BTC surges, what are the reasons driving the rise?
Written by: veDAO
Bitcoin prices have reached a 17-month high, the highest level since May 2022. This rally caught many people off guard, and with this "cryptocurrencyThe steady rise of the "King of Bitcoin" has brought a bullish atmosphere to the crypto market. So what are the reasons for the rise? What is the subsequent development of BTC?
BeforeDAO 研究院的文章提到，虽然假新闻让 BTC 的价格经历了一波过山车，但市场情绪积极，后续的趋势将会向好。本篇，veDAO 研究院将带来近期 BTC 涨势相关的原因，以及后续走势的分析。
Reasons for BTC price increase
Considering the crypto market’s vulnerability to volatility, one single factor cannot be considered the sole reason for the rally. In the past few days, BlackRock’s BTC spot ETF appeared on the DTCC website, and was added back after being briefly removed, which is also considered to be one of the reasons for the rally. In addition, there are some more influential factors:
BTC halving is coming soon
There are less than 6 months left until the BTC halving.cryptocurrencyCommunityIt is expected that this event will kick off the next bull market cycle. According to analysts such as Michal van de Poppe, now (6 to 10 months before BTC halving) is the best time to invest in altcoins, and venture capitalists can’t wait to start getting funding support.
While investors are counting the days until their investments start to appreciate, BTC miners are worried about the event. Miners' concerns stem from the fact that the event will cause the mining reward to be halved, from 6.25 BTC per block to 3.125 BTC. But for investors, the halving event is valuable because it reduces the growth of newly mined BTC. Over time, the operating costs of miners are also increasing. Specifically, mining infrastructure has become more complex and expensive. Others complain about rising electricity costs, and US miners may face a tax of 30%, which has caused more uneasiness. This is because BTC hash power (the computing power required for computer or hardware operations when solving different hashing algorithms) is mainly concentrated in the United States.
US Banking Crisis and BTC
The US banking crisis that occurred in March this year turned out to be a boon for BTC and the crypto market. One of the most important reasons was the lack of correlation between cryptocurrencies and the US stock market. Although the banking system has been relatively stable since then, the current market conditions once again suggest that a similar scenario is developing.
Bank of America takes another hit
The four largest Wall Street banks in the United States - Citigroup (C), Morgan Stanley (MS), Goldman Sachs (GS) and Bank of America (BAC) - are currently at their lowest levels since the banking crisis. The year-to-date performance of these banks shows that their stock prices are currently the lowest, even lower than in March this year. Citigroup's stock price has fallen by 14% since the beginning of the year, and Goldman Sachs has fallen by nearly 13%. Morgan Stanley's losses exceed these two, with a decline of 16% so far this year, while Bank of America leads the way with a decline of 23%.
Cryptocurrencies and US banks negatively correlated
While the current state of the U.S. economy does not support a bullish narrative for banks or the stock market, the situation in the crypto market is quite different. Currently, BTC has a clear negative correlation with the S&P 500 and Nasdaq, at -0.8 and -0.78 respectively.
In March, as banks came under great pressure, BTC prices rose along with other cryptocurrencies, and coincidentally, BTC is also rising now. This makes other alternativesTokenIt also rose, pushing the market value of the entire crypto market to $1.244 trillion.
From this perspective, the losses of US banking institutions are translating into profits for cryptocurrency investors, suggesting that the flow of funds into the sector is not just influenced by the United States. However, the continued losses of banking institutions may not be the only reason for the rise of BTC.Xiaobai Navigation.
Behind the Israeli-Palestinian conflict, US Treasury bonds and BTC
Arthur Hayes, co-founder of BitMEX, recently wrote that the current economy is being affected by a “global war”, which has catalyzed the recent sell-off of U.S. Treasuries.Safety, investors are choosing BTC and gold as alternative investment commodities.
Arthur Hayes elaborated on the impact that the current tensions in the Middle East may have on the financial markets, pointing out that as the US government continues to provide military aid to Israel, this will lead to a sell-off of US Treasury bonds. He explained: "If you are a long-term investor in US Treasury bonds, the most worrying thing is that the US government does not think it is spending too much. If the US defense spending enters a ridiculous mode, there will be trillions of dollars borrowed to support the war machine, which will require the government to sell more long-term bonds to investors to absorb funds, and global distrust of US Treasury bonds will further increase. This is why bonds are being sold and yields are rising."
As the Israeli-Palestinian conflict and the Federal Reserve's pause in rate hikes push U.S. Treasury yields to a 16-year high, Arthur Hayes believes that when long-term U.S. Treasury bonds no longer offer investorsSafetyInvestors will seek alternatives, and the preferred assets in this context are gold and BTC. Arthur Hayes believes that the rise in BTC and gold is due to the sharp decline in long-term US Treasury bonds. This is not speculation about whether the ETF will be approved, but BTC's response to the high inflation caused by the future depreciation of the US dollar and war. Arthur Hayes also mentioned another reason for the bond plunge. When the Fed's interest rate hike cycle comes to an end and the US economy remains normal, investors will no longer have more motivation to hold long-term, which will also lead to the selling of US Treasury bonds.
BTC price may rise due to other factors
A group of key investors may also be one of the reasons for this rally. Whale addresses holding 100 to 1,000 BTC have been accumulating BTC since September 21. In a month, this group's BTC holdings increased by 50,000 BTC, worth $1.7 billion; this increased their holdings from 3.85 million BTC to 3.9 million BTC.
BTC Trends
As of this writing, BTC is priced at $34,572 and could rise further as market momentum remains strong. It remains in the mid-to-high range of the market, as shown in the chart above, from the lows of early 2023 to this year’s high of $35,184.
The price of BTC doubled from the closing price of $16,542 on December 31, breaking through the 61.8% Fibonacci level of $28,067 during the rise, which is a key retracement level. The strong momentum of this rally also broke through the 78.6% Fibonacci level to $31,197.
Pressure from increased buying volume could push BTC prices to continue rising, with a bullish target of $35,000. In this case, the most reasonable target would be the top Fibonacci chart level of $35,184.
However, the BTC price could still see a downtrend if profit-taking sets in. In this case, BTC’s support level could be around $31,197, or more likely around $28,067. In the worst-case scenario, the price could drop to the $25,869 level.
Conclusion
As the price of BTC continues to rise, market sentiment is obviously high. It can be said that multiple factors such as the upcoming BTC halving, pressure on the US banking industry, and rising US Treasury yields have driven this round of price increases. Although there may be fluctuations in the short term, in the medium and long term, the price of BTC is in an upward channel. For investors, now is still a good time to deploy BTC. With the gradual release of the halving effect, BTC may usher in a new bull market cycle, which is worth looking forward to.
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