The current Bitcoin surge is following a pattern, and several indicators suggest it's just beginning. Not too long ago, on Feb. 12, Bitcoin's price went past $50,000. Sean Farrell, who serves as the Head of Digital Strategy at Fundstrat Global Advisors, foresaw this development.
He confidently asserted that the surge still has a distance to cover shortly. His forward-thinking perspective was spot on.
On Friday, Mar. 5, the value of cryptocurrency increased to slightly over $70,000. Then it fell back to its current amount. This increase happened after already crossing the $50,000 mark, showing the rally still had some momentum.
Here are indications that it still has the potential to grow, even after reaching its record-high price for the first time in approximately two and a half years.
The Federal Reserve rate remains unchanged
Bitcoin is reaching record-high prices, and interestingly, this is not due to a drop in the U.S. federal funds rate. Unlike previous times when Bitcoin's price spiked, the current surge is not driven by lowered borrowing rates or an abundant supply of dollars. In essence, Bitcoin's performance is all the more impressive.
James Butterfill, who is the head of research at the digital asset management firm CoinShares, shared with ABC News there is a correlation between the price surge and a period of high-interest rates. He proposed that this jump in demand is not necessarily due to excess cash looking for a place to land.
Likely around 2024, Bitcoin's ability to resist inflation will become a major driving factor for its demand. This is similar to how tech stocks benefit from an abundance of cash and low-cost loans during periods of low interest rates.
A whale withdraws $1 billion from Coinbase
A major investor, often referred to as a 'whale', recently withdrew Bitcoins worth $1 billion from Coinbase. Santiment recorded this transaction on March 1, effectively removing 16,000 BTC from the exchange.
Bitcoin prices are experiencing a fantastic surge, as whales show no signs of selling. They continue to refrain from selling, even as the crypto behemoth nears its highest-ever recorded price. Interestingly, they're not alone in this strategy.
Back in February, more than a billion dollars worth of Bitcoin was moved off Coinbase by such investors. They could cash in now for a hefty profit, yet they choose to hold on. This indicates they believe Bitcoin's price will climb even higher.
Bitcoin held on exchanges has reached a six-year low, with a trend that doesn't seem to stop even after the massive billion-dollar withdrawal. This indicates a strong and long-term global belief in Bitcoin's potential for rising value.
Bitcoin ETF holdings reach 4% of BTC
As March began, spot Bitcoin ETFs owned 776,464 BTC according to BitMEX data. This staggering amount represents 4% of all available Bitcoin. Remarkably, the Wall Street-regulated ETF market achieved this feat in less than two months, making a significant dent in the on-chain spot supply of actual Bitcoin.
The scenario isn't as grim as Arthur Hayes' prediction that the ETFs could "destroy" Bitcoin. However, the ETFs have made a significant impact in less than two months. This could potentially lead to a drastic imbalance in supply and demand, pushing the Bitcoin prices significantly higher.
The head of research at Grayscale Investments, Zach Pandl, expressed that the current scarcity of Bitcoin is a primary factor. He indicated that the cryptocurrency simply cannot keep up with the increasing demand, thus leading to a natural dynamic where the prices are driven higher due to supply/demand mechanisms.
Congress considers allowing banks to custody BTC
The landscape of Bitcoin investment is evolving rapidly with ETFs poised to compete against retail investors for Bitcoin ownership. It's predicted that banks will soon enter the fray, which may drive scarcity and prices to new heights.
Recently, there has been movement in the political arena to facilitate this shift. Specifically, Rep. Mike Flood, a Republican from Nebraska, has been leading the charge in the House Financial Services Committee. Flood has advanced a resolution aimed at ensuring consumer protection by eliminating obstacles that currently prevent highly regulated banks from serving as custodians of digital assets.
Issuers of Exchange-Traded Funds and regulated major banks will soon have the ability to hold Bitcoin. This will add to the worldwide shortage of the 21 million Bitcoins ever created. This ongoing supply and demand imbalance continues to impact Bitcoin’s value.