Bitcoin ($BTC) started this week soaring to a new all-time high of $73,794, which was a significant milestone for the leading cryptocurrency.
Investor interest has continued to remain high, particularly driven by the United States’ spot Bitcoin exchange-traded funds (ETFs). The momentum is also partly driven by the anticipation of the upcoming Bitcoin halving event, which is about 38 days away.
In parallel, MicroStrategy, a leading tech firm known for its significant Bitcoin holdings, announced plans to acquire more than 1% of the total Bitcoin supply.
What is Bitcoin?
Bitcoin was the first ever cryptocurrency with it originally being founded in 2008 from a whitepaper by a person, or group of people using the psuedonym Satoshi Nakamoto. It was launched soon after, in January 2009. Since going live, it has been consistently the largest cryptocurrency by market capitalisation.
At the time of writing, it has a staggering market capitalisation of $744 billion, making up almost half of the entire industry.
Bitcoin transformed finance with its innovative technology that sowed the seeds for the cryptocurrency industry. By pioneering blockchain technology, $BTC enabled direct peer-to-peer transactions online.
This innovation eliminated the need for intermediaries in financial exchanges, aligning with Nakamoto’s vision of facilitating “online payments… directly from one party to another without going through a financial institution”.
Bitcoin’s inception marked the beginning of a new era in finance, introducing the entire concept of the cryptocurrency market, a decentralised form of money that can be transferred across the globe without the reliance on traditional financial institutions.
How does Bitcoin work?
Bitcoin operates on a blockchain, a type of distributed ledger that records transactions across multiple computers. This ledger is secured through advanced encryption techniques.
In the Bitcoin network, transactions are added to a new block, which is then encrypted and verified by network participants, known as miners. Upon successful verification, a new block is created, and the miners are rewarded with newly minted Bitcoins.
The Bitcoin network uses a proof-of-work model, where transactions are queued and validated by miners. These miners use specialised software and hardware to solve a cryptographic puzzle. The first miner to solve the puzzle gets to add the new block to the blockchain and is rewarded with Bitcoin.
Initially, Bitcoin mining was possible on standard personal computers. However, as the network expanded and more miners joined, the process became more complex, requiring more powerful hardware.
BTC’s utility
Initially designed as a peer-to-peer payment system, Bitcoin has gained acceptance as a means of payment for a wide range of goods and services.
It is now supported by various merchants and retailers, both online and in physical stores. Major payment providers like PayPal and Stripe have also integrated Bitcoin into their platforms.
However, Bitcoin has come increasingly under fire for its lack of utility compared to other blockchains and cryptocurrencies on the market. This was especially spearheaded after Ethereum’s launch, $BTC’s closest rival.
Ethereum ($ETH) distinguished itself by enabling the development of applications and secondary networks on its blockchain, a feature that led to widespread innovation in the sector.
Some applications have emerged to bring similar decentralised finance (DeFi) use cases to $BTC, but it is still lagging far behind leader $ETH. While Ethereum is ranked first with its $26 billion total value locked (TVL) in DeFi, Bitcoin is placed only 11 with $280m TVL.
Bitcoin price history
Bitcoin’s price has come a long way since its official launch in 2009. CoinMarketCap first started tracking the decentralised asset in July 2010 at the $0.05 price level. At the time of writing, it has gained over 60,000,000% since then.
As the market leader, Bitcoin’s price is often indicative of the wider industry. It saw a significant upward price momentum with the bull market at the end of 2017. While there were numerous different causes behind this surge, the crypto industry did start getting recognised by traditional finance giants. For example, the CME Group announced it would start listing the cryptocurrency on its futures marketplace.
$BTC rocketed to a new price record of $19,345.49 on 16 December 2017. While it eventually corrected from this level back down to the $3,000 level at the end of 2018, its next bull run took place three years later in 2021.
2021 was a bullish year for both the cryptocurrency and the wider industry. $BTC rocketed past the $40,000 mark in January and to a new high of $61,000 in April. The industry was profiting from the rise of DeFi and general venture capital investment.
Then, in June, El Salvador announced that it was making Bitcoin legal tender, which came into force in September. This law meant that $BTC must be accepted as a payment means throughout the country.
Bitcoin surged to its all-time high of $68,789.63 on 10 November. But the crypto hype eventually came crashing down in the following months and years.
$BTC closed the year below the $50,000 mark and stooped to $40,000 in late April 2022.
The collapse of the Terra ($LUNC) ecosystem and the subsequent chaos that ensued saw investors lose trust in the industry. $BTC crashed back to the $20,000 level in July.
