Bitcoin back at $50k: Will the rally continue?

In a remarkable comeback, Bitcoin has soared past the $50,000 mark for the first time since 2021, sparking a wave of optimism among industry experts and investors alike. The last time Bitcoin achieved this level was in December 2021, which was subsequently followed by a dramatic downturn that saw the crypto plummet to a low of $16000 by the end of 2022. This crash was precipitated by a series of adverse events, including 11 consecutive interest rate hikes by the US Federal Reserve, the $10 billion fraud scandal involving FTX's Sam Bankman-Fried, the collapse of Changpeng Zhao-led Binance, and a widespread exodus of retail investors. These tumultuous events cast a shadow over the cryptocurrency market, raising doubts about its stability and future.

The narrative, however, took a turn (good or for the worst only time will tell!) as Wall Street began to show a renewed interest in the cryptocurrency space, buoyed by the Securities and Exchange Commission's approval of exchange-traded funds (ETFs) to invest directly in Bitcoin. The regulatory green light heralded a new era of optimism and credibility for digital assets, signalling a broader acceptance and institutional backing.

A report from CoinShares mentions the burgeoning interest in Bitcoin, stating that spot Bitcoin ETFs have attracted $1.1 billion in inflows in just the past week (Feb 12), marking the most significant seven-day period of inflows since the ETFs were introduced on January 11. According to Cointelegraph, approximately $493 million, or about 10,280 Bitcoins, flowed into spot Bitcoin ETFs. Given that only around $200 billion in Bitcoins is tradable, these ETFs have absorbed a staggering 5% of the entire tradable supply of Bitcoin in just 30 days. The iShares Bitcoin Trust by BlackRock led the pack with a massive $375 million in inflows, followed by Fidelity’s Wise Origin Bitcoin Fund at $152 million.

The enthusiasm surrounding Bitcoin's rebound is further amplified by Bernstein, a well-known US investment bank, which has projected that Bitcoin could more than treble in value, reaching $150,000 by 2025. Amid this backdrop of renewed optimism and institutional embrace, industry leaders have voiced their support for Bitcoin's current trajectory.

Manhar Garegrat, country head of India & global partnerships, Liminal Custody Solutions, highlights the crucial role of the upcoming Bitcoin halving and the introduction of Bitcoin spot Exchange-Traded Funds (ETFs) in driving the price surge. "The approval of Bitcoin spot ETFs in mid-January 2024, attracting over $50 billion in investments within a month, has significantly increased demand," says Garegrat. He further emphasises on the potential of the halving event to kickstart a new bull run for digital assets, potentially pushing Bitcoin to surpass its historic highs.

Shivam Thakral, CEO of BuyUcoin, India's second-longest-running digital asset exchange, feels with the total crypto market capitalisation rising to $1.87 trillion is a testament to the growing strength of the digital asset market. Thakral feels the upcoming halving could propel the cryptocurrency market to new heights. "The macroeconomic factors, including the anticipated rate cut by the US Federal Reserve and the popularity of Bitcoin ETFs, are expected to drive the market in the mid to long term," says Thakral, hinting at a possible retest of Bitcoin's all-time high of $69,000 post-halving.

Raj Karkara, COO of ZebPay, views the Bitcoin milestone as a pivotal moment that underscores the growing mainstream acceptance and resilience of digital assets. "Bitcoin's price has tripled since the start of 2023, indicating sustained growth," says Karkara. He attributes part of this success to the approval of exchange-traded funds, which have expanded the investor base and contributed to the positive market sentiment.

As Bitcoin regains its position above the $50,000 threshold, the consensus among industry leaders is clear: with regulatory acceptance and innovative financial products like ETFs playing a significant role in shaping the future of cryptocurrency, digital assets are here to stay.

Bitcoin runs on a decentralised computer network also known as a distributed ledger that keeps a track of transactions in the cryptocurrency. When computers on the network verify and process transactions, new bitcoins are created, or mined. Bitcoins are not stored in one address but spread across roughly 22,000 addresses making it a very concentrated digital asset. Since it's a peer-to-peer network, the crypto is stored on the devices of users who voluntarily opt to run the software. According to River Financial, Bitcoin-focused asset manager, the anonymous creator of Bitcoin, known as Satoshi Nakamoto, first mined more than 22,000 blocks in 2009, and in turn, received more than one million Bitcoins in cumulative block rewards for the work. As a result, Satoshi is estimated to have more than 1.1 million Bitcoins, valued at $47 billion as of February 2024.

Ironically, Bitcoin, once hailed as the antidote to the ills of mainstream finance, has found its resurgence and validation through the embrace of Wall Street, the very epitome of the financial establishment it aimed to disrupt!