Upcoming milestones suggest that bitcoin's ascent past $40K is just the beginning.
Bitcoin’s rally past $43,000 this week reflects pivotal shifts taking place in the financial markets. Bitcoin is now up over 60% since September and over 150% since the start of the year as investors and institutions increasingly look to the leading cryptocurrency as a stable alternative to the uncertainties of traditional assets.
What's driving the rally and what's next for bitcoin's price? A few key events on bitcoin's horizon suggest that the leading cryptocurrency, which now hovers at a valuation of over $825B, may keep soaring.
The Halving: Supply Scarcity and Increased Demand
One of the fundamental aspects that sets bitcoin apart from other currencies, crypto and fiat alike, is its fixed supply cap of 21 million coins.
The Halving is a programmed event that occurs approximately every four years on the Bitcoin network, which reduces the reward that miners derive from validating transactions by 50%. This scarcity mechanism plays a pivotal role in driving up the value of bitcoin and has historically led to major price gains.
And the next Halving is coming soon, in April 2024.
But why do Halvings typically drive up bitcoin's price?
This can be attributed to the reduced rate at which new bitcoins are introduced into circulation which effectively decreases the available supply of bitcoin. As demand remains strong or even increases (especially if this week's bitcoin's upward price momentum continues), the scarcity factor will only intensify, driving bitcoin's price further upwards.
Investors and institutions have taken notice of this unique supply mechanism, recognizing the potential for long-term value appreciation.
As demand remains strong or even increases (especially if this week's bitcoin's upward price momentum continues), the scarcity factor will only intensify, driving bitcoin's price further upwards.
As a result, the recent Halving event is likely to contribute to bitcoin's upward trajectory.
The Potential Approval of Bitcoin ETFs: Mainstream Adoption Accelerator
Another significant development that could push bitcoin's price to even further new heights is the potential approval of Bitcoin ETFs.
Currently, the United States Securities and Exchange Commission (SEC) is evaluating multiple proposals for Bitcoin ETFs from top institutions like BlackRock, Fidelity, and Invesco. If approved, these could mark a major milestone for the cryptocurrency ecosystem, creating new ways for mainstream investors to get exposure to bitcoin and vast new inflows of capital into bitcoin from institutional players.
The introduction of Bitcoin ETFs would provide a regulated and accessible investment vehicle for institutional and retail investors alike. This increased accessibility could lead to a surge in demand from traditional financial institutions and retail investors who were previously hesitant to directly invest in bitcoin.
The approval of Bitcoin ETFs would open the floodgates for even greater institutional involvement in bitcoin, potentially bringing a substantial influx of capital into the market.
Fed's Rate Cut: Fueling Market Momentum
After raising interest rates to record levels in recent years, the Federal Reserve may well cut interest rates in 2024. This potential move by the Fed would carry significant implications for the broader financial landscape and contribute to bitcoin's ongoing momentum by injecting more money into the financial markets.
A reduction in interest rates typically encourages borrowing and spending, leading to increased liquidity in the markets. This liquidity, in turn, can find its fuel increased investment in alternative assets like bitcoin.
This influx of liquidity could further promote bitcoin's upward trajectory, creating an environment where bitcoin stands out as an attractive option for investors seeking both value and security in a shifting financial landscape.
As bitcoin clears the $40,000 mark, the combination of reduced supply through the Halving and increased accessibility and legitimacy through ETFs has the potential to create a perfect storm for bitcoin's sustained growth.
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