Unpacking the Factors Behind Bitcoin's Recent Price Surge: An In-Depth Analysis

Bombolo | News and Media

Unpacking the Factors Behind Bitcoin's Recent Price Surge: An In-Depth Analysis. Bombolo | News and Media

As the new year began, bitcoin found itself in a state of despair, having endured a tumultuous 2022 characterized by plummeting cryptocurrency values, business failures, and corporate controversies.

In under three months, bitcoin has regained its strength and momentum. Having achieved over 70% growth since the beginning of the year, it has surpassed other significant assets and was trading close to its highest value in nine months as of Wednesday. This is not the first time that the original and most prominent cryptocurrency has experienced such fluctuations, as its 15-year existence has been marked by remarkable price surges and steep declines. The driving force behind its current gains is the interest rates.

Six investors and analysts from both the traditional finance and cryptocurrency industries have informed Reuters that the markets anticipate that central banks are approaching the peak of their interest rate increases. As a result, this scenario is expected to lift risk-on assets, including bitcoin.

In addition to the expected effects of central bank interest rate hikes, other factors are also contributing to the current state of affairs. These include instability in the banking sector as well as persistent, albeit unfulfilled, aspirations that bitcoin will attain widespread acceptance as a payment method.

On Sunday, bitcoin concluded its most prosperous week in four years and has seen a surge of 45% in value in merely 12 days.

The recent bankruptcy of Silicon Valley Bank and Signature Bank in the United States was one of the factors that led to the acquisition of Credit Suisse, which has been in operation for 167 years, by its competitor UBS on Sunday. These events have given rise to assertions that bitcoin is an asset that is impervious to the hazards of traditional finance.

Analysts have stated that the primary drivers behind bitcoin's growth have been its core group of retail investors. However, institutional investors, such as pension funds, who have traditionally been cautious of the volatile and largely unregulated nature of bitcoin, are expected to maintain their skepticism regarding the cryptocurrency's long-term revival, according to the interviews.

Last week, investment products related to bitcoin, which are typically favored by bigger investors, experienced outflows worth $113 million, as reported by digital asset manager CoinShares. This was due to a rush for liquidity amidst the tumultuous banking sector, according to the firm.