What’s fueling Bitcoin’s remarkable ascent to $108,000? From political leaders’ speeches to institutional investments and cryptocurrency funds, a significant institutional supply squeeze may be on the horizon.
Bitcoin Reaches New Heights
Bitcoin (BTC) has again made headlines, surging to an all-time high of $108,260 on December 17, marking over a 50% increase since the recent U.S. elections. As of the latest update on December 17, BTC is trading around $106,663.
BTC’s price surge follows a proposal from President-elect Donald Trump to create a U.S. Bitcoin strategic reserve, generating significant excitement in the markets. During his address at the New York Stock Exchange on December 12, Trump emphasized America’s need to excel in the crypto sector, suggesting the creation of reserves akin to the U.S. strategic oil stockpile.
This proposal is reminiscent of the BITCOIN Act championed by Republican Senator Cynthia Lummis, which aims for the U.S. to acquire 1 million BTC over five years to combat the mounting $35 trillion national debt.
Institutional buying has also propelled the price. MicroStrategy, known for its aggressive Bitcoin acquisition strategy, recently announced the purchase of $1.5 billion worth of BTC at an average price of $100,386 per coin, increasing its total holdings to 439,000 BTC valued at approximately $47 billion. This strategy has significantly bolstered the company’s market capitalization, skyrocketing from $1.1 billion in 2020 to nearly $100 billion today.
Additionally, MicroStrategy’s impending inclusion in the Nasdaq 100 index is anticipated to drive further demand for its shares as investment funds and ETFs adjust their portfolios.
Meanwhile, Ethereum (ETH) has also witnessed a revival, reaching a seven-day high of $4,106 on December 16, reflecting a weekly gain of 6%. Despite some minor profit-taking, ETH remains stable around the $3,950 mark.
Let’s delve deeper into the key dynamics propelling Bitcoin and Ethereum, explore the macroeconomic indicators influencing this bull run, and assess expert predictions for the near future.
The Institutional Influence
The robust performance of Bitcoin and Ethereum is underscored by rising ETF inflows, liquidation trends, and futures open interest. Spot Bitcoin ETFs have experienced unprecedented inflows throughout December, accumulating over $5.16 billion by December 16.
This influx has driven total assets under management for Bitcoin ETFs to $123 billion, signaling strong confidence particularly from institutional players. In contrast, Ethereum ETFs have seen slower growth. Since their launch, they attracted modest inflows of $733.6 million until December 3, yet since then, have received an additional $1.58 billion, indicating renewed investor interest.
The liquidation landscape highlights ongoing market dynamics. Over 24 hours ending December 17, approximately $339 million in positions were liquidated, with Bitcoin liquidations totaling around $60 million and Ethereum experiencing even higher liquidations at about $78.5 million. This indicates many traders betting against the price rally were forced out as BTC crossed the $108,000 threshold.
Futures open interest in Bitcoin has surged, climbing from $32 billion in early October to a staggering $70 billion as of December 17, affirming the bullish sentiment as new capital flows into the market.
Both Bitcoin and Ethereum appear to be on solid ground, benefiting from institutional investments, ETF inflows, and a strong market backdrop.
Macroeconomic Influences
The current macroeconomic climate presents mixed signals, with a softening U.S. Dollar and rate cut expectations introducing complexities for investors. Recent retail sales data exceeded expectations but indicated a slowdown in consumer spending—an essential component of the U.S. economy.
The Federal Reserve is widely anticipated to announce a 25-basis-point rate cut soon, yet uncertainty surrounds future cuts, causing fluctuations in the Dollar. A weaker dollar typically allows riskier assets like Bitcoin to thrive, particularly when traditional markets exhibit weakness.
Geopolitical tensions in Europe, including political instability in Germany and ongoing economic challenges in France, are also contributing to market uncertainty, prompting investors to seek alternatives like Bitcoin, which operates outside government controls.
The U.S. 10-year Treasury yield has recently pulled back, which—if the trend continues—can encourage borrowing and redirect capital into higher-yielding assets like Bitcoin and Ethereum, particularly amid shaky confidence in traditional markets.
Expert Insights
Bitcoin’s current rally is poised for further movement, supported by instabilities in traditional markets and tightening supply dynamics. Experts suggest that the institutional accumulation of Bitcoin could lead to a significant supply squeeze, impacting prices positively.
Ethereum is also displaying solid fundamentals. Analysts indicate that the cryptocurrency is still in the early phases of bullish market psychology, suggesting that further significant price movements might be ahead.
Historical data on Bitcoin’s MVRV ratio suggests potential for substantial price appreciation, highlighting the possibility for BTC to reach values of $210,000 in the coming years, assuming favorable market conditions prevail.
However, the Federal Reserve’s upcoming meeting remains a wildcard that could introduce volatility. Bitcoin historically reacts strongly to such monetary policy decisions, impacting liquidity across financial markets.
Ultimately, the current rally is underpinned by strong institutional demand, dwindling supply, and shifting market sentiment. Nonetheless, investors should remain cautious, as volatility remains likely and risk management is crucial in navigating this evolving landscape.
Disclosure: This article is for informational purposes only and does not constitute investment advice.
