changing Internet environment.

Why the price of Bitcoin continues to rise is inseparable from its fixed and scarce total supply. The biggest difference between Bitcoin and other virtual currencies is that the total number is very limited and it has extremely strong scarcity. The supply is capped at 21 million. Compared with other digital currencies, this total supply is relatively low. On the demand side, the demand for Bitcoin has increased significantly in recent years.

At present, some investors regard digital currency as a new investment target, and many people have obtained investment returns of hundreds or even tens of thousands of times. The current virtual currency has just begun to show its budding state. If it continues to develop at the current speed, it will have a magnificent market. To paraphrase a sentence, everything has just begun, and all “coins” must change.

The entry of mainstream institutional investors on Wall Street is one of the main reasons for the rise of Bitcoin.

The rise of Bitcoin is a symbolic rise that has a great positive effect on the entire encryption field and the blockchain. It is equivalent to the formation of a blockchain for the entire ecosystem, bringing positive liquidity. In theory, all such assets are a bubble. As it becomes increasingly difficult to compete with traditional payment currencies, Bitcoin will move forward on the path of alternative assets. In the entire blockchain ecosystem, wherever there is innovation, there is progress.

The highest point in Bitcoin history occurred on November 10, 2021, when it was close to $69,000. Since then, Bitcoin has been declining, falling below $16,000 in November 2022, hitting the lowest point of this round of decline. After that, the price of Bitcoin rebounded and has been floating around US$30,000 until December 2023, when the price once again exceeded the US$40,000 mark. On March 16, 2024, the price of Bitcoin (BTC) once exceeded US$73,000, continuing to hit a new high since November 2021. As of now, the price of Bitcoin has fallen, hovering around US$69,000.

Of course, there are many reasons for the rise in Bitcoin prices, including the following key factors:

1. Participation of institutional investors: In recent years, more and more large institutions have begun to invest in Bitcoin. Companies such as MicroStrategy and Square purchase Bitcoin as part of their asset allocation. The investment behavior of these institutions increases the market demand for Bitcoin, thereby pushing up the price.

2. Bitcoin halving event: Bitcoin's upcoming halving event in April has further stimulated market optimism. The Bitcoin halving is a scheduled event that occurs every four years and reduces the rate of supply of new Bitcoins by reducing mining rewards. Judging from historical experience, halving events tend to drive up the price of Bitcoin before and after it, because the market generally expects that the reduction in Bitcoin supply will lead to an increase in its price.

Halving refers to a special event in Bitcoin that occurs regularly and has an impact on the supply of Bitcoin. Every time 210,000 blocks are mined, the Bitcoin reward will be halved. Bitcoin reward refers to the number of Bitcoins miners receive when mining a new block.

The halving event will have a significant impact on Bitcoin. First, halving will cause the new supply of Bitcoin to decrease. Since the reward for each new block is halved, it means that the supply of Bitcoin is growing at a slower rate, which usually leads to an increase in price because demand remains unchanged or increases, resulting in an imbalance between supply and demand, causing prices to rise.

After each halving occurs, the price of Bitcoin typically rises rapidly within six to eighteen months. The halving event is often considered a trigger point for Bitcoin price increases because it attracts the attention of investors and traders and drives more people to participate in the Bitcoin market. Bitcoin prices tend to hit record highs after each halving. A new all-time high.

The price impact after each halving is upward, but the magnitude is getting smaller and smaller. It is estimated that after this halving, the price will rise to 130,000 to 140,000. The reason is that the market value is large and has exceeded the trillion level. With more market participants and institutional investors, assets will become more mature and volatility will shrink.

3. Monetary policy and macroeconomic environment: Low-interest rates and ample liquidity globally have prompted investors to look for non-traditional assets with higher returns. As a decentralized digital currency, Bitcoin is favored in this environment due to its anti-inflation properties.

4. Payment platform support: Payment platforms such as PayPal allow users to buy, hold and sell Bitcoin, and even use Bitcoin for shopping, which increases the availability and acceptance of Bitcoin, thereby increasing its value.

5. The launch of spot ETF: The approval of Bitcoin spot ETF in January injected new vitality into the market, attracting a large number of funds from mainstream and institutional investors, which significantly increased the purchase demand for Bitcoin in the short term, pushing up prices. Data shows that the trading volume of BlackRock's spot Bitcoin ETF was US$1.35 billion on February 28, a record high. The total net asset value of Bitcoin spot ETFs has also exceeded US$40 billion. Grayscales Bitcoin spot ETF, known as GBTC, had a net outflow of US$22.37 million in a single day. The net outflows decreased for four consecutive trading days and hit a record low.

6. Market sentiment and investor behavior: As the price of Bitcoin rises, the market has experienced a “fear of missing out” (FOMO) sentiment, and more investors and retail speculators have joined the market, hoping to profit from it and push it further up the price.

7. Technological innovation and expansion of application scenarios: With the development of blockchain technology and the increase in digital currency application scenarios, the practicality and potential value of Bitcoin have been improved, attracting the attention of more investors.

8. Changes in the regulatory environment: Although uncertainty about regulatory policies is a risk factor, the legalization of Bitcoin and the establishment of regulatory frameworks in some countries and regions have also provided support for its price.

It should be noted that although the above factors have promoted the rise of Bitcoin prices, the Bitcoin market is still highly volatile, and investors should carefully assess risks and make reasonable investment decisions based on their circumstances. At the same time, changes in regulatory policies, fluctuations in the global economic environment, and technological developments may have an impact on Bitcoin prices.