After an 18-month slump, Bitcoin price reached an all-time high of $69,000 on Tuesday in 30+ countries, since its last all-time high in November 2021. Riding the wave of the bull run in Bitcoin, the trading volume in Indian crypto exchanges CoinDCX, WazirX, and BitBNS also reached a 10-month high in February. The main reasons attributed to this surge are an increase in institutional demand, notable growth of Bitcoin ETFs and the upcoming Bitcoin halving.
Before we delve into the reasons behind Bitcoin’s recent upsurge and its sustainability, let us first understand how Bitcoin works.
What Is Bitcoin Price And How Does It Work
Bitcoin is a decentralised digital currency created in 2009 by Satoshi Nakamoto after the global financial crisis. Bitcoin is the world’s first and largest decentralised cryptocurrency. Here are some important terms to help you understand how Bitcoin works.
Cryptocurrency Price
Cryptocurrency refers to virtual money created using codes. It is designed to act as money using peer-to-peer monitoring protocol and does not require any third-party administrator or a centralised authority like a bank. Hence, it is not owned and controlled by anyone and transactions can be made from one user to another through the Bitcoin network. Cryptocurrency Price These transactions are verified by cryptography, which is a scientific technique of securing information and data using codes.
Blockchain Means
A blockchain is a digital record book, made of Blockchain Means that store ordered records or transactions. Each block is linked to another block using cryptography. It is like a shared ledger distributed among authorised users.
Bitcoin wallet
You need to have a Bitcoin wallet to buy or sell Bitcoins. It is a program that contains a public key and a private key. A public key is like an account number through which you can receive Bitcoins and a private key is a secret digital signature used to send Bitcoins. A transaction is the transfer of Bitcoin value between these wallets.
Bitcoin mining
It is the process of running a Bitcoin program to validate a Bitcoin transaction on a blockchain and to generate a new Bitcoin. It is like a bank printing money. Miners validate transactions by solving complex mathematical puzzles and are rewarded with free Bitcoins and transaction fees.
Reasons Behind Bitcoin’s Recent Upsurge
Bitcoin has been enjoying an upsurge since October’2023. The market capitalisation of Bitcoin has reached $1.31 trillion after the rise in prices. So what is driving this sudden surge in the price of Bitcoin?
Launch of Bitcoin’s Spot ETFs
The introduction of Bitcoin’s Spot ETFs has proven to be a game changer for the crypto market. It allows a traditional investor to get exposure to Bitcoin without holding the asset. An investor can now easily buy a share of a Bitcoin ETF on the stock market leading to safer and wider accessibility. However, Indian investors can only invest in Bitcoins through the RBI’s Legalised Remittance Scheme (LRS).
Increase in institutional demand
Along with crypto whales, traditional Institutional investors are also entering the crypto market resulting in an increased institutional demand. These investors are seizing the opportunity leading to significant inflows into the Bitcoin ETFs. As investors are rushing to capitalise on the expected gains, it is driving the upward price movement of Bitcoins.
Bitcoin halving speculation
Another factor contributing to the upward movement in Bitcoin price is the speculated halving in April. Halving is when the rewards earned by miners are halved which results in a reduced supply of new Bitcoins into the market. It can potentially increase the price and demand of Bitcoin as many people buy Bitcoins before a halving event.
What Does This Upsurge Mean For An Investor in India?
According to RBI, investors dealing in digital currency are doing it at their own risk. This is because the regulatory landscape is different in every country and India does not have any regulations for crypto transactions yet. Bitcoin Price in India, Indian experts still believe that cryptocurrency is not a safe investment option and they advise investors to practice caution.
Another factor acting against cryptocurrency is that it does not have any intrinsic value which means if a significant number of investors opt out of Bitcoins, its value will fall to zero because it does not have any underlying value.
It is important to note that without government regulation, there is a high risk of fraud and money laundering in the cryptocurrency industry. For instance, the FTX crypto exchange in the US went bankrupt, and the largest crypto exchange in Canada, Quadriga CX, experienced a loss of assets worth $119 million.
Is The Recent Surge A Game Changer Or Not?
With Bitcoin reaching an all-time high, the crypto market players are expecting it to break all the previous records. However, it is difficult to predict the future of cryptocurrency without any economic fundamentals, so we can only rely on the past performance of the market.
Investing in Bitcoins is highly risky as the volatile nature of Bitcoins makes it a speculative asset which may lead to an investor losing all his invested capital. The price and demand of Bitcoins are highly unpredictable, making it difficult to ascertain how long this bull run will last. Only time can tell whether it is a game-changer or not.
Conclusion
If as an investor, you want to get exposure to the crypto market, It is important to make an informed decision. Staying updated with the latest Bitcoin news, Bitcoin price in India and comparing the Bitcoin price today with its price history can help you understand what is driving the price movements and when is the right time to invest. Assess potential risks, start with small investments and avoid investments that are driven by greed before making an investment decision.
Resources:
- https://news.abplive.com/business/crypto/bitcoin-price-rally-gain-all-time-high-buy-sell-investor-tips-abpp-1669774
- https://www.livemint.com/market/cryptocurrency/crypto-trading-reaches-10-month-high-in-india-report-11709628269595.html
- https://www.linkedin.com/pulse/why-bitcoin-rising-its-impact-digital-money-kamalika-poddar-krcoc/
- https://www.livemint.com/market/cryptocurrency/bitcoin-surge-why-should-you-still-not-invest-in-cryptos-7-key-reasons-explained-caution-against-cryptocurrencies-11709640063521.html
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