Bitcoin prices have reached a 17-month high, levels not seen since May 2022. This rally caught many people off guard, bringing a bull market atmosphere to the crypto market as the “King of Cryptocurrencies” steadily rose. So what are the reasons driving the rally? What is the future development of BTC?
A previous article by veDAO Research Institute mentioned that although fake news has caused the price of BTC to experience a roller coaster, market sentiment is positive and the subsequent trend will be positive. In this article, veDAO Research Institute will bring the reasons related to the recent BTC rise and the analysis of subsequent trends.
Reasons for the rise in BTC price
Considering that crypto markets are susceptible to volatility, one single factor cannot be considered the sole cause of the rally. Over the past few days, BlackRock’s BTC spot ETF appeared on the DTCC’s website, was briefly removed and then re-added, which is also believed to be one of the reasons for the rally. In addition, there are some more influential factors:
BTC halving is coming soon
There are less than 6 months until the BTC halving. The cryptocurrency community expects this event to kick off the next bull market cycle. According to analysts like Michaël van de Poppe and others, now (6 to 10 months before BTC’s halving) is the best time to invest in altcoins, and VCs can’t wait to start getting funding.
While investors are counting the days until their investments start to increase in value, BTC miners are concerned about the incident. Miners’ concerns stem from the fact that the event will result in a halving of mining rewards, from 6.25 BTC to 3.125 BTC per block. But for investors, the halving event is valuable because it reduces the growth of newly mined BTC. Over time, miners operating costs increase. Specifically, mining infrastructure has become more complex and expensive. Others complained about rising electricity bills, while U.S. miners could face a 30 percent tax, causing more unease. This is because BTC hashing power (the computing power required for computer or hardware operation when solving different hashing algorithms) is mainly concentrated in the United States.
US Bank Crisis and BTC
The U.S. banking crisis that occurred in March this year became a boon for BTC and the crypto market. One of the most important reasons is the lack of correlation between cryptocurrencies and the U.S. stock market. While the banking system has stabilized relatively since then, current market conditions again suggest a similar scenario is developing.
Bank of America takes another hit
Wall Streets four biggest banks - Citigroup (C), Morgan Stanley (MS), Goldman Sachs (GS) and Bank of America (BAC) - are trading at their lowest levels since the banking crisis. The banks year-to-date performance shows that their share prices are currently among the lowest, even lower than in March this year. Citigroup shares are down 14% since the beginning of the year, and Goldman Sachs is down nearly 13%. Morgan Stanley has lost more than both, having fallen 16% this year, while Bank of America leads the way with a 23% decline.
Cryptocurrencies negatively correlated with U.S. banks
While the current state of the U.S. economy does not support a bullish narrative for banks or stocks, the story is very different for crypto markets. BTC currently has a significant negative correlation with the SP 500 and Nasdaq, at -0.8 and -0.78 respectively.
In March, BTC prices rose along with other cryptocurrencies as banks came under intense pressure, and coincidentally, BTC is also rising now. This allowed other altcoins to follow suit, pushing the overall crypto market’s market capitalization to $1.244 trillion.
Viewed in this light, losses at U.S. banking institutions are being translated into profits for cryptocurrency investors, indicating that capital flows to the sector are not solely influenced by the United States. However, continued losses at banking institutions may not be the only reason for BTC’s rise.
Behind the Palestinian-Israeli conflict, U.S. Treasury bonds and BTC
BitMEX co-founder Arthur Hayes recently wrote* that the current economy is being affected by a global war, which has catalyzed the recent sell-off of U.S. Treasury bonds. As Treasury bonds are no longer safe, investors are choosing BTC and gold as alternative investments. commodity.
The spread between the 2-year and 30-year Treasury yields turned positive for the first time since mid-2022
Arthur Hayes elaborated on the impact that current tensions in the Middle East may have on financial markets, noting that as the U.S. government continues military aid to Israel, this will lead to a sell-off in U.S. Treasury bonds. He explained: If you are a long-term investor in U.S. Treasury bonds, the most worrying thing is that the U.S. government does not think it is spending too much. If U.S. defense spending goes into ridiculous mode, there will be trillions US dollar borrowing is used to support the war machine, which will require the government to sell more long-term bonds to investors to absorb funds, and global distrust of US Treasury bonds will further increase. This is why bonds are selling off and yields are rising.
As the Palestinian-Israeli conflict and the Federal Reserve (FED) pause in raising interest rates push U.S. Treasury yields to a 16-year high, Arthur Hayes believes that when long-term U.S. Treasury bonds no longer provide safety to investors, investors will Looking for alternatives, the preferred assets in this context are none other than gold and BTC. Arthur Hayes believes that the rise in BTC and gold is due to the sharp decline in long-term US Treasury bonds. This is not speculation about whether the ETF is approved, but BTC’s response to future high inflation caused by the depreciation of the US dollar and war. Arthur Hayes also mentioned another reason for the collapse of bonds. When the Feds interest rate hike cycle comes to an end and the U.S. economy remains normal, investors no longer have more incentives to hold on for the long term, which will also lead to a sell-off in U.S. Treasury bonds.
BTC price may rise due to other factors
A group of key investors may also be contributing to the rally. Whale addresses holding between 100 and 1,000 BTC have been accumulating BTC since September 21. In one month, this group’s BTC holdings increased by 50,000 BTC, worth $1.7 billion; this brought their holdings from 3.85 million BTC to 3.9 million BTC.
BTC Trend
As of this writing, BTC price stands at $34,572 and may rise as market momentum remains strong. It remains in the mid-to-high range of the market, with the chart above showing an assessment from the early 2023 lows to this year’s high of $35,184.
The price of BTC has doubled from the December 31 closing price of $16,542, breaking above the 61.8% Fibonacci level of $28,067 on the way up, which is a key retracement level. The rally was also powered by a break above the 78.6% Fibonacci level to $31,197.
Pressure from increased buying volumes could push BTC price to continue rising, with a bullish target of $35,000. In this case, the most reasonable target would be the $35,184 level at the top of the Fibonacci chart.
However, BTC price could still see a downward trend if profit-taking begins. In this case, BTC support levels could be around $31,197, or more likely around $28,067. In the most severe case, the price could drop to the level of $25, 869.
Conclusion
As BTC prices continue to climb, market sentiment is significantly higher. It can be said that multiple factors such as the imminent BTC halving, pressure on the US banking industry, and rising US Treasury yields have driven this round of price increases. Although there may still be fluctuations in the short term, in the medium to long term, BTC prices are in an upward channel. For investors, today is still a good opportunity to invest in BTC. With the gradual release of the halving effect, BTC may start a new bull market cycle, which is worth looking forward to.
Quoting documentation:https://cryptohayes.substack.com/p/the-periphery
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