Bitcoin breaks through $40,000, what are the driving forces behind it?

Original author:Martin TALK

As the largest cryptocurrency in terms of market capitalization and popularity, Bitcoin has once again exceeded the $40,000 mark, attracting global attention. This is the first time since April 2022 that Bitcoin has stood above the $40,000 mark, which is an important milestone and a testament to Bitcoin’s resilience and growing acceptance in the financial world.

Since its birth in 2009, Bitcoin has had its ups and downs and is highly volatile. The recent breach of $40,000 marked a notable moment in its journey and sparked market discussion about price drivers.

BTC/USDT chart from March 2022

The driving force behind

Although there is no direct cause for this surge, momentum has been gradually building over the past month and perhaps throughout 2023. Two of the culprits behind the 2022 Bear Market – Do Kwon and Sam Bankman-Fried – have been arrested and extradited, with Bankman-Fried having been found guilty by a jury a month ago.

The impending listing of a spot Bitcoin ETF also helped the price surge. Although there is no news on the specific date, market expectations have been building. Galaxy Digital even estimates that a spot Bitcoin ETF could have a market size of up to a year after its launch$14 trillion。

In addition, expectations for the Federal Reserve to cut interest rates have also become an important driver. Markets interpreted recent comments from Federal Reserve Chairman Jerome Powell as less hawkish, signaling the need to find a balance between tighter monetary conditions and promoting economic stability. The outlook for lower interest rates is positive for Bitcoin, as loose monetary policy has historically been associated with increased speculative trading and higher cryptocurrency prices.

Expectations of interest rate cuts have pushed commodity prices up in advance, with gold prices breaking through all-time highs this past weekend and BTC rebounding by more than 60% for more than a month. With the U.S. economy likely to enter a recession, fund managers have reached 80% consensus on forecasting a fall in interest rates in 2024, the highest consensus ever recorded in a survey. Along with the continuous decline of the US dollar index, the price of Bitcoin continuously broke through new highs during the year and returned to above $40,000 yesterday.

Another potential catalyst that has been proven by the market many times is the BTC halving planned for 2024. For more information on the expected halving in 2024, see ourAnswers to top ten questions about halving. Historically, halving events have effectively slowed the rate at which new Bitcoins enter circulation, causing prices to surge. As the next halving approaches, investors may be buying Bitcoin in anticipation of similar price action.

Where does the future go?

Looking to the future, the trend of Bitcoin remains a topic of great concern and speculation.

While many investors may have sold their BTC holdings when the spot Bitcoin ETF launched, others may see it as a sign that Bitcoin is gaining acceptance from the traditional financial sector and even the general public. Capital may flow into the crypto market in large quantities, providing more stability and growth to BTC prices. If the Federal Reserve cuts interest rates in the coming months, investors will also seek high-yielding assets such as BTC and other cryptocurrencies.

The halving is only a few months away. Since past halving events have triggered major bull runs that lasted for several months, we may still see more investors and speculators betting on this upcoming event, putting more and more capital into BTC. .

BTCs move above $40,000 reflects a complex interplay of economic factors and market speculation. While the future remains uncertain, understanding the underlying causes will provide investors with valuable information.

Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed, nor does it constitute investment, financial or trading advice. A qualified professional should be consulted before making financial decisions.