The race never stops bitcoin. On Wednesday, the first and most widespread cryptocurrency made another upward leap of 6%, returning above the threshold of 60 thousand dollars (56 thousand euros) which it has not reached since November 2021. Compared to the lows of two years ago, the value of bitcoin has tripled, growing by 160% in the last year alone, and historical highs – between 67 thousand and 69 thousand dollars, according to the stock exchanges of reference – they are now very close. A spectacular rebound, after the collapse and a series of scandals that had pushed many to leave bitcoin for dead. Which can be explained by a series of factors: the approval on January 10th by the American regulator of the first ETF investment instrument linked to bitcoin, which brought it into the official finance club; the prospect of an imminent reversal of monetary tightening by central banks, which brings back interest in riskier investments; and the most technical of all, that is, the approaching appointment with the so-called “halving”.
Bitcoin enters official finance, American authorities approve the first ETFs by Filippo Santelli 10 January 2024
What is halving and why does it drive prices?
To understand what it is l’halvingand because it tends to push the price of bitcoins, we must remember how the programmed scarcity system developed over 15 years ago by the mysterious computer scientist works Satoshi Nakamoto. When the nodes of the decentralized network validate a transaction, they receive bitcoins as a reward: this is how the new coins are “minted” and placed on the market. At scheduled intervals, however, the size of this reward is halved, hence the term “halving”: the result is that the supply of bitcoin decreases, which – in the hypothesis of constant or increasing demand – should increase the their price. The halving occurs more or less every four years and the next one, according to estimates, should take place in April. It is not certain that on the days in which the threshold is exceeded the price necessarily rises. On the occasion of previous halvings, for example, it happened to see an increase in the previous months – like the current ones – a stationary price, or even a decline around the halving, and then a new rally a few weeks later. However, the medium and long term principle remains positive in theory for the price of bitcoin, given that supply decreases.
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The growth of ETFs
The other factor behind the bitcoin rally is the approval by the SEC, the American stock exchange regulator, of the first ETFs linked to the “spot” price of bitcoin. These are listed financial instruments that replicate the price of an underlying asset, in this case the cryptocurrency, thus allowing you to invest in it without actually having to own it and buy it on one of the risky and poorly regulated sector stock exchanges. The turning point, after years of resistance from the Sec, was interpreted as the entry of bitcoin into the world of official and regulated finance, and a big step forward for its adoption as an investment asset by institutional operators and private savers. After the SEC’s announcement of the green light, a dozen of these ETFs, some of which are proposed by asset management giants such as Blackrock, the price of the cryptocurrency has fallen, in a textbook case of the principle according to which “you buy on indiscretion and sell on news”. In the following weeks, however, the bitcoin rally began again, fueled by the new demand created by ETFs: if savers in fact buy a contract from financial intermediaries, not real bitcoins, they in turn have to hedge by purchasing the underlying asset, therefore the cryptocurrency . In recent days, trading volumes on ETFs have progressively increased: on Monday, Blackrock’s exchange rate exceeded one billion dollars in daily transactions for the first time, approaching the top 10 of the largest global ETFs.
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And now?
Bitcoin has risen a lot in recent months and, as happened in the past, it is not excluded that this surge will push someone to cash in on part of the profits, generating a more or less abrupt correction. Not only crypto enthusiasts, but also a significant portion of crypto-neutral analysts, seem to agree that the above factors – in particular the inflow of “institutional” capital – should continue to keep the market in the “bull” phase. , which could lead bitcoin to test all-time highs in the near future. In the meantime, ETF applications have also been submitted for ethereum, the second most widespread cryptocurrency. In the background, however, the usual unknowns remain, regarding the extreme volatility of bitcoin, its link with the market cycle, the lack of transparency of some key market operators and the related attitude of the regulators. Factors that in the past have suddenly reversed trends.