BTC Soars What Factors Are Driving the Rise

Exploring the Factors Behind BTC's Soaring Value

The price of Bitcoin has reached its highest level in 17 months, the highest it has been since May 2022. This sudden surge has caught many people off guard, creating a bullish atmosphere in the cryptocurrency market as the “king of cryptocurrencies” steadily rises. So, what are the reasons behind this upward trend? And what does the future hold for BTC?

Reasons for BTC Price Increase

Considering how susceptible the cryptocurrency market is to volatility, it is important not to attribute the rise to a single factor. In the past few days, the appearance of BlackRock’s BTC spot ETF on the DTCC website, after being briefly removed and then added back, has been seen as one of the reasons for this surge. But there are other influential factors as well:

Upcoming BTC Halving

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We are less than 6 months away from the next BTC halving. The cryptocurrency community expects this event to kickstart the next bull market cycle. According to analysts like Michaël van de Poppe, now (the 6 to 10 months before the halving) is the best time to invest in altcoins, and venture capitalists are eagerly seeking funding opportunities.

While investors count down the days for their investments to appreciate in value, BTC miners are concerned about the event. Miners worry because the halving will reduce mining rewards from 6.25 BTC per block to 3.125 BTC. But for investors, the halving is valuable because it reduces the growth of newly mined BTC. Over time, mining operational costs have also increased, with mining infrastructure becoming more complex and expensive. Others complain about rising electricity costs, and US miners could face a 30% tax, causing even more unease. This is due to the concentration of BTC hash power (the computing power required for computer or hardware operations in solving different hash algorithms) mainly in the US.

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 cryptocurrency market. One of the most significant reasons is the lack of correlation between cryptocurrency and the US stock market. Although the banking system has since stabilized, the current market conditions once again suggest a similar scenario is forming.

US Banks Hit Again

The four major banks on Wall Street — Citigroup (C), Morgan Stanley (MS), Goldman Sachs (GS), and Bank of America (BAC) — are currently at their lowest levels since the banking crisis. Their performance from the beginning of the year until now shows that their stock prices are at their lowest, even lower than in March this year. Citigroup’s stock price has dropped 14% since the beginning of the year, and Goldman Sachs is not far behind with a decline of nearly 13%. Morgan Stanley has suffered even greater losses, falling 16% this year, while Bank of America is leading with a 23% decline.

Cryptocurrency and US banks are negatively correlated

While the current state of the US economy does not support a bullish narrative for banks or the stock market, the situation in the crypto market is quite different. Currently, BTC is significantly negatively correlated with the S&P 500 and Nasdaq, at -0.8 and -0.78, respectively.

In March, as banks faced tremendous pressure, BTC prices rose along with other cryptocurrencies, and coincidentally, BTC is now also rising. This has led to an increase in the value of other alternative coins, pushing the overall crypto market cap to $1.244 trillion.

From this perspective, the losses of US bank institutions are converting into profits for cryptocurrency investors, which indicates that the flow of funds into this sector is not only influenced by the US. However, continuous losses by bank institutions may not be the sole reason for BTC’s rise.

Behind the Israeli-Palestinian conflict, US Treasury bonds and BTC

Arthur Hayes, co-founder of BitMEX, recently wrote * that the current economy is being influenced by the “global war,” which has catalyzed the recent sell-off of US Treasury bonds. As Treasury bonds are no longer considered safe, investors are choosing BTC and gold as alternative investment commodities.

Arthur Hayes explains the impact of the tense situation in the Middle East on the financial markets. He points out that with the continued military support from the US government to Israel, this will lead to the sell-off of US Treasury bonds. He explains, “If you are a long-term holder of US Treasury bonds, the most worrisome thing is that the US government does not think it is spending too much. If US defense spending enters an absurd mode, tens of trillions of dollars will be borrowed to support the war machine, and this will require the government to sell more long-term bonds to investors to absorb funds, further increasing global distrust of US Treasury bonds. That’s why bond yields are rising and being sold off.”

With the “Israeli-Palestinian conflict” and the “Federal Reserve (FED) pausing interest rate hikes” pushing US Treasury bond yields to a 16-year high, Arthur Hayes believes that when long-term US Treasury bonds no longer provide security for investors, they will seek alternative assets, and in this backdrop, gold and BTC are the preferred assets. Arthur Hayes believes that the rise in BTC, as well as gold, is not speculation about ETF approval but rather a reaction to the high inflation caused by the devaluation of the future US dollar and wars. Arthur Hayes also mentions another reason for the bond sell-off, which is when the Federal Reserve’s interest rate cycle nears its end and the US economy remains normal, investors no longer have the motivation to hold for the long term, leading to the sell-off of US Treasury bonds.

BTC Price May Rise Due to Other Factors

A group of key investors may be one of the reasons behind this surge. Since September 21st, whale addresses holding 100 to 1000 BTC have been accumulating BTC. In the span of one month, the BTC holdings of this group increased by 50,000 BTC, valued at $1.7 billion; this increased their holdings from 3.85 million BTC to 3.9 million BTC.

BTC Trend

As of writing this article, the BTC price stands at $34,572 and may continue to rise due to strong market momentum. It remains in the upper range of the market, and the chart above evaluates from the low point in early 2023 to the high point of this year at $35,184.

BTC’s price has doubled from its closing price of $16,542 on December 31st, surpassing the 61.8% Fibonacci retracement level at $28,067, which is a crucial support level. The strong momentum of this rebound also broke through the 78.6% Fibonacci level, reaching $31,197.

The pressure from increased buying volume could push the BTC price to continue rising, with a target of $35,000. In this case, the most reasonable target would be the Fibonacci chart’s top level at $35,184.

However, if profit-taking begins, the BTC price could still experience a downward trend. In this scenario, the support level for BTC could be around $31,197, or more likely, around $28,067. In the worst case, the price could fall to the level of $25,869.

Conclusion

With the continuous rise in BTC price, market sentiment is clearly bullish. It can be said that multiple factors such as the impending halving of BTC, pressure from the US banking industry, and rising US Treasury yields are driving this round of price increases. Although there may still be volatility in the short term, BTC price is in an upward channel in the medium to long term. For investors, now is still a good opportunity to enter 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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