Bitcoin dropped to $15,599.05 in November, its lowest point of almost two years.
BTC in ‘Euphoria Zone’
Bitcoin’s recent surge to a new all-time high above $73,000 has catapulted it into what analysts describe as the ‘Euphoria Zone’.
This phase, characterised by extreme investor optimism and FOMO (Fear of Missing Out), reflected a significant shift in sentiment towards the cryptocurrency.
Market intelligence firm, Glassnode, highlighted Bitcoin’s achievement of clearing the $69,000 all-time high set in November 2021, marking the fourth new cycle all-time high in history. This milestone indicated extreme greed sentiments at 81, underscoring the euphoric atmosphere surrounding Bitcoin.
Analysts also noted classic characteristics of Bitcoin bull markets, such as wealth transfer from older to younger investors.
Glassnode observed increased distribution pressure from long-term holders who had accumulated Bitcoin at lower prices, as well as a surge in new Bitcoin wallets, reflecting growing investor participation.
Bitcoin open interest numbers explode
The surge in Bitcoin’s price has coincided with a surge in open interest for Bitcoin futures contracts, signalling strong investor expectations for future price movements.
This metric, which measures the total number of outstanding contracts, has reached staggering levels.
According to data from SoSo Value, a cryptocurrency analytics firm, open interest in Bitcoin futures has surpassed previous records, reaching a remarkable $34 billion.
This surge underscores the heightened interest and activity in Bitcoin derivatives markets.
Bitcoin ETFs: A gateway for Wall Street
Investor enthusiasm for Bitcoin isn’t limited to traditional futures markets. Spot Bitcoin ETFs, which directly track the price of Bitcoin, are experiencing unprecedented demand, particularly among institutional investors.
Data from Farside revealed a substantial net inflow of $683.7 billion into these ETFs on 13 March, far surpassing outflows from the Grayscale Bitcoin Trust (GBTC).
BlackRock’s iShares BTC ETF (IBIT) witnessed a historic single-day net inflow of $850 million on 12 March, highlighting the growing appetite for Bitcoin among institutional players.
This surge in demand for Bitcoin ETFs underscores the increasing acceptance of Bitcoin as a legitimate asset class on the Wall Street.
Bitcoin price prediction
Despite the euphoria surrounding Bitcoin, some analysts caution against potential corrections in the market. Founder of quantitative Bitcoin and digital asset fund Capriole Investments, Charles Edwards, remained optimistic about Bitcoin’s prospects but warned of market volatility.
“Bitcoin’s getting ready for a big move”, Edwards told subscribers, emphasising the recent influx of funds into Bitcoin ETFs. He suggested that ongoing institutional adoption could drive further upside for BTC/USD.
In contrast, Galaxy Digital CEO Mike Novogratz acknowledged the current frothy market conditions and warned of the possibility of corrections. “Things are frothy, funding rates high. In times like this, you have to be ready for a correction”, Novogratz cautioned in an interview with CNBC.
Digital asset analytics firm Swissblock also noted the potential for a temporary setback in Bitcoin’s price.
They highlighted a negative bearish divergence between Bitcoin’s price and the relative strength index (RSI), suggesting that a pullback could materialise in the near term.
“While the top is not in, we see BTC dropping to $58,000-$59,000 in the next move,” Swissblock analysts stated, reflecting a cautious outlook amid the ongoing market volatility.
At the time of press, $BTC maintained its position above the $73K price level, up by over 10% weekly. Technical indicators were also in the bullish zones above their half-lines. Both the Awesome Oscillator and Moving Average Convergence Divergence (MACD) were seen with long green histograms on their respective charts.
FAQs
Should I invest in Bitcoin?
While numerous Bitcoin price forecasts remain positive following its new all-time high, the top coin’s history of high volatility serves as a reminder that investments should only be made with funds that one can afford to lose.
Is Bitcoin a good investment?
Bitcoin is the largest cryptocurrency and is recently on an upward trajectory as anticipation of the first spot ETF is growing. Investors should be cautious and always conduct thorough due diligence.
Disclaimer: The information provided in this article is for informational and educational purposes only and should not be construed as financial advice. CoinNews and its authors are not financial advisors or experts. We recommend that you consult a professional financial advisor or conduct thorough research before making any investment decisions. Cryptocurrency investments carry a high degree of risk, and you should only invest an amount you are willing to lose. The opinions expressed in this article are those of the author and do not necessarily reflect the views of CoinNews or its affiliates.
