Bitcoin, the world’s biggest cryptocurrency, has kicked off the New Year on a high note, breaking through the $45,000 barrier on Tuesday, a level not seen since April 2022. The surge in price has garnered attention and enthusiasm from investors, driven in part by optimistic expectations surrounding the potential approval of exchange-traded spot Bitcoin funds. In the backdrop of Bitcoin’s impressive 156% gain in the previous year, its strongest performance since 2020, the cryptocurrency reached a 21-month peak at $45,532 before settling at $45,318, marking a 2.5% increase.
On a side note, Ether, the coin linked to the Ethereum blockchain network, was 1.45% higher at $2,386 on Tuesday, having seen a 91% increase in 2023.
The primary driver behind Bitcoin’s recent surge is the anticipation of the U.S. Securities and Exchange Commission (SEC) approving spot Bitcoin exchange-traded funds (ETFs). The SEC has historically rejected multiple applications, expressing concerns about the susceptibility of the cryptocurrency market to manipulation. However, recent signals suggest a shift in regulatory sentiment, with expectations rising that a decision on the 13 proposed spot Bitcoin ETFs could come in early January. The approval of such ETFs would open the doors for millions of new investors and attract substantial investments, potentially pushing Bitcoin’s price even higher.
Besides regulatory developments, the crypto market has found support in the growing belief that major central banks might cut interest rates in the coming year. This positive outlook has helped dispel the gloom that enveloped crypto markets in 2022, marked by the collapse of FTX and other crypto-related business failures. Jupiter Zheng, partner of liquid funds at HashKey Capital, predicts notable growth in the crypto market in the upcoming year, attributing it to factors like spot ETF investments, Bitcoin halving, and a more accommodating monetary policy globally.
The concept of Bitcoin halving has been a recurring theme in the cryptocurrency market. Historically, Bitcoin price movements have often been associated with halving events. This unique occurrence takes place approximately every four years when the reward that miners receive for validating transactions is halved. The latest halving event occurred in 2020, reducing the reward from 12.5 to 6.25 Bitcoins.
Bitcoin halving impacts the cryptocurrency in multiple ways. The reduction in the supply of new Bitcoin entering the market often leads to increased scarcity, making the digital asset more appealing to investors. This scarcity is a fundamental economic principle, where decreasing supply against constant or growing demand tends to drive prices higher.
Factors Influencing Post-Halving Price Movements:
Historical patterns suggest a positive correlation between Bitcoin halving events and price surges, even though past performance does not guarantee future results. The following factors contribute to Bitcoin’s post-halving dynamics:
Bitcoin’s recent surge above $45,000 and the anticipation surrounding spot Bitcoin ETF approvals highlight the cryptocurrency’s resilience and growing mainstream acceptance. The upcoming Bitcoin halving adds another dimension to the market dynamics as history shows that past Bitcoin halvings have been long-term bullish drivers for the cryptocurrency’s price.
Stay informed with our Bi-Weekly Pulse for the latest crypto and blockchain news.
Get access to the week’s most interesting reads, stats and find out about the most recent trends in the cryptocurrency market.