If you are active in the crypto space or have peers who do so, you must have noticed their excitement the past few days! They are all enthused by the upswing of Bitcoin price that started over the weekend with the price going from $27K (15th October 2023) to $31K and if that is not enough the current price of this pioneer crypto at the time of this writing is at $34,470.90. This is slightly below the price recorded on Tuesday 24th October 2023 which was at $35,000. Cryptocurrency enthusiasts and holders are wondering if this is the onset of the much-awaited crypto bull characterized by massive price swings of different crypto tokens and coins. In this piece, we look at some of the reasons leading to the uptick of the Bitcoin price and crypto assets such as Ether and Solana that registered at least 10% increase in price, the last few days.
Possible reasons for the recent Upswing of Bitcoin Price:
Potential Approval of Bitcoin ETFs
A Bitcoin Exchange Traded Fund (ETF) is a financial product that allows investors to gain from the crypto asset price volatility without having to own Bitcoin directly. In simple terms it’s similar to buying of shares or units of a company that holds Bitcoin but you as a user won’t own the asset directly, hence, Bitcoin being held by the firm as it’s underlying asset. Many people are interested in benefiting from Bitcoin or crypto assets’ price volatility but they are wary of the process of buying and holding the asset because for an ordinary user, it is tedious and opaque. For instance, setting up and maintaining crypto wallets either as an individual or via exchanges. More so, Bitcoin ETFs offer investors an investment structure that is popular and well regulated. Therefore, several investment firms such as BlackRock and 21Shares have been keen on extending this investment option to their target market and they are constantly tendering in their applications with United States Securities Exchange Commission. However, SEC has continually refused to approve any of these applications until recently when another firm, Grayscale, recorded a major victor with the commission announcing that it won’t appeal against a US court decision. Different analysts and reports show that a Bitcoin ETF approval would lead to a new demand of at least $600 billion, creating an additional $1 trillion market capitalization. The news of this institutional interest continues to spike interest for Bitcoin among retail and institutional buyers who do not want to miss the next bull run. Hence, the renewed demand against a pre-determined supply of the crypto asset spiking the price up.
Bitcoin Halving and inherent Design
By design, there will only be 21 million of Bitcoins to ever exist. This introduces an element of scarcity as there can be no more or less of this number. Hence, as demand goes up against the static supply following principles of economics, the price of Bitcoin is bound to go up.
Secondly, in the design of Bitcoin, there is a process known as halving. In its code, Bitcoin is created through a process of mining, where miners get some reward for every process they verify on the Bitcoin network. This reward gets cut by half every four years, leading to an event known as Bitcoin halving, which introduces more scarcity of Bitcoin created over time. The next halving event is around the corner and will happen in May 2024 and days leading and after this event, the price of Bitcoin goes up in a season known as bull run. Investors and enthusiasts look forward to purchasing more of Bitcoin on days leading to the halving so as not to miss on the huge capital gains characterized during a bull run season.
An Alternative to Traditional Safe Havens
This is an interesting debate on whether Bitcoin is a safe haven compared to traditional safe havens like the S&P 500, gold, among others. Zooming out the historical increase or performance of Bitcoin when considered as an alternative to conventional investment options, it is indeed a safe haven asset. Traditional assets such as the S&P 500 and gold in the last 6 months have gained by a mere 3.2 and 2.6 percent. Contrastingly, Bitcoin is up by 20.62 percent, outperforming the conventional safe haven assets. A lot of investors interested in long term returns upon investigating the price of granddaddy crypto realize that it offers better returns compared to the traditional assets, thereby, spiking further the demand of Bitcoin.
Several factors have played in the recent upswing of Bitcoin price in the last few days. Even though it is difficult to predict the price of this cryptocurrency, market sentiments and fundamentals behind Bitcoin as a network project and a monetary unit free of any control or third-party interference, leading more people to its adoption.
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