2023 has been fruitful for cryptocurrencies, gaining around 84% and transforming Bitcoin into a top-performing digital asset again. The latest price spike indicates a growing interest in crypto projects among investors worldwide.
The current price of Bitcoin is above the $30,000 mark. The oldest digital coin in the sector set a new price high since the bear market started, giving investors hope that the sector will bounce back anytime soon. 2023 has been a fruitful year for the crypto sector because the market gained over 80% of its previous value, and well-established digital coins like Bitcoin and Ethereum have increased in value again. Bitcoin has been on an ascending trajectory since the beginning of the year. If, at the start of January, it traded at around $16,500, the asset has steadily risen in value, reaching the current price. This was the first time since the summer of 2022 when it reached this level, and if it maintains this trajectory, experts predict that it will go above the psychological resistance level of $30,000.
Several factors point to a resurgence of Bitcoin’s value in the following months. Tag along if you want to find out more about them.
Bitcoin attracts blue-chip companies and institutional investors.
We must highlight that most institutional investors are betting on the cryptocurrencies with the largest market cap, like Bitcoin and Ethereum. Some investors have been extremely bullish on Bitcoin even during the bear market because they think it will deliver revenue in the long term. This might be the ideal moment to purchase digital assets when sold at lower prices because the return on investment could be maximal in a bull market. A recent survey reveals that out of 1,052 asset management firms across North America, Europe, and Asia, 60% bought Bitcoin in 2022, and 75% plan to add it to their portfolios.
Blue-chip companies like MasterCard, Alphabet, and BlackRock have also invested in Bitcoin to expand their range of services and enable their clients to pay with cryptocurrencies. This kind of backing could only mean good news for Bitcoin, so we expect its price to rally in 2023.
Bitcoin’s four-year cycles
Seasoned investors didn’t panic when Bitcoin entered the crypto winter because they knew it runs bull markets every four years. The four-year market cycle has four stages:
– Bitcoin goes through an accumulation
– Bitcoin experiences an uptrend
– Bitcoin enters a selling and distribution of the crypto phase
– Bitcoin ends the cycle with a downtrend
Bitcoin enthusiasts state that 2023 is the beginning of a new accumulation phase, and they expect the cryptocurrency to gain even greater value towards the end of the year.
In addition, 2024 will bring another halving event, and historically each halving brought new price increases. Therefore, investors accumulate Bitcoin before the halving event for higher profits.
Bitcoin has a limited supply.
We mentioned earlier that Bitcoin is getting close to its fourth halving event, essential in maintaining its scarcity. Satoshi Nakamoto created the Bitcoin code to allow for the minting of a maximum supply of 21 million coins; more than 90% of them have already been mined. Every four years, the rate at which new coins are created is cut in half. The fewer Bitcoins available to mine and in circulation, the higher the demand. Bitcoin’s price could increase when the supply is lower. Price spikes have followed all Bitcoin halving events, so there’s no reason for the next one to differ.
Bitcoin has always been a scarce digital currency, and it’s easy to analyze this feature by looking at its illiquid supply of coins. The circulating supply of Bitcoin can be broken into three categories: illiquid, liquid, and highly liquid supply. The illiquid supply refers to the entities that hold more than 75% of their Bitcoin in a single store. Highly liquid supply refers to the entities that hold less than 25% of the Bitcoin supply in a store, and the liquid supply refers to the entities in between the first two mentioned.
In 2022 many investors moved Bitcoin from exchanges into their custody solutions. Some even panicked and sold the cryptocurrency entirely, afraid the market won’t bounce back.
The US Federal Reserve will lower its interest rates
2022 was marked by increasing interest rates to keep up with the growing inflation rates. As expected, this strategy hindered investments in the crypto and stock markets, and the US Federal Reserve had to search for solutions to deal with this issue.
It’s also essential to note that the hikes in interest rates have caused inflation in the US to drop to 7.1 in December 2022, the lowest level since 2021. In the current situation, the US Federal Reserve hinted that it might lower the interest rate in 2023. We will most likely witness lower interest rates if inflation continues on the descendant trajectory. Investors will feel more confident to invest in alternative assets like Bitcoin, which could only trigger a price spike.
Bitcoin is the most liquid digital currency.
The more investors add Bitcoin to their portfolios, the more valuable the asset becomes. The network recently announced a series of new use cases, which could cause a price rise because they would enable the currency to remain competitive. The market has witnessed the efforts of market participants to create investment products based on the Bitcoin blockchain, like mutual funds and futures, which would make it accessible to a broader audience.
Crypto investors labeled Bitcoin the most liquid digital currency because it can be bought and sold at any exchange and converted to cash. Increased liquidity is good for price stability. However, remember that Bitcoin is prone to volatility and price swings. Assets with high liquidity are easier to sell and buy, so Bitcoin is valuable to traders and investors.
