- Bitcoin surpassed $69,000, its all-time record high before falling more than 10% on Tuesday.
- Analysts expect the bitcoin price to continue rising due to the increased demand for bitcoin from ETFs, and also the supply will be limited by the April halving.
- This is not the norm for Bitcoin to set an all-time high price so soon before a halving. Usually, this happens approximately a year after a halving.
- Bitcoin could benefit from the Federal Reserve’s rate reduction, while higher rates for longer periods could have a negative impact.
The day Tuesday for bitcoin investors ( BTCUSD ) was wild. Bitcoin briefly reached an all-time record high of $69,000, but then fell quickly on profit taking. It was only a matter of hours before it recovered some gains.
Bitcoin is again on the rise today. No one knows where it will end up. Market watchers have been trying to interpret some clues to gain a clearer picture of cryptocurrency markets.
The demand pressure will continue as the supply goes down
Inflows of money and the activity of trading in spot bitcoin ETFs has been brisk in the last few days. This is especially true for Blackrock’s iShares bitcoin Trust ( iBIT), that had already accumulated $10,6 billion in bitcoin by the end of Tuesday’s trading session.
According to Bitwise Research Analyst Gayatri Choudhury, the direct effect on demand and supply was that the spot bitcoin ETF demand on Monday exceeded by more than ten times the new bitcoins generated or supplied by the miners.
On April 20, the halves event is also expected. This is where the number of bitcoins created every 10 minutes will be cut in half. The bitcoin supply cap is 21 million. With fewer bitcoins being created, at a slower rate, most people bet on the imbalance between demand and supply to drive bitcoin prices up.
The rise of Fast and Furious may not be sustainable
Not all cryptocurrency market analysts see bitcoin as a bright future.
The peak is always the best time to buy. I predicted this rise when the price was in the lower $30k range, and I thought it would top out at the high $50k area. John Glover is Chief Investment Officer of digital assets financial services firm Ledn. He sent Investopedia an email stating that the extension felt like a “blow off top”.
Glover’s not the only one. JP Morgan analysts have predicted that Bitcoin could drop to $42,000 after the event. 4 Other analysts say the factors driving up prices–ETFs, and the impending halving — are the same ones that contribute to bitcoin price volatility.
Scale could be the deciding factor in a successful investment. It’s hard for something to produce eye-popping returns when it becomes large. Even Warren Buffett acknowledges this.
In an interview with CNBC, Pomp Investments’ founder Anthony Pompliano said that bitcoin doubled its price within 18 days after three new highs. He expects a higher price for bitcoin due to ETFs and the halving but does not think it will reach $140,000.
Previous Cycles of Price Halving may be History
Many investment models are based on how an asset behaves over time. The April half-off should, in theory, be a good indicator for the future price of bitcoin, but the trend is about to change.
Bitcoin’s price has never risen to an all-time record high before a halving, but it always does within a year or so. The first bitcoin halving took place in November 2012. At the time, it was worth about $13. By November 2013, its value had risen to over $1100.
Bitcoin reached a new lifetime high of over $19,000 in the year following its second halves, which occurred in July 2016. The most recent halving on May 2020 took place roughly 18 months before the record-breaking $69,000 that was set yesterday.
Past performance does not predict future results.
Yes, the Fed could break up Bitcoin Party
Bitcoin is vulnerable to macroeconomic signals, particularly those from the U.S. Federal Reserve.
In a recent commentary, researchers at Grayscale cited the Fed’s monetary policies as a “main risk” to cryptocurrency valuations. They cited stubborn inflation rates and that a delayed rate cut could be detrimental to cryptocurrency values. 6
A separate Grayscale comment noted that “lower real interest rates” and “rising public sector debt” could weigh on the Dollar’s value and help support other assets such as Bitcoin.
Altcoin Season isn’t Here Yet
In general, rising bitcoins lift other crypto assets. It’s not clear if the “altseason”, as it is known, will happen again due to the current concentration of crypto narrative on bitcoin.
The second largest cryptocurrency in terms of market capitalization is Ether. It has reached over $3800, thanks to bitcoin hype and the possible approval of spot ETF, but still far from the $4,800 it achieved back in 2021.