Bitcoin explosion: The secrets behind the spectacular jump to $50,000!

One year ago to the day, the price of bitcoin (BTC) was hovering around $20,000. Throughout 2023, the flagship cryptocurrency has been in the spotlight for its remarkable dynamism despite its ups and downs. Today, the asset is valued at over $50,000. A level it hadn’t reached since December 2021. BTC’s surge to reach this milestone is considered a major event for the crypto industry, which has been predicted by a host of experts to see a resurgence in 2024. But how can we reasonably explain that within a week, BTC has increased its valuation by 19% to currently trade around $51,600?

The wave of liquidity spurred by the Bitcoin Spot ETF craze

The first reason behind the bitcoin (BTC) surge is the recent trend involving spot Bitcoin ETFs. The finding is clear: investors in bitcoin (BTC) are making history by fueling a record-breaking inflow into ETFs.

In a single day, $631 million was injected into Spot Bitcoin ETFs. For analysts, this wasn’t a mere blip, but a lasting trend, with an influx of $2.07 billion funds over four days, averaging more than half a billion dollars per day.

Another important detail concerning this massive influx of liquidity is that it’s not just recycled money. Unlike previous movements, outflows from the Grayscale Bitcoin Trust (GBTC) remained stable at $73 million. This indicates the entrance of significant new capital. Financial sector players such as Blackrock and Fidelity are riding the wave, collectively contributing nearly $657 million.

For Matt Hougan, Chief Investment Officer at Bitwise, the official numbers underestimate the true investor demand. He estimates that at least $5 billion in new investments have been made by long-standing players to offset fund outflows.

This record increase undoubtedly marks a turning point for bitcoin (BTC). It reflects a major shift in investor sentiment, with traditional finance heavyweights like Blackrock adopting the digital asset. With sustained demand and the inflow of liquidity, the Bitcoin ETF wave could only amplify the momentum.

Bitcoin (BTC) flies off the shelves!

The second major reason for bitcoin’s (BTC) dramatic rise. Indeed, large industry players are buying BTC like hotcakes. As a result, there is an explosion of demand that exceeds supply, notably in the over-the-counter market.

This perspective is particularly defended by several experts who see it as good news for the flagship crypto. According to them, this trend gives an optimistic outlook on the prospects of BTC. Indeed, these large-volume private transactions, preferred by institutions, reveal a strong appetite for the digital gold. This supply and demand dynamic indicates that big investors are accumulating bitcoin (BTC), which could further push the price upwards. In other words, a valuation of $51,000 for BTC is just the beginning!

Fears of a potential bitcoin (BTC) crash are dissipating

Recently, the bankruptcy of Genesis and the planned liquidation of Grayscale Bitcoin Trust (GBTC) shares had raised concerns. Those being that bitcoin (BTC) could crash and its prospects with it. But these fears are seemingly dissipating.

While a liquidation amounting to $1.5 billion had raised fears of a market slowdown, new elements suggest that the impact will be less significant.

As a reminder, Genesis, facing financial difficulties due to loans and settlements, is seeking to liquidate 36 million shares of GBTC. However, the proposed settlement plan gives priority to “in-kind” reimbursements. Meaning creditors receive bitcoins directly, not money. This approach helps avoid forced sales and potential market volatility.

Greg Schvey, CEO of Axoni, elaborates: “Creditors will receive bitcoins, which will prevent long-term holders from facing taxable gains and potential selling pressure. This means that many lenders will not immediately sell their bitcoins, which will further mitigate the impact on the market,” he said.

While some sales are inevitable, the in-kind distribution and potential long-term retention by creditors suggest a less negative market reaction. Attention is now focusing on the details of the liquidation plan and its execution timeline. In any case, this situation seems to have had a significant effect on the current dynamism of the flagship crypto.

What now…?

The question every crypto enthusiast is asking is whether this BTC momentum, which influences the entire crypto market, will continue. We can answer this by looking at the data. Recent trends show that the crypto market dropped after the publication of unexpected US inflation data.

Specifically, the annual inflation rate is at 3.1%, exceeding the expected 2.9%. This led the Federal Reserve (Fed) to maintain interest rates between 5.25% and 5.50%. The crypto market responded to these figures with its market capitalization dropping by 0.3% to $1.95 trillion.

In this context, the prospects are somewhat mixed. While the market reacted negatively to the unchanged interest rates, some traders remain optimistic. Options trades on bitcoin (BTC) are set to expire in March, which according to them indicates that the price could hit new highs, with prices ranging between $60,000 and $75,000. Will the predictions by financial actors like VanEck materialize? Let’s wait and see.