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Bitcoin is the most prominent cryptocurrency, with a market capitalization of $1,279.36 billion (as of March 4, 2024). It was launched by Satoshi Nakamoto in 2009 as a new form of digital money free from the rope of a government or financial institution. Bitcoin is slowly but surely approaching price discovery as its value exceeds $65,000, its highest level in two years. This price hike can be attributed to the ETF launch in the United States. Large holders, commonly referred to as whales, own a significant portion of the available supply. It’s expected that Bitcoin will run out by 2040, in spite of more powerful mining equipment.
Since Its Inception, Bitcoin Has Attracted the Attention of Fans, Investors, And Regulators
Bitcoin was designed as a way to conduct transactions without the intervention of a third party (a central bank or financial institution), granting users some degree of anonymity. Similar to gold, its value comes from scarcity, so as the supply of unrewarded tokens diminishes, demand increases, and prices rise. In case you’re wondering about the best way to buy Bitcoin, here’s what you need to know: open an account at an exchange and place an order. Of course, you’ll need a place to store your funds safely. Bitcoin has come a long way since its first recorded price of less than a cent.
Cryptocurrency fans, investors, and financial regulators have become interested in Bitcoin over time. It’s become accepted as a medium of exchange, store of value, and unit of account, so it’s more than a new form of money. Bitcoin can be described as a multi-layered independent network within the financial system. Over the years, efforts have been made to use FinTech to improve fiscal transparency, strengthen budget planning/execution, and upgrade cash management. Several noteworthy applications have stemmed from FinTech innovations, but they all remained confined to the traditional fiat system. Every innovation starts with an idea, and that idea was Bitcoin.
As Anticipation Mounts, There’s Nothing in The Way of Bitcoin Heading into Price Discovery
The SEC approved the listing and trading of eleven ETFs that invest directly in Bitcoin, a historic movement, but nonetheless, one we were expecting. Investors can gain exposure to the current price of the cryptocurrency without owning Bitcoin directly. Examples of ETF providers include but aren’t limited to BlackRock, VanEck, and iShares. For the average person, buying and holding Bitcoin requires research and technical know-how. Equally, it involves signing up for an exchange, managing a self-custody wallet, and learning how to manage your portfolio. Not anyone is willing to take on these responsibilities.
The sustained demand doesn’t come as a surprise, taking into account the progressive growth of ETFs following their official launch in the US market. The demand for Bitcoin will only grow as ETFs make Bitcoin investing easily accessible, drawing interest from traditional finance. Although spot Bitcoin ETFs are now available, not every financial institution can access them because much of the trading is undertaken by individual investors. For the time being, banks and large broker-dealers and security houses remain reluctant, but it’s normal given the extensive due diligence required. Overall, traders and analysts are split between optimism and disbelief.
Price Discovery Empowers Crypto Market Participants to Make Better, More Informed Decisions
Cryptocurrency investing isn’t the focus of the mainstream majority, and in the event of a change occurring, a new wave of interest in Bitcoin and altcoins could materialize, therefore fueling the market. Price discovery allows buyers and sellers to set the prices of digital assets – in other words, sellers can decide what they’re willing to accept, while buyers can figure out what they’re willing to pay. Supply and demand meet at the market equilibrium. Cryptocurrency market participants can make decisions based on facts and allocate resources accordingly. The market price of Bitcoin can deviate from its intrinsic value due to various factors, including market sentiment, supply-demand imbalances, and liquidity constraints.
The Bitcoin spot market exhibits better efficiency during stabler periods, meaning that uncertainty is reduced, enabling participants to have higher confidence in the asset’s intrinsic value. Spot markets are preferable on account of their deeper liquidity, continuous trading hours, and a greater degree of anonymity. Spot Bitcoin ETFs calculate their net asset value against dedicated benchmarks at market closing time. The overall trading volume in spot Bitcoin ETFs rose sharply, while the value of Bitcoin exchanging hands on major exchanges was the highest for 2024 (so far). Wall Street is now paying for Bitcoin, and it’s unlikely investment bankers will change their minds.
Many Place Considerable Importance On The Impact Of The Next Bitcoin Halving
As mentioned previously, Bitcoin’s price is influenced by supply and demand. The supply is drastically reduced during the halving event, which occurs roughly every four years and influences people’s desire to hold or purchase Bitcoin. To be more exact, the reduced supply growth rate interacts with demand to drive up prices. According to Bitwise, one of the world’s largest crypto index fund managers, Bitcoin will trade at $80,000 after the upcoming halving before it settles at around $70,000 by the end of the year. As an investor, risk management is of the essence because volatility goes up by orders of magnitude.
The halving is a technical event that takes place after every 210,000 blocks are added to the Bitcoin blockchain. Miners see their rewards cut in half, literally, meaning they receive less Bitcoin than they did before. There will never be more than 21 million Bitcoins, and more than 19 million have already been mined. The halving event should happen around April, but we don’t have an exact date yet. Investors are easing back into cryptocurrency in anticipation of the upcoming event that, throughout the years, has been followed by a price appreciation. Needless to say, long-term investors aren’t willing to sell.
Conclusion
All things considered, Bitcoin has managed to top $65,000 for the first time since 2021, and chances are it will trade above $80,000 by the end of the year. Bitcoin’s value is fueled by the halving, not to mention investors buying ETFs that track the spot price. Consider risk tolerance and investment goals before diving into the world of Bitcoin.
