Bitcoin just set a new historical high of $73,000 in March this year, continuously refreshing its peak within less than a year. There are 21 million bitcoins, with the current price around $81,000, making its total market value immeasurable. The price is not something that can be easily manipulated, so what forces are driving Bitcoin's frequent breakthroughs of new highs in recent days?
1. Increase in market enthusiasm
With Trump's assumption of office and the increasing confidence in the crypto market, it is well known that Trump strongly supports the development of digital currencies, claiming to stockpile 1 million bitcoins and develop digital currency into a strategic resource for the U.S. Although these have yet to be realized, he has issued digital currency himself, and his son and wife also invest in digital currency. This has once again boosted the heat of the crypto market, with massive funds pouring into the crypto space. As Bitcoin's price continues to rise, market sentiment also becomes more optimistic, with investors bullish on Bitcoin's future prospects, flooding into the market and further driving up Bitcoin's price.
2. The scarcity of Bitcoin and the increase in demand
The total supply of Bitcoin has an upper limit of only 21 million coins. Over time, the existing supply gradually decreases while demand continues to increase. This imbalance in supply and demand is an important factor driving the price rise.
3. ETF inflow
ETFs were highly anticipated at their launch, mainly due to a large inflow of new funds, leading Bitcoin prices to create new historical highs. However, soon after, total funds in the ETF began to net outflows, and market sentiment started to decline. But recently, BTC ETFs have continued to see a large inflow of funds.
Not only has there been a record daily net inflow of funds, but the open interest has also reached a new high. The logic is clear: after Trump took office, there is a high possibility of the emergence of 'crypto gold', and the political support for cryptocurrency in the U.S. will grow stronger. For traditional financial 'big players', the possibility of allocating funds to crypto may increase, with BTC ETFs becoming the most convenient way to invest in crypto. For other U.S. stock investors, BTC ETFs will also become very attractive under Trump's endorsement.
4. Rate cuts
The Federal Reserve cut interest rates by 50 basis points in September, significantly exceeding expectations, and Bitcoin also surged in response. In the November interest rate meeting, a cut of 25 basis points was confirmed, which the market generally interpreted as a positive factor, after all, the starting point of the last bull market was the interest rate cut in March 2020. With the implementation of the rate cut, it is also good news for digital currencies, as lower interest rates and falling gold prices make digital currencies a better investment choice for these investors.